7 steps to successful single-parent budgeting - 100.7 KFM-BFM - San Diego Radio - kfmbfm.com

7 steps to successful single-parent budgeting

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© iStockphoto.com / René Mansi © iStockphoto.com / René Mansi


By Andrew Housser

 

Budgeting is not an easy proposition for most people. It can be tougher still for single parents, who must manage all the bills for themselves and their children, and often do so with lower incomes. For the 14.5 million U.S. single-parent families, managing money requires some special techniques. These seven tips can help protect your family's financial well-being.

1. Budget in your own way – but definitely budget.

Whether you have been on your own all along, or your ex previously handled the money, single parenting demands a strong budget strategy. Find a method that works for you, and then use it consistently. Make sure you can pay bills, and pay on time. Paying late can result in late fees and charges that can quickly spiral out of control. Consider setting aside part of some paychecks to pay bills that arrive later in the month, every other month, quarterly or annually. Use automated payments to make the process as painless as possible.

2. Prioritize building an emergency fund.

Commit to save part of your income in an emergency fund. Your target should be to save enough to cover six to nine months of living expenses. While that might sound unattainable, every little bit helps. Try having some of each paycheck transferred automatically to a savings account. Emergency funds should be kept in an account that you can access when you need to, but not one that is so easy to access that you might spend the money inadvertently. Ideally, work to save 10 percent or more of each paycheck, but most importantly, always save something. Even starting with $250 or $500 in the bank can help tremendously when an unexpected medical bill or car repair comes along.

3. Try not to rely on child support.

Your children's other parent may be a reliable provider of child support payments. But what if those payments suddenly stop for some reason? If the other parent is injured, laid off or, unfortunately, sometimes even when a new partner enters the picture, child support might drop or be discontinued. Returning to court for an updated child support agreement or seeking legal recourse to retrieve child support payments takes time. Be careful to establish a monthly budget that will allow you to maintain your home and other base expenses if child support falters.

4. Turn saving into a game.

Involve your kids in the savings process. They can help seek out deals at the grocery store or decide that they would prefer a better-value pair of sneakers if it means a contribution to the family emergency fund. Consider seeking out high-quality secondhand stores with good merchandise, and make it a game to hunt for treasures. You will be teaching your children valuable financial skills as you save.

5. Do not be too quick to try to keep your home.

Sometimes after a divorce, one parent wants to stay in the family home to provide a steady “home base” for the children. This is admirable, but be careful not to exceed your means. Housing expenses should remain below 30 to 35 percent of your take-home income. It is better to move to a more affordable home than to risk losing the home to foreclosure later.

6. Plan for taxes.

The tax situation can be tricky for single parents who share custody with an ex. To avoid running afoul of the IRS, parents will need to decide together on who claims the child tax credit. Many people alternate years to keep it fair. Also, while child support is not taxed, spousal support does incur taxes. If you receive spousal support, you will need to keep records of the income and set aside a portion of each payment for taxes. Also, be aware of other tax credits you may qualify for, such as the Earned Income Credit.

7. Get help if you need it.

If you realize that you are falling deeper and deeper into debt, consider seeking help from a credible debt relief professional. Debt relief can be difficult, but it is worth it when it is truly necessary. The American Fair Credit Council vets debt relief providers to ensure they adhere to industry and ethical standards.

Whether you manage your budget and debt yourself, or whether you seek help, be sure to build a monthly budget and lifestyle that allows you to make ends meet. This is important for everyone, but even more so for single parents, who have great responsibilities for raising children. The good news is that it is possible – and by showing your kids how it is done, you can teach valuable financial lessons that will help them throughout their lives.

 

 

Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.
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