Being a single mother is quite a challenging task. You not only juggle various roles of being a guide, counsellor, friend, and protector, but also manage your finances in a manner that doesn’t hamper the upbringing of your child. From ensuring your child’s good education to making him/her financially independent, a mother has to make some crucial smart money moves for financial stability.
Take a look at a few tips that enable you to ace your role as the financial manager of your family.
1) Plan your finances with attention to your single parentship
Embrace the fact that you may be the sole breadwinner and act accordingly when it comes to increasing your income. Seize financial opportunities and don’t hesitate to take on senior positions at work that could help you earn a higher salary. Further, make monthly contributions to your emergency reserve to create a cushion to fall back on in times of need. Plan payments to go out at the start of the month automatically and make it a point to save as much as you can from your salary.
You must maintain adequate emergency funds to fall back upon during financial emergencies like job loss, accident etc. While creating an emergency fund, do note that it should not be the sum-total of your savings and investments, but a fund that makes you feel safe during that emergency period, assuming it would last no longer than six to 12 months. If you are taking a loan, plan its repayment smartly based on your income and savings, and prepay only when it is cost-effective to do so.
2) Start with small investments and aim for big returns
Along with paying utility bills and rent, you also have to purchase groceries, pay the maid, set aside funds for travel, and pay your child’s miscellaneous expenses. This does not justify putting off investments for both short- and long-term goals and your retirement.
Start small but be aggressive. Set up a recurring deposit and let it mature to be invested in a fixed deposit. This takes care of low risk and fixed returns. Now turn to moderately risky but profitable avenues. SIPs demand amounts as low as Rs.500, so put off the extra takeout and coffee to make a monthly investment.
Diversify your portfolio to balance your risk and accumulate savings in a separate bank account so you aren’t tempted to spend. Feel free to take the help of a financial planner so you can list goals like buying a home or sending your child overseas for education in 10 years and can invest wisely to achieve
3) Build room for indulgence
Just because you are a single parent doesn’t mean you can’t take your child to bathe baby elephants in Kerala. Build a financial reserve so strong that it can withstand the hit from spontaneous decisions like a vacation, a new laptop, or a spa day. Steadily put funds towards an account that can be solely used for these purposes. This helps you organise your income efficiently and ensure you aren’t tapping into other expense budgets.
Use credit cards to your advantage by swiping them for fixed expenses and make the most of rewards that allow you to book travel and stay using your points or enjoy discounts at partner stores.
4) Maintain the right amount of liquidity and insurance cover
The percentage of liquid funds you own determines your ability to fund emergencies and protect your savings and investments. By having enough liquidity, you don’t lose out on profits when you withdraw investments pre-maturely. While you maintain a savings account for your emergency corpus and plan your investment returns to coincide with your goals, also ensure you have enough insurance cover for health and other assets, be it your home or car, so you can have security during times of need.
As a single mother and sole breadwinner, you must buy a term insurance policy for securing future financial stability of your child. A term insurance acts as an income replacement tool in event of your untimely demise. A health insurance plan will help you deal with rising healthcare costs in case of a medical emergency.
5) Be aware, learn about tax saving
While choosing your investment option, also empower yourself with a good knowledge about tax saving. Smart tax planning reduces your tax burden and provides more money in your hand to accomplish your financial goals. So while considering your investments, do understand the tax implications on returns. You can also seek help of a financial advisor while choosing your investment options and understanding the tax implications on the return.
Use these tips to start living financially healthy and you’ll see that you are able to tackle every goal and adversity on an even keel.