Life as a single mom is not easy. You now have an additional money responsibility to fulfil. On the personal end, you now have the double responsibility of being a mother and a father to your kids. This article contains simple financial planning tips targeted at single mothers so that they can take a grip over their family’s finances and plan confidently for a brighter future.
Tip # 1: Sort out your husband’s finances and legal paperwork:
The trauma of a husband’s death or a divorce will take time to heal. However, as soon as you are in a proper frame of mind, take it as your first priority to sort out your husband’s finances and paperwork. Check all the money related files for all the insurance and investments made by your husband. Note that the ownership of investments does not shift to you automatically on your husband’s death. If you’ve undergone a divorce, then it is a little bit complicated. The best approach is to have a good lawyer by your side who can give you proper legal guidance in these matters. You should do the following tasks:
- File insurance claim in the life insurance policies purchased by your deceased husband.
- Apply to all financial institutions to transfer investments in your name, with some documentary proof like a death certificate and probated copy of the will or succession certificate.
- Make your will. Appoint a guardian in your will who will take care of your kids in case of your untimely demise.
Tip # 2: Restart your career:
Many women leave their profession after childbirth. However, the situation you are now in may need you to restart your career. However, you need to assess the hours that you can give to your job and the skill sets you possess. For example, suppose earlier you were a full-time software engineer. In that case, a significant time gap may make it harder to find another job. Instead, you can choose a part-time job or a freelance role that can help you earn a stable monthly income and manage your kids simultaneously. Reach out to your past colleagues for support. Also, in the meanwhile, enrol in one of the several low-cost online courses that are available. This will help you bridge your skill gap and also improve your CV.
Tip # 3: Clear past debts
Your husband might have taken certain loans in his lifetime, which have not yet been fully paid. Take proper legal advice to know of your legal rights and responsibilities in such cases. Figure out the finer details of the loan. Contact the lender and explain your situation. See if they can restructure the terms of the loan. Close the credit card and personal loans first by using the liquid funds at your disposal. Beware of unscrupulous people who would ask you to repay loans that they had lent to your husband. Demand satisfactory written evidence as well as supporting bank entries to prove the same.
Tip # 4: Purchase proper insurances:
Make a list of the risks that your family is exposed to. Map the existing insurance covers that you have and find out the gap. Buy the relevant insurances as early as possible. This may include a pure term plan yourself and medical and personal accident insurance for the entire family. If you already have a health insurance plan and the cover is inadequate, consider a top-up plan that is very cheap compared to buying a new plan. Also, buy home insurance for your house structure and contents.
Tip # 5: Create an emergency fund:
As a single mom, you must have a sufficient emergency fund of a minimum of six months of your expenses and EMI payments. This will help you in two ways. First, it will save you from other family members and expensive credit card and personal loans. Second, it will help you keep your long-term investment plans to remain unaffected. You can earmark any existing fixed deposits or investment in liquid mutual funds towards this goal.
Tip # 6: Make a household budget:
As they say, the fundamentals are the most important. If you want to get a grip on your finances, you must first get a firm grip on your monthly cash flow. Make an expense diary. Find out how much money comes in and where does all the money go. The amount that is left is your savings. This analysis will provide you a good idea of the broad cash flow pattern in a few months. That clarity will then act as an input to reduce your expenses and invest the savings in productive avenues.
Tip # 7: Invest in the right financial products:
In the absence of proper knowledge of the right investment avenues, many single moms keep the monthly savings and the proceeds from the insurance policies in a bank account. A better approach is to devote some time every week to learn about personal finance and create a goal-based investment plan for each of your financial goals. It is essential not to take any hasty decision with your money and don’t invest blindly based on the advice of ill-informed relatives or unscrupulous financial salespeople. You can also hire the services of a SEBI Registered Investment Adviser and invest as per her advice.
As a single mom, the hectic daily routine can keep your focus away from money management. This lack of focus can compromise your family’s financial well-being in the long run. You need to quickly upskill yourself and take hold of your finances before it’s too late. The proper knowledge will protect you from bad advice. It will also help you make the proper decisions at the right time to secure your critical financial goals.
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