A Helpful Checklist for Single Moms
- Create a budget and evaluate your spending.
- Determine your short- and long-term financial goals and how you can achieve them.
- Put as much money as possible into your 401(k)—10 percent to 12 percent of your paycheck is ideal if you can swing it.
- Continue to contribute as much as you can to your 401(k) and college savings plans. If you have to choose, it’s more important to contribute to your 401(k), as loans and scholarships can help pay for higher education.
- Begin saving enough to cover three to sixth months of household expenses in case of an emergency.
- Take steps to reduce any credit card debt. If you’re paying high interest charges, ask your issuers to lower your rate or find cards that offer lower rates. Taking out a home equity loan is one way to consolidate debt at a much lower interest rate.
- Avoid taking money out of your 401(k) or IRA—in addition to paying income tax on the withdrawal, you’ll have to pay a 10% penalty on the withdrawal before age 59½, unless an exception applies.
- Make sure you have enough life insurance and disability insurance to protect your children in the event you’re unable to work or you pass away.
- Take advantage of all of the tax breaks available to families with children.
- Draft a will or update the one you have to name a guardian for your children.
- Teach your children about money and your financial situation as soon as they are old enough to understand. Having their own savings account is a great way to show them how to strike a balance between saving and spending.