Both good news and bad news goes along with finances as a single parent. The good news is, you don't have to fight over money or purchases with your partner and are free to make all the household financial decisions. The bad news is, you may be facing a much smaller household budget, and all the responsibility is on you.
Not surprising, since it costs nearly a quarter of a million dollars to raise a child today. That does not include special circumstances, such as high medical expenses or private schools! Many couples with children both work to be able to make ends meet. If a two-income family suddenly becomes a one-income family, it can be quite a shock for both remaining parent and child, particularly when the loss is due to death.
This article will explore various strategies for managing money as a single parent.
The working poor
Many individuals, partnered or not, are considered the working poor. Working poor is defined as an individual who spends 27 weeks or more in the work force (either working or actively looking for work) and still has an income below poverty level. The Bureau of Labor Statistics reports that in 2012, 10.6 million people were considered working poor.
Not surprisingly, many single parents fall into this category. Many times, a divorce means a parent goes from two incomes to one. If the single parent makes a low salary, the result can be even more staggering.
Many working poor receive some type of assistance. There is no shame in asking for, or accepting, help. Many people pride themselves on "taking care of their own" without help from anyone; this is an admirable trait. However, it is not worth the level of stress it can create to do everything without assistance. It is far better to ask for, and accept, help than allow circumstances to overwhelm you. Think of it this way – the less stress you're under, the better you'll be able to parent your kids.
Many churches and community centers, as well as organizations, such as the Salvation Army, have food banks to help supply those in need. Some require an application, but many are open to anyone. Check your local area for days, times, and locations of food banks or distribution sites.
Resources, such as food assistance programs, welfare, and healthcare for children are available based on income and other criteria.
In most cases of divorce, courts will grant child support to the custodial parent. Child support payments are calculated based on statutory guidelines. Calculation criteria usually includes information regarding income, number of children, and amount of time the children spend with the non-custodial parent. If a couple's income is equal, and custody is shared equally, there may be no child support awarded to either parent. If circumstances change, the issue can be revisited and new calculations made.
Each state has its own statutory guidelines for calculating child support payments. Websites, such as the law portal AllLaw.com, have child support payment worksheets for every state. For example, Florida takes into account the number of children, net monthly incomes of both parents, day care costs, and monthly cost of healthcare premiums, while California also takes into account payments made for (or income from) any court-ordered child support or alimony payments from other relationships.
Being awarded alimony is sometimes no guarantee of receiving it. Non-custodial parents may vanish or refuse to pay. The custodial parent does have legal recourse in such cases, and should take it. However, as the saying goes, you cannot get blood from a stone, so if there is no income to attach, no payments will be forthcoming. (Some non-custodial parents have been known to quit working to avoid child custody wage garnishments!) If the non-custodial parent files for bankruptcy, they're still liable for child support payments.
Such a devastating circumstance is made worse by facing financial troubles, as well. For this reason, unless one has a hefty savings account, it is crucial that parents carry life insurance or final expenses insurance. At minimum, life insurance is suggested for any parent whose income makes a contribution to the well-being of the family, so if both parents work, both parents should carry insurance; however, couples may wish to insure the stay-at-home parent as well. The sudden loss of the family caregiver can also be financially devastating. Unexpected costs may include hospital or funeral expenses, child care, emergency travel, counseling, and assistance in the home (temporary or permanent).
At the very least, parents, especially single parents, need to carry end-of-life insurance. This typically low-cost insurance offers coverage amounts as low as $2,500, and is available without a medical examination. The purpose of this insurance is to provide funds for funeral expenses and other needs in the event of the carrier's death. Considering costs for cremation run anywhere from $1,500 to $4,000, and traditional funerals with embalming and casket average $6,000 (2013), single parents need to carry this insurance for the sake of their children, even if the budget is tight. Having life or final expenses insurance when you're a parent in a two-parent home is a very good idea. When you're a single parent, it's crucial.
If you rent your home, another excellent insurance to consider is renter's insurance (homeowners carry homeowner's insurance, which differs in that it includes the house structure itself, and is usually required by the mortgage holder). This low-cost insurance (especially if you add it to your auto or life insurance policy) is often overlooked, but very helpful should disaster strike. Consider for a moment what would happen if a fire swept through your home – would you be in a financial position to replace everything your family owns? Toiletries, food, clothing, blankets, pillows, beds, shoes, school supplies, computers, utensils, furniture -- the list goes on and on. Very few of us could afford to replace everything we own instantly without financial help, not to mention pay for temporary shelter. This is where renter's insurance comes in. Most basic policies cover losses due to fire or theft, but many cover breakage or destruction by accident (your child's friend knocks over and breaks your big screen TV, for example). Using the Internet, it is simple to shop for a policy that suits you; or ask your current insurance agent.
Of course, the "gamble" with insurance is, you may never use it. But it is better to be prepared – especially as a single parent.
When you're suddenly a single parent, you are on your own with budgeting. Even if you were the one to do the budgeting and bill-paying before the split, you need to develop a new budgeting process. Even if your previous budget strategies worked well, your financial and partnership situation has now changed. So should your budgeting process. If the budgeting and bill-paying was up to your spouse, you are better off to develop your own new strategies than attempt to duplicate your former partner's way of doing things.
Another excellent strategy is to plan your bill-paying. It is important, especially on a tight budget, to plan when to pay the bills and how much to pay. Missed payments due to oversight or lack of planning can not only damage your credit rating, they can put you behind in a way that never seems to allow you to catch up. This can be disastrous if the bills which have fallen behind affect basic life needs, such as shelter, water, or power.
To plan your bill-paying, you'll need your stack of bills (or a list with amounts and due dates), a current calendar, your dates and amounts of income during the month, and a simple budget sheet. Printable budget sheets (both for short-range and long-range planning) are available for free on the Internet. The monthly budget sheet below is from frugalfanatic.com:
Using a calendar, mark the dates your bills are due and the dates you receive income. Plan to pay bills prior to the due date, using income as the guide for payment dates. For large bills, such as housing, it can be helpful to divide the amount by the number of paychecks received each month, and withhold that amount from each check. In this manner, the rent or house payment doesn't use an entire income payment, leaving you destitute until the next pay period.
You may add, omit, or change categories on the budget sheet to suit your own circumstances. For example, many rental units include water, garbage, or other services in the rental price, so those categories can be omitted from the sheet. You can also separate categories into sub-categories; for example, if you wish to keep track of each family member's individual medical costs, the "medical" category can be broken down into sub-categories for each individual.
A good idea, especially when there is "too much month left at the end of the money," is a daily money plan. The plan is simple: Gather up all the money you have – cash, bank account, change, etc. – and count it. Deduct the amounts for any bills that must be paid prior to the next payday. Then divide the remaining amount by the number of days left until the next paycheck or influx of funds. This is the amount of money you can afford to spend each day. If one day, you spend a bit less, you can "roll over" those funds to the following day, or save the excess for any unexpected expense during the daily plan. If your children receive allowances, teach them this principle – not only is it an excellent training tool now, this skill will be quite beneficial later on, when the child goes out on their own into the adult world.
This brings up the subject of budgeting and the children – should you share any financial or budget information with the kids? The answer for single parents is definitely "yes." Your financial circumstances and dynamics differ from those in two-parent homes, so you need to "recruit" your kids to be part of Team Family, which includes financial information. The most important thing to remember is, do not overwhelm the children with information! Discussions about money must be age-appropriate. Regarding her 10-year-old son, one mother commented, "I think I shared too much information about the household finances with him too soon. He's the oldest, and I think he feels it's his job to be the man of the house and worry about money. He's always asking me if we have enough to pay the bills." The mother did not mean to traumatize her son; in her good-hearted attempt to help him understand their new circumstances, she shared too much information for him to handle. When children are small, it's best to explain the basics of how money and bills work, without divulging specifics about your particular situation. A 4-year-old is too young to be told the power may go out because you can't afford to pay the bill! If it does go out, of course, you must explain, but to tell them about such an event in advance only makes them worried and frightened. A pre-teen, on the other hand, is much more capable of understanding the situation and (this is very important) learning from it by watching the parent competently cope with, and correct, the situation. Principles such as daily money are excellent ways to teach children how to budget money, and shows them one way the single parent keeps the household running financially.
One mistake many people on a budget make when they first get paid is to go grocery shopping first and pay the bills second. Seems logical, right? The children need to eat, so you can't go without food. Strangely, the best thing to do is the opposite – pay the bills before buying groceries. The reason is this: When we go to the grocery store with a wallet or bank account full of money, we tend to feel we have "extra" money available and we over-buy, picking up things on a whim and purchasing more than we need. Then we come home and groan because we've spent too much at the supermarket and now can't afford to pay the phone bill. By paying bills first, particularly those related to shelter and other vital needs, you've taken care of the most important things, and now have a set amount of funds left for groceries – and because the "extra" money is no longer there tempting you, you're more likely to stick to your list and not buy things you and the children don't need.
One way to ensure your grocery list is not full of "fluff" is to plan your meals. Pay attention to what is quickly consumed by the family and what foods wind up in the trash. It's great if you want your kids to eat healthful food, but it does no good if you are continually purchasing food that winds up in the garbage. If your children are older, consider making your grocery list with a set amount of "junk food" you will purchase (or none at all), teach them to plan out their own snacks, and have them pay for snack items from their allowance. Then purchase healthful food based on a meal plan – if they're hungry enough and out of snack money, they'll probably eat the carrots you've got in the fridge.
A real budget-breaker is the holidays. Particularly the first year after a breakup or divorce, traditional gift-giving holidays can be murder on the budget, not to mention upsetting or difficult overall. To avoid eating ramen noodles for weeks on end, spend wisely, particularly during the holidays. It's not necessary to go overboard to ensure your kids don't feel deprived; it is not only possible, but quite doable to give children a great holiday on a budget. All it takes is a little ingenuity. If you don't already, start picking up gift items year-round. This can be challenging with children, as they grow so quickly and their tastes and interests change continuously, so gifts bought in advance for them should be things you know your child will want six months from now. Books, novelty items, jewelry, and sometimes clothing or shoes are good items to "stash away" for gift-giving. Many kids seem to love receiving gift cards, and many stores offer cash back or discounts periodically on gift cards. Buy things on sale as often as possible, clip coupons, shop for deals on the Internet, or sign up for email notices on sales and specials from your favorite stores. If you and the kids enjoy eating out, look for specials at local restaurants and diners. Some offer "kid's night," where kids eat free or for a discounted price.
One of the best things single parents can do to ease a tight budget is, learn to do more with less. For instance, if your sofa is beyond repair and must be replaced, instead of buying one on high-interest time payments or breaking the budget to pay in full for a brand-new one, consider finding one at a thrift store, yard sale, or website, like craigslist, or ask friends and neighbors if they know of one available for purchase. Sometimes, an acquaintance may know someone with a sofa to give away – but you won't know unless you ask.
At tax time, use any tax breaks at your disposal. If possible, set up an emergency fund to handle extra expenses. If you receive tax refunds, consider putting them aside in a savings account for this purpose.
Credit counseling, debt consolidation, and bankruptcy
For a single parent in debt, the best solution is to contact your creditors directly and see if they will work with you to develop a repayment plan. If such negotiations are not possible, the in-debt single parent might consider a more drastic step.
Many people believe credit counseling and debt consolidation are the same. While they both begin with the process of meeting with someone who will help analyze your debt, credit counseling also takes into account your income. Debt consolidation is more suitable for individuals who have not yet fallen behind on payments and still have a good credit rating. Debt consolidation requires you to take out one large loan (usually at a lower interest and payment rate) to pay off all debts, leaving you with an easier-to-manage single payment. This can be done with the help of a reputable debt consolidation service, or on your own with a private bank.
While credit counseling also works toward a consolidated plan, credit counseling firms do not offer loans. Instead (usually for a fee), counselors will work with your creditors on the client's behalf to negotiate lower percentage rates and/or monthly payment amounts. Drawbacks include the need to make separate payments to creditors who don't agree to participate in the plan, and the possibility of losing your property if it's part of the counseling agreement and you default. Additionally, the percentage of individuals who do not complete a credit counseling program is rather high – about 47 percent. A debt consolidation agreement may not allow you to obtain any new credit during the program.
Bankruptcy should always be a last resort; it stays on your credit report for seven to 10 years and can make it difficult to obtain not only loans, but housing and employment, as well. Any loans or credit cards obtained during and right after the bankruptcy period will likely be at an astronomically high interest rate. Utility services may require a substantial deposit to turn on service.
Bankruptcy laws have changed since 2005 in an attempt to encourage individuals to file for Chapter 13 bankruptcy instead of Chapter 7 (straight) bankruptcy. Briefly, the difference is as follows: In a Chapter 13 bankruptcy, if the filer has consistent employment or income, he or she agrees to a court-approved repayment plan, typically lasting 3-5 years. At the end of this period, if all payments have been made, any remaining debt will be discharged. Chapter 13 "wipes out" all unsecured debt, such as credit card bills, but you may lose some of your possessions, especially non-essential property like a boat or vacation home. Individuals wishing to file Chapter 13 must have proof of meeting with a credit counselor within the six months prior to filing, and one must now wait eight years following a Chapter 7 discharge to file again (the waiting period is shorter for Chapter 13). And remember, bankruptcy does not dismiss child support or alimony payments.
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- Pros and Cons in Single-Parent Families
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- How to Support Your Child's Socialization
- Substance Abuse Problems in the Workplace
- What Positive Parenting Looks Like in Our Reality
- First Stage of Child Development
- The Foundation of a Parent-Child Relationship: Establishing a Close, Healthy Parent-Child Relationship
- Drug Effects of Hallucinogens Abuse in the Workplace
- Understanding Child Development
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