Approximately 40 percent of single women have less than $1,000 saved for retirement. Single parents don’t lack savings because they don’t think they need it. They simply don’t know how to come up with the extra money.
There are some tips that single men and women can follow to free up some money to use for their savings accounts and retirement. Look at the struggles single parents face and some solutions to fix their problems.
The Issue of Budgeting
Raising a child is expensive. In 2015, it cost an average of $233,610 to raise a child, and the number keeps going up. Single parents often find themselves juggling utilities, childcare costs, clothing, and more, leaving nothing to put into savings.
Implementing and following a strict budget is the solution to this problem.
Begin by tracking your spending for a full week. Then, find three categories where the spending is out of control. These typically include food, clothing, and entertainment.
Create a new spending goal for those three categories, keeping the 50/20/30 plan in mind. This plan means that 50 percent should go to necessities and 20 percent should go to savings. Then, the final thirty percent should go to other items.
Create a new budget with the plan and start saving. Continue to make adjustments until your savings goals are reached.
Drowning in Credit Card Debt
It’s impossible for single parents to save if they have credit card debt. Unfortunately, it’s normal to charge items when struggling to get by with a single income.
People who rack up a lot of credit card debt end up trapped in that debt for years. They make minimum monthly payments and barely hit the principle. They end up spending years making payments and wasting thousands of dollars on interest.
Parents who want to save need to tackle this debt head-on.
Single parents who have credit cards with high interest rates should consider a balance transfer. Balance transfer credit cards offer zero percent interest for a specific period of time. This typically ranges from six months to a full two years.
Once the balance is transferred, it is up to the parent to pay it down quickly. Avoid making minimum monthly payments. These payments don’t pay the debt down fast enough. Instead, parents should double or triple the minimum payment to pay down the debt quickly.
If a balance transfer card isn’t an option, people can use the stacking method to pay off the debt. This is also referred to as the avalanche method. Consumers put all extra money into paying off the card with the highest interest rate first and then move down the line to the next card.
After paying off their credit cards, cardholders should edit their budgets so the money that was going to the credit card goes to savings instead. It is easy to build up a savings account once credit cards are paid off.
Paying for Food
Food is necessary but costly. Americans spend an average of $151 a week on food, and ten percent of people spend $300 or more on food.
Food quickly eats up your budget, but fortunately, there is an easy solution.
Single parents can save as much as 40 percent at the grocery store by building their menus around coupons and using reward programs. Consider going the extra mile by purchasing twice as much of the sale items and freezing the rest.
People should also avoid eating out. Simply spending $10 a day on lunch adds up to $50 per work week. That’s $2,600 a year that could go toward savings.
Finding Extra Money
Single parents also need to realize there are tax breaks designed for them. These breaks make it even easier to save money.
Single parents who have a gross income of less than $75,000 a year might be able to get a credit of up to $1,000 per child. Those with a gross income of less than $38,646 per year also might be eligible for an earned income credit.
Finally, the IRS offers tax breaks for parents of children in college. Take advantage of the breaks and funnel those refund check into savings.
Raising a child alone is hard enough without the added burden of trying to get by without savings. Everyone needs money in savings to use for retirement and as a safety net if something goes wrong. Follow these tips and start building that savings account today. Soon, saving money will be second nature.
You can find more of Patty’s personal finance, career, and motherhood articles over at her Twitter @WorkMomLife. When she’s not at work, you can find her playing with her daughter or going on long runs.