Knowing where to begin is the first step. If you’re divorced (or currently going through the process), tackling financial matters may seem daunting.
“A divorce is kind of like hitting the reset button on your finances,” says Ryan Bertrand, vice president and managing director of Advanced Markets at Transamerica.
To offer some guidance, the Advanced Markets team compiled the Divorce Checklist: 7 Steps to Consider. You’ll, of course, want to consult with a financial professional and seek licensed tax and legal counsel when necessary.
As you start down the path toward financial stability, here are just a few things you might want to think about:
Create an emergency fund
Most financial professionals suggest keeping four to six months of living expenses in a liquid account for unexpected events. As a single parent, you’ll want to have enough to cover your kids’ expenses too. That amount may seem like a lot but start with small, regular deposits into a liquid account. Maintaining an emergency fund may help you avoid dipping into retirement savings or maxing out credit cards in the case of an unforeseen event.
Get a handle on credit
If you have issues with credit and don’t feel like you’ve got the ability to address it on your own, consider seeking guidance from an organization like the National Foundation for Credit Counseling. In some instances, they might be able to provide free or low-cost counseling.
Rein in childcare costs
Childcare costs are soaring across the country. Recognizing the financial burden this imposes, Bertrand suggests it’s worth reaching out to grandparents, other relatives, or friends to potentially reduce costs and fill in the gaps.
A smart way to save for higher ed
When it comes to putting money away for your children’s education, consider looking at a 529 college savings plan or possibly a Roth IRA. NerdWallet.com compared the two options: “Your contributions to a Roth are available to you anytime tax- and penalty-free.” So, in that respect, it can act as a back-up emergency fund if the need arises. Keep in mind that generally, only your contributions can be pulled without penalty before you turn 59½.Distributions on growth must be used for qualified educational expenses to avoid the 10% penalty.NerdWallet also notes 529 plans have some advantages when it comes to contribution and income limits and taxation. These vary by state, so do some comparison research.
Time is valuable – so treat it as a commodity
Of course, there are a lot of things to manage as a single mom – both financially and personally. In terms of budgeting, Bertrand includes time on the list. That means budgeting time for yourself and time with your kids. You might find having those moments can offer some perspective and remind you what’s most important. If that fails, there’s always that massage.
If you’re a single mom, do you have any tips for managing the day-to-day challenges of motherhood? What works for you regarding money matters?