I'm a Single Parent. How Can I Get Ahead Financially?
March 14, 2016
Single parents can get ahead financially by identifying their goals, budgeting carefully, reducing debt, and taking advantage of tax-advantaged accounts.
As a single parent, you need to understand the financial strategies that can stretch your income and help you lay the groundwork for a secure future. Consider the following lessons to help improve your family's bottom line:
Identify Your Goals You can't have a financial plan without first defining your financial goals. Start by recording all of your short-, medium-, and long-term financial goals.
For example, a child's education could be one of the biggest expenses in your future. Setting aside money for emergencies and planning for retirement are other important goals you'll need to keep in mind while raising a family. Don't let day-to-day concerns distract you from such important goals. Plan for today and tomorrow.
Be a Better Budgeter To pursue your family's goals, it's necessary to manage your household's cash flow. That involves tracking income and spending, eliminating unnecessary costs, and living within the confines of a realistic budget.
For example, if you spend $2 each work day on a take-out coffee, that amounts to about $40 each month. By eliminating that minor expense from your budget, you could easily save almost $500 per year.
Say No to Debt High-interest credit card debt can make it extremely difficult to get your budget in order. If you have an outstanding balance, consider paying it off as aggressively as possible. The savings in interest alone could allow you to address other important financial goals.
It's also a good idea to review your credit history, commonly referred to as your credit report, to make sure that the information it contains about your past use of credit is accurate.
Capitalize on Tax-Advantaged Accounts Once you free up some cash, apply it toward your goals. But first, learn about the savings and investment opportunities available to you. Keep in mind that tax-deferred investment accounts may enable you to grow the value of your assets more significantly than taxable accounts. Examples of such accounts include 401(k) plans and IRAs for retirement planning.
For college goals, Section 529 college savings plans. These plans are state-sponsored investment programs that allow tax-free withdrawals for college expenses. College savers who contribute to their home state's 529 plan may be eligible for state tax breaks.