How To Stay On Top Of Your Finances As A Single Parent

Unfortunately, when due to divorce and/or demise of your life partner, you are forced to become a single parent. Sometimes you choose to take this role for the rest of your life. Here is how to be in charge of your finances.

Have A Budget In Place

Begin by documenting all income sources and then make a list of your monthly expenses, such as rent, utilities, groceries, childcare, and medical costs. Differentiate between essential and discretionary expenses. Prioritize spending on essentials—like nutrition, clothing, healthcare, and education for your child.

“Consider dividing your income such that 50 per cent covers necessities, 30 per cent goes toward optional spending, and 20 per cent is allocated for savings and debt repayment. This structure promotes balance and financial security,” says Madhupam Krishna, Securities and Exchange Board of India (Sebi) registered investment advisor (RIA) and chief planner, WealthWisher Financial Planner and Advisors.

Utilize budgeting tools or spreadsheets to track your expenditures each month and make adjustments as necessary to stay aligned with your budget.

Get Insured

Insurance - both for life and health, to protect the financial interest of those dependent on you – be it children, parents, and/or in-laws. “They should have a term policy benefiting the child that will address the complete goals of the child. It can be education, higher education, and marriage. The parent should identify all goals and plan accordingly,” says B. Srinivasan, director and founder, Shree Sidvin Investment Advisors. Also, consider adding disability insurance to manage income during such a phase of life.

Plan Wisely

Balancing the need to save for your child's education and your retirement can be tough as a single parent. Start by assessing your overall financial situation, making sure you cover essentials like housing, groceries, and any debt you might have.

Plan for both goals: child education and your retirement. Most of the time you will have more time to fulfill retirement goals in comparison to child education. Hence you need to choose investments accordingly.

“Consider starting systematic investment plans (SIPs) in mutual funds, especially equity funds for long-term goals. They are a good way to create wealth over the long term and achieve financial goals. If you’re planning for your children’s future needs like education don’t forget to factor in inflation as it has the power to erode the purchasing power of money,” says Krishna.

One cannot be dependent on their child. ‘Even if there is dependency, there is something called a moral dependency and the second is called the financial dependency. You can have a moral dependency, but you should never have a financial dependency. So being a single parent one cannot ignore their own retirement goals,” says Srinivasan.

Pay Off Your Debt

Sometimes you may find yourself in debt and this is quite a challenge for a single parent. In such a case you need to go backward -to your budget. The monthly budget will provide you with hints on where you can and should save to pay off debt. “Focus on tackling higher interest debts first, like credit cards, to reduce overall costs. Consider debt consolidation or negotiating with creditors for better interest rates to streamline payments,” says Krishna. If still the ask is too high, look for ways to increase your income through part-time jobs or freelance work; this extra money can go directly toward paying off debt and building savings.

“A single parent also needs to look at estate planning where in the event, that something happens to them and their child is a minor, they need to create a trust which will come into force immediately after their demise, which will ensure the child gets all the money with the executors and all goals will be addressed. In other words, all their savings and investments will go into their trust and the trust will take care of the child’s future,” says Srinivasan.