If you’re a single mom or you’re part of a parenting team but one of you is a stay-at-home parent, you may have to find a way to live on a single income moving forward. As challenging as that can be, it can also be rewarding, creating more opportunities for both parents to spend quality time with children. In addition, having one parent run the bulk of the household can be less stressful than trying to juggle the tasks between two working parents. However, it still can require some smart financial strategizing, and the tips below can help you with that.
Pay Down Debt
Debt can consume a substantial portion of your monthly pay. In fact, if you are both still working, you may need to pay down your existing debt before you can move to living on a single income. High-interest debt, such as what you owe on your credit card, can be particularly hard to deal with if you’re not bringing in two incomes for a family of three or more. Your first step in paying down what you owe should be to reduce that amount as much as possible. Rolling credit card balances onto a card that offers low interest for transfers can give you a few months to aggressively pay those balances off without constantly mounting interest.
However, if you do go this route, make sure that you note when the low-interest period ends. Taking advantage of NaviRefi student loan refinancing can help you refinance your student loan debt into something more manageable, whether that means lower monthly payments or lower interest rates. Work out a schedule for paying off your highest-interest debt first. Put most of your resources toward this, sticking for now with minimum payments on your other debts. Once the one that was costing you the most in interest is taken care of, you can reassess whether this is a good time for one of you to quit working or if you want to get rid of more debt first.
Have Emergency Savings
The corollary to paying down debt is having an emergency savings fund. You often end up owing money not because you have been careless with it but because life happens, in the form of your dog getting sick, your furnace breaking or your wisdom teeth deciding to torment you. Having emergency savings can change these incidents from financially cataclysmic to merely annoying. Building up this fund is something else you should consider doing prior to one person leaving their job if you’re both working.
The usual advice is to have between three and six months of expenses in this fund. With children, it’s probably a good idea to aim for the more financially conservative goal of six months. This should be in an account that is easily accessed instantly, such as a money market account or a regular savings account. If you’d feel more comfortable with additional savings beyond that, you could consider investing them across several certificates of deposit that are due at varying intervals. This allows you to earn a higher interest rate than you would with a savings account but ensures that the money isn’t inaccessible for too long.
Knowing exactly where your money is going will be critical to managing on a single income. In addition, creating a budget presents an opportunity to think about where you’re spending your money and how you’d like to change that. You will discover ways to save money on food, or trim down entertainment costs, etc. If you’re either transitioning from two incomes to one or you’ve been struggling on a single income up to now, this is a good time to identify how you could remove some of that financial pressure. Some of your changes might be fairly low-key, such as doing more meal planning so that you aren’t impulse buying at the grocery store or feeding the family on expensive takeout. Some might be more drastic efforts at downsizing. You may decide to trade in your car for a less expensive one or that you want to move to a smaller place. It’s important that your budget doesn’t feel like a tool of deprivation, but you may also need to work on your mindset in that regard. For example, if you have to cut back on the family entertainment budget, remind yourselves that it’s less the things that you do and more the time you spend together that is important.