Single parents typically carry a lot of weight on their shoulders, paying for their child’s food, clothes, medical care, after-school programs, and more.
It can be challenging to make ends meet and avoid credit card debt. Saving for the future (including college) can be difficult.
But that doesn’t mean it’s impossible. There are smart strategies that help make it possible for single moms and dads and their kids to thrive. Establishing a basic budget, knowing how to handle taxes, and whittling down debt can all play a part in boosting your financial wealth.
Here, learn some important financial moves for single parents.
9 Ways to Budget As a Single Parent
Setting up a simple budget can be a smart move for a single parent. It can help you take control of your cash and also make your money work harder for you.
1. Crunching the Numbers and Creating a Single Parent Budget
A great way to get a better financial path is to first figure out where you currently stand and come up with a monthly budget.
How to budget as a single mom or dad is similar to what anyone else would do. You can do this by gathering your financial statements for the past several months, then using them to figure out your average monthly income (after taxes), including any child support or alimony you receive.
Next, you can tally up your fixed expenses (monthly bills) and variable expenses (clothing, food, entertainment) to see how much, on average, you are spending each month.
Ideally, you want your monthly inflow to be larger than the outflow — that way, you have money left over for savings and paying off debt. One smart technique can be the 50/30/20 budget rule, which divides your income into three parts: 50% for needs, 30% for wants, and 20% for savings and paying off debt beyond the minimum.
If your current income isn’t high enough to make that work, you can re-jigger the percentages and come up with a spending and saving plan that works for you.
2. Trimming Expenses in Your Single Mom Budget
Next, you need to figure out how to live on a budget.
If you find yourself breaking even or, worse, going backwards each month, you may next want to look hard at your list of expenses and start searching for ways to save money.
A key single parent budgeting move is to hone in on your recurring bills to see if there are any ways to lower them. You may now be living on a single income, which can involve some lifestyle tweaks. You might be able to switch to a cheaper cell phone, for example. Or, maybe you can find a better deal on car insurance or ditch your cable subscription.
You can also look for ways to cut everyday spending, such as breaking a morning coffee shop habit, cooking more often and getting less take-out, and using coupons (say, via RetailMeNot or Coupons.com) whenever you shop.
3. Opening an Interest-Bearing Account
Once you start freeing up some money each month, it can be a good idea to start siphoning it off into a high-yield savings account. This can help you create some financial security for your family, as well as help you reach short-term goals, like going on a vacation or putting a downpayment on a home.
Even if you can only afford to set aside $25 or $50 per month, it will begin to add up.
Some good places to stash cash you may need in the next two or three years include a high-yield savings account, an online savings account, or a checking and savings account. These accounts typically earn more interest than a standard savings account, yet allow you to have easy access to your money when you need it.
You may want to keep an eye out for fees, and shop around for financial institutions that won’t charge you monthly and other account fees (which can take a bite out of your hard-earned savings).
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4. Prioritizing Emergency Savings
Expensive problems you can’t plan for often come up, like a car or home repair, taking a child to urgent care, or a sudden loss of income. Without a cushion, small money problems can quickly balloon into big ones if you are forced to run up high interest credit card debt to deal with them.
As you start building savings as part of your monthly single parent budget, it can be wise to prioritize emergency savings. Experts often recommend having at least three- to six-months worth of living expenses stashed away in a separate savings account where you won’t be tempted to spend it. That way it’s there when you need it.
5. Paying Off Your Credit Cards
A debt elimination plan can make a significant change in your monthly cash flow. When creating a budget for a single mom (or dad), it can be a good idea to leave room for credit card payments that are higher than the minimum.
You may want to start with the debt that has the highest interest first since borrowing from those creditors is costing you the most money. However, if you’re likely to get discouraged because it’s taking a long time to pay off that debt, you can start with the lowest balance debt. Getting some small debts paid off may motivate you to keep going.
Whatever debt you target, you can then pay more than the minimum payment on that debt while continuing to pay the minimum on others, with the goal to eliminate them one by one.
Another option: personal loans for single moms can help pay off the debt and substitute a lower-interest payment for what you were paying the credit card company. This may be an avenue to explore.
6. Planning for the Future
Once you’ve mastered your day-to-day finances, you may want to look toward your two big long-term financial security goals: retirement and your children’s college education.
If you can’t comfortably save for both at the same time, you may want to begin with retirement. While your kids can likely get loans for college, there aren’t loans for retirement.
You may want to start by contributing to any employer-sponsored 401(k) plan. If your employer is matching contributions, it can be a good idea to chip in at least enough to get the match (otherwise you’re turning away free money!). Or you can set up an IRA; even $25 or $50 a month at first is a start.
When you’re in the habit of regularly contributing to a retirement savings account, you may want to turn your attention to saving for college: An ESA (education savings account) or 529 college savings fund can help you save towards college expenses while getting a tax break.
7. Automating Your Finances
As a single parent, you may be super busy, making it easy to pay bills late simply because you forgot. Automating your finances can simplify your budget (and your life) and help ensure you don’t get slapped with expensive fees or interest charges for being late with payments.
A good place to start is to set up autopay for all your recurring bills, either through your service providers or your bank. This way you don’t have to stay on top of due dates and remember to make every payment.
Automating can also be a great idea when it comes to saving. Often referred to as “paying yourself first,” you may want to set up an automatic transfer of money from your checking to your savings account on the same day each month, perhaps right after your paycheck gets deposited. This prevents you from spending those dollars or having to remember to transfer the funds to your savings at a later time.
8. Increasing Your Income
If your budget is super tight even after cutting expenses, then you may want to find ways to increase your income. This can help take a lot of the stress off budgeting as a single mom or dad.
There are many ways you can increase your income. For starters, if you’ve been at your job for a while and are performing well, you may want to consider asking for a raise. It can be helpful to research what the industry average pay is for your position with your experience to get an idea of how much you should ask for.
Another way to increase your income is to start a side hustle, like walking dogs, becoming a virtual assistant, taking on freelance work in your profession, selling your crafts, becoming a tutor, caring for other people’s kids, or offering music lessons.
9. Taking Advantage of Tax Breaks
Tax credits for single vs. married people can vary. When you’re budgeting as a single mom or dad, it can be smart to be aware of all the tax benefits you may be entitled to. A tax credit is directly subtracted from the amount you owe in taxes, while an exemption means that amount is deducted from your total income before your taxes are calculated.
Here are few tax benefits that may be worth investigating:
• Filing as “Head of Household” instead of “Single.” If you meet the requirements, you may be able to get a higher standard deduction.
• The child tax credit. If you share equal custody with your child’s other parent, only one of you can claim this. You may want to consider alternating years.
• The earned income tax credit. Single working parents with low to moderate incomes often qualify.
• The child and dependent care credit. If you’ve been paying for childcare so that you can work (or look for work), you may be entitled to this. But only one parent can claim it each year.
Budgeting as a single mom or dad can be challenging. With some simple financial planning, however, you can start to feel less stressed about money and get closer to both your short- and long-term goals.
Key steps for single moms and dads include taking a close look at your monthly cash flow, trimming expenses, paying off your credit cards, taking advantage of tax benefits for parents, and saving a little each month to create financial security. If you’re looking for a simple way to stay on top of your single parent budget, you may want to consider if you have the right banking partner.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
How do single parents survive financially?
Single parents can survive financially by taking control of their money and budgeting, managing expenses, building up an emergency fund and savings, and minimizing debt. Budgeting for single moms and dads is important since you are likely the only income stream so every dollar counts.
How can a single parent afford everything?
To afford everything (meaning all the expenses related to raising a child), single parents can budget wisely, seek child support, bring in additional income, and seek government assistance if needed.
How much should a single parent have in savings?
It’s important for single parents to have an emergency with a minimum of three to six months’ worth of living expenses set aside. This can help if there’s an unexpected medical or car repair bill or if you are laid off; since you don’t have another income in the family, this is a very important move. Beyond that, experts recommend saving 20% of your salary if possible.
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