10 Financial Mistakes to Avoid as a Single Mom
Whatever the “why” that brings us to raising our kids solo, one thing we all share in common is figuring out how to survive financially as a single mom. Unfortunately, some of us have to go as far as to tackle how to be a single mom with little to no help. So in this article, I want to discuss ten financial mistakes single moms should avoid and offer solutions to help you dodge some major financial pitfalls.
Why Single Moms Get Trapped Into Financial Mistakes
For solitary gals with kids, the relationship with our money can be as rocky as a toxic ex. Money is a huge stressor that can cause other problems for us; depression, anxiety, and chronic illness. Single moms are more likely to live in poverty than married couples, and our incomes are stretched thin by the added costs of raising children if we’re the custodial parent.
Limited funds can make it challenging to create retirement savings, pay off debt, or even keep up with monthly bills. In addition, single mamas may find it challenging to balance their checkbooks throughout the month because of dynamics that are out of our control.
The cost of living is rising for families.
The cost of housing, healthcare, groceries, and gas is at a forty-year high. Wages for women remain stagnant and, in many cases, lower than those of our counterparts. Many women have to work multiple jobs to make ends meet.
Children are expensive.
Raising kids is not cheap! From the cost of food and formula to clothing and shoes, our resources only go so far. As our kids get older, our child-rearing costs increase. Extracurricular activities, school supplies, and college tuition add up, and it’s easy to see why we have to make our money work smarter.
Child support doesn’t cover as much as it should.
In an ideal world, child support would cover child-rearing expenses. But in reality, it often falls short, leaving single moms and sometimes our families to make the difference. Whether you’re financially dependent on friends and family to get by or it’s you, yourself, and you learning to make sound financial decisions will give your well-deserved ego a super-boost.
The Importance of Avoiding Financial Mistakes as a Single Mom
A split with an income-earning partner may immediately cause financial instability for you and your kids. Unfortunately, when we have money problems, we often are too exhausted and embarrassed to ask for help or face it.
Financial confidence is essential to being a healthy momma, which we all strive to achieve. Consider two sure things to get you started on your money journey: Retirement and unexpected expenses.
You’ll need a retirement plan someday.
Ladies, we work our butts off. Maybe you love your job as I do, or perhaps you hit your snooze to avoid the morning dread. We go through a lot for eighteen straight years, and we are rock stars for it. I want to help you pause by pumping the brakes on living life at warp speed and bring your attention to this reality – you will get older, and you deserve to have a retirement plan. It doesn’t matter what level of income you earn.
Yep, you read that right—you’ve earned it.
You never know when unexpected expenses might pop up.
Single mamas don’t usually enjoy surprises unless on a beach in a tropical paradise. An unexpected expense can mean your paycheck is spent for the next six weeks, and that’s no good for our mental health. We set ourselves up for failure with the “I’ll worry about it when it happens” approach.
With those truths in mind, it’s time to think about taking some action.
10 Financial Mistakes to Avoid As a Single Mom
Regarding our finances, it’s essential to know what to avoid so we don’t create a dynamic that will work against what we’re trying to achieve: confidence and control.
1.Letting your credit report go unmonitored.
A low credit score can prevent us from getting the best interest rates, housing, transportation, and employment. Even if you’re diligent about paying your bills on time, credit reports can contain incorrect information about your accounts, including your payment history, which significantly impacts your credit score. Sign up for a credit monitoring service like Credit Karma or Credit Sesame.
2. Going without a plan or a budget.
A company that doesn’t have a plan or a budget wouldn’t survive long and leave its investors at a loss. The same applies to our little company—our family! The worst financial plan is not having a plan. Be sure to use a budgeting system like the 50/30/20 budget or something similar to get a handle on how you spend your hard earned cash each month.
3. Ignoring where your money is going.
Knowledge is power! Track your spending so you see what’s costing you the most. Many banking apps have a spending calculator with easy-to-read charts to help pin down where your hard-earned dough is going. Tracking your spending will help you stick to your budget.
4. Excessive and frivolous spending.
We have so many choices in purchasing things that we can end up nickel and diming ourselves and sabotage our money flow. Look at your spending on an annual basis and see if it makes sense. For example, a $25 a week Starbucks tab adds up to $1,300 per year, a good chunk of change. Cutting that in half would add an extra $600 to your annual cash flow.
5. Underestimating childcare costs.
Childcare Aware of America reports childcare costs account for 10% of two-income homes and 35% of single-parent households. Build a support network and lean on it. Asking for help isn’t something we’re great at, and this is the time to suck it up. Are there other single moms in your neighborhood? Parents of your kids’ friends? Church or synagogue members? What about a neighborhood babysitter? Planning for childcare will help you avoid a mental meltdown when an emergency arises.
6. Spending too much on housing.
Women coming out of a breakup with a partner face many changes, including housing. Many of us work hard to prevent our kids from being too disrupted because of it. Unfortunately, housing costs can take up to fifty percent of our net income, leaving us stretched for other bills.
After you know where your money is going, look at your housing expenses: mortgage or rent, insurance, taxes, utilities, cable, phone, and maintenance. If your housing expenses exceed 50% or higher, prioritize each expenditure in that bucket and start making cuts.
7. Postponing financial decisions.
Making smart financial decisions is difficult if you feel like you are always broke. While it may feel counterintuitive if that’s your experience, it’s even more important to lean into making tough decisions. Something as simple as making an appointment with a manager or financial advisor at the local branch of your bank to have them help you will make a huge difference in building your confidence. That’s what they’re there for, and it’s free!
8. Choosing not to invest in your future.
When every dollar counts, focusing on savings seems like something we should figure out later. I can’t stress the importance of paying yourself before paying other bills. Investing just $5 – $10 per paycheck and adding the same amount to an emergency fund savings account will increase over time. Refer to the free FDIC training for building a retirement strategy, or lean on the bank manager for advice.
9. Foregoing Life Insurance.
Life insurance means death—who wants to think about that? However, accidents and illnesses happen, and if something happened to us, where would that leave our kids? God forbid if something happened to our kids, where would that leave us? Horrible thoughts! So we often skip them, and planning goes down the drain.
The last thing you or your kids want to worry about if one of you is lost is money. Life insurance is easy to obtain and affordable for you and your kids through companies like Ethos or Colonial Penn Life.
10. Oversharing finances with your kids.
Giving kids more information than is age appropriate causes us to pass along all the negative emotions we’re feeling to our little ones, and it can plant a negative seed for them with their own money down the road. While it’s normal for a kid to see a parent stressed, telling them more than they need to know about your financial stress can cause a sense of insecurity and helplessness.
I’m not suggesting you fake it around them; instead, refrain from telling them your account is overdrawn or their father is behind on support or cheap. Have them help with chores and other areas where they can feel like they’re pitching in.
OK, ladies, now it’s time to take out your cape and put it on because getting your stuff together financially is going to make you feel so confident in yourself that you’re going to want to take a supermom’s lap!
You’ve got this. Face your fears by grabbing the financial bull by the horns and showing him who’s boss! And if you need a little help along the way, check out our database of financial resources for single moms.
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