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Being a parent is one of the most rewarding and most exhausting experiences there is. Parenting has continuous obstacles to overcome, but single parents face their own set of unique challenges — especially when it comes to finances.
As a single dad, you’re carrying the weight of the world on your shoulders. Your kids are completely dependent on you for all of their physical, emotional and financial needs.
And with the current coronavirus pandemic, you may be feeling even more overwhelmed if your job stability is up in the air. All of this in addition to the fact that your kids are unexpectedly out of school and probably eating you out of house and home while needing every moment of your attention.
Here are some financial literacy tips for single dads to help you stay on stable, financial ground during this unprecedented time.
Put a money management system in place
As a single dad, you’re likely solely responsible for the money coming in — and the money going out, which means you probably don’t have someone holding you accountable for your spending.
So, it’s important that you sit down and come up with a realistic money management system that works for your family. Your system should include a detailed budget that accounts for all of your income, expenses and savings goals.
During this pandemic, it’s easy to give into online shopping and mindlessly buying things you may not need. And for many people, that money isn’t readily available, which can lead to lasting credit card debt.
You may need to say “no” to yourself and to your kids more than you’d like during this uncertain time. And that’s okay. Your child’s immediate wants shouldn’t outweigh your family’s immediate and future needs.
Once you have a budget put together, set up a routine to check up on your finances. Use a budgeting app or create a spreadsheet to track your family’s spending. This approach will help you to head off any spending problems, while encouraging you to dedicate more funds to your savings and other financial goals.
Cut down your expenses now
As you craft your budget, consider which expenses you can eliminate or negotiate. The more you can shave off your expenses, the better position you’ll be in if you were to experience a drop in income due to COVID-19.
Many companies are offering crazy-good deals to retain current customers and bring new ones on board. Call each of your service providers (e.g. internet, phone, TV, etc.) and ask to speak with their retention department. Their loyalty team will often offer rates that aren’t advertised to keep your business.
You might also be able to cut your child care expenses during this pandemic if you’re an essential worker. For example, parents working in essential jobs in Tennessee can access free child care through various local partnerships. So, be sure to check with your state and local authorities for available child care resources.
Build up your emergency fund
Having a hefty emergency fund is even more important as a single parent because your family depends on your income. There isn’t an income to fall back on if you lose your job or have your hours cut during this pandemic.
Ideally, you want to have at least three to six months’ worth of living expenses set aside for life’s emergencies.
Here are some ways you can quickly increase your emergency fund:
- If you have federal student loans that were put into automatic forbearance under the CARES Act, you can reallocate your monthly payment to your emergency fund instead. Once your student loan payments resume, you may be able to lower your monthly payments with an income-driven repayment (IDR) plan. Or, look into refinancing your student loans for a lower interest rate.
- Use all or part of your economic impact payment from the federal government to pad your emergency fund.
- Pick up a side hustle and dedicate those earnings to grow your savings.
You should also review your credit card balances and limits. Credit cards should only be used as a last resort, but they may become a necessity during a crisis.
Protect your family by planning for the future
One of the best ways to protect your children is to ensure that you have about five times your income in term-life insurance protection.
Term life insurance provides a flat amount of coverage to your family during a set period (e.g. 10 years, 20 years, etc.) if you pass away. I recommend going with a term life insurance policy, rather than whole life insurance, because:
- Term life insurance can be purchased at a small fraction of the cost. Some of my clients at Student Loan Planner have paid hundreds of dollars a month for very little coverage; whereas, I pay about $20 a month for a 10-year term policy with $1 million in coverage.
- Whole life insurance rates of return are low compared to investing in index funds long term. And considering a large number of policies lapse within the first five years, the annual rate of return for those policies are well into the negative range.
- Whole life insurance companies pay huge commissions to their sales agents. Commissions can be as much as 100% of the first year’s premium and even extend into additional years’ worth of premiums. This is why sales agents can be aggressive and persuasive even though it’s not a great financial product.
Choose a term that matches your needs, but most people should consider a 20-year term policy. You’ll want a policy that will at least cover you until your children are living on their own and no longer dependent on your income for survival.
Get creative and make memories during this pandemic
Your kids won’t remember how much money you made or spent during this pandemic. They will remember the meaningful memories that were made as a family.
And making memories doesn’t have to cost an arm and a leg.
Use this time to connect with your kids. Go for family walks. Throw around a ball in the driveway. Have movie nights on the living room floor. Go camping in your own backyard. Embrace this chance to go back to the basics while improving your family’s finances.
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This content is brought to you by Travis Hornsby.
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