Smart Financial Management: a Checklist for Single Parents

Introduction

If you’re a single parent, keeping your household in the black and financially secure is probably a major concern. You might have gone through the grief of losing a partner or started a family without a partner. In either case,  you’ve found yourself supporting your family on a single income. As such, providing your dependents with a good quality of life requires smart financial planning. Luckily, you have a lot of things you can do to build a solid foundation for your future. Use this checklist to get started, stay organised, and minimise your financial stress.

1. Review your finances

Do a financial stocktake by reviewing all your accounts, documents, bank balances, mortgages and other debts, superannuation, and assets. Set aside an afternoon to review everything and work out where you stand financially. From this review, you can then start listing some realistic goals.

2. Define your financial goals

Write down your financial goals, from immediate ones such as paying all your bills on time to longer-term ones like putting away money for your kids’ university costs. You can also set goals to pay down debt, such as paying off the highest interest debt like credit cards first before paying off your mortgage as soon as possible. Other types of goals include personal and lifestyle ones like taking the kids on an overseas holiday and buying a new car.

3. Create a budget

Once you’ve listed your goals, set out a budget. For most, a budget is vital and forms the framework for achieving your financial goals. Work out your monthly income, expenses, and how much you have left over. Consider what you can put into savings or an emergency fund and what you can use on things like new clothes for the kids, entertainment, and eating out. Take the opportunity to consider new habits you can adopt; for example, shopping with a grocery list to prevent impulse buys and buying in bulk to save more.

4. Review your insurance coverage

If you don’t have insurance, consider taking out appropriate cover. Life insurance products, for example, can help you cover your medical bills and living expenses if you’re sick or injured and can’t work. It’s much easier not to think about worst-case scenarios, but as a single parent, managing these types of risks can put you at ease as you know your children will be taken care of no matter what. Moreover, it’s worth noting some types of insurance, such as income protection insurance, can be tax deductible. Insurance policies should reflect your goals and needs. As such, review it regularly to make sure it’s still adequate.

5. Build up your emergency fund

Your emergency fund is another way, in adding to insurance, to manage the uncertainties of life. Car breakdowns, emergency house repairs, and other unexpected things can blow out your budget. For this reason, open up a dedicated savings account for emergencies and start adding to it now. Aim to have enough in your emergency fund to cover you for at least three months. If you’re self-employed, you might want to put away more, such as six months’ worth of income or expenses.

6. Boost your income

Have you thought about additional ways to boost your income? Options include asking for a pay raise and upskilling and getting a higher-paying job. If you have some spare time, consider a side hustle. Even decluttering your house and selling some of your unwanted items could bring in some extra money that could be put to good use.

7. Grow your retirement nest egg

If you have money left over each month, put some of it towards your retirement. You can boost your super contributions or start investing in liquid assets like shares yourself. Thanks to the power of compounding, growing your savings over time by investing them and reinvesting your earnings can make a lot of difference by the time you retire.

8. Update your estate plan

An up-to-date estate plan is especially important if you’re a single parent as it lets you decide who looks after your children if the unthinkable were to happen. It can help you provide for your children, including how insurance payouts are to be used, and ensure they’re financially provided. Review your estate plan with your solicitor every year to make sure it’s current.

9. Explore government assistance

Depending on your situation, you could be eligible for certain types of government assistance as a single parent, and your children could also be able to access benefits. These could include child care subsidies, rent assistance, and parenting payments. Look into what you can claim. Every little bit can help make your life easier and life better for your kids.

10. Do a monthly financial check-in

Your finances and budget should closely reflect your life. Since your circumstances are constantly changing, it’s a good idea to do a monthly check-in with your budget to make sure it’s still relevant. These regular check-ins keep you financially on track and allow you to think clearly about what you are and where you’re going. If your income increases or your expenses and goals change, you’ll also want to do an update.

Conclusion

As a single parent, financial security for you and your dependents is likely high on your list of priorities. Do a thorough review of your current finances, set out goals, and work to a budget. Your goals help guide your behaviour and day-to-day decisions, and they can motivate you to stay on track. Review your insurance products; these are important for managing risk and unexpected events in life. Updating your estate planning, putting aside money for retirement, and doing regular financial check-ins are also vital. Don’t hesitate to see a qualified financial planner or other experts if you have any questions or doubts. By following this checklist, you can gain clarity into your financial goals and have specific steps to achieve them.