How single parents can plan finance?

Managing finances as a single parent could be challenging in today’s changing environment if not appropriately planned.

Things could get out of control if not managed adequately. The child/children could be deprived of basic needs like education, clothing, etc.

Single parents need to plan things well in advance so they don’t lose their sleep over finances.

1. Get rid of debt

The first step is to get rid of debt. If you have any, try to pay off all the debt to reduce liability. And there is no stress of paying the EMIs.

2. Emergency corpus

The next step is creating an emergency corpus for yourself and your child to remain protected in uncertain events like job loss.

The ideal way of making an emergency corpus is to put aside 6 months of your expenses. For example: if you have monthly expenses of Rs. 30,000, then you should put Rs.1,80,000 in a liquid fund or fixed deposit.

3. Life Insurance

If something wrong happens to you, how or who will care for your child’s expenses? For such a situation, consider having life insurance, preferably Term insurance.

Calculating the amount of life insurance can be calculated in many ways. One could be 25 times your CTC. Suppose you have a CTC of 6 Lacs. The ideal life insurance cover you should consider is 1.5 crore.

4. Medical insurance

Anyone can face health issues at any point in time. So, it is better to be well prepared by buying medical insurance.

5. Make a budget

After having all these things in place, make a monthly budget. Calculate all your inflows and outflows, and categorize them into different categories

6. Define short-term & long-term goals

Now, you need to prioritize your goals based on their importance and the time left to achieve them. Suppose you have to buy a house and a car and pay your child higher education fees.

Now, you need to define which one is a short-term goal or which one is a long-term goal.

Like buying a house or car can come under long-term goal, but paying for your child’s education could be short-term or long-term, but it needs to be prioritized at the top of your goals.

Define the goals and prioritize them so that you achieve all your goal in time. 

7. Make a financial plan

Create a financial plan to achieve your goals which will define the time to achieve it, your risk appetite, and how much amount will be required to achieve that goal.

Draw your investment strategy to help you achieve your goals effectively and efficiently.

Read more: How expensive is an education abroad for a parent?

Conclusion

When you are the only person to take care of your child, you should try to plan everything well in advance to provide a quality of living for your child. Having a sound financial plan will also help you ease your financial journey during the downturn.

Consult an expert advisor to get the right plan