Raising a child is no simple matter as parents are responsible for everything from clothes and school supplies to rides and guidance. Above all else, it is the job of the parent to ensure the well-being of their children. For a couple this is no easy task but when the situation is changed and that job falls to a sole individual, it can become exponentially more difficult. Along with balancing life around ever-changing schedules, the added challenge of a single income presents its own unique difficulties. Things can get tight and it may become a matter of picking one necessity over another. That stops today. There are ways to go about tackling finances that will enable a more comfortable lifestyle without costing you unnecessarily. Below are a few tips that will help you understand where you face the biggest expenses and how you can start cutting them.
Make a Budget
One of the most important things to do when trying to get a better grasp on your finances is to create a budget. When it comes to spending and saving, your budget is your guide. To begin, you’ll want to take one to two weeks to jot down the various expenses you pay. Include everything from utilities to purchases at the grocery store. The more information you have, the easier it will be for you to create a comprehensive outline of how you will allocate your money. Be sure to include the amount you need to save up and an aspirational amount that you would like to save up. When you have your budget in hand, start following it. Something that many don’t realize is that budgets will be subject to change. Especially as you find those opportunities to cut more spending in some areas than you initially believed you would, amend your budget to reflect this discovery so that you can further increase your savings.
Make Financial Goals
Along with your budget, you should take the details of your situation into account and begin making financial goals to aim for. These goals can include an emergency savings balance, retirement planning, and even a college fund. Be sure to note that you should always prioritize your retirement over your child’s college fund. Though it sounds cruel, it is possible for students to qualify for scholarships, financial aid, and student loans. For adults, there is no entity that will provide the same assistance with retirement. Be sure to make some short-terms goals and long-term goals as well because part of progressing is seeing yourself advance. It is inspiring to check off the boxes of the items we accomplish and it can inspire us to keep pushing towards our more difficult goals.
Have An Emergency Fund
An emergency fund is the most important savings account you can have. It is meant to serve as a safety net for any unexpected occurrences that could threaten your financial stability. Whether a medical crisis, unexpected death, or major car repair, it is your emergency fund that should be able to bail you out should you need it. Because of its significance, it is important that you build it up over time. The more money that you have in that account, the greater your ability will be to overcome snags down the road. In addition, it is critical to remember that an emergency fund is meant to be used only for emergencies. Tapping it as you would another savings account undermines what it represents and could quite literally threaten your financial stability should you have need for the fund. Maintaining half a year’s pay in an emergency account is advised but holding a full year’s pay in your account should ensure you valuable coverage.
Start Paying Off Debt
One of the most important financial obligations to address is debt. Whatever form it takes(credit card debt, student loan debt, etc.), debt represents a regular payment subject to interest. When it comes to repaying debt, if you have to prioritize any of your payments in particular be sure to go for the ones with the highest interest rates, as they will cost you the most money. The strategy when paying is to exceed the minimum amount and instead make the full payment requested. Once again, if you can only pay the full amount on one source of debt, do it to the one with the highest interest rate. This will help to expedite the process of repayment. The sooner you can get out of debt, the sooner you’ll be able to allocate more of your money.
Sometimes the expenses that seem the most insignificant are the ones that end up costing us the most. Often these include leaving the lights on or making a few quick stops into a fast food establishment each week. Though it is easy to chalk these habits up to necessary expenses, minimizing those insignificant costs can go a long way. Especially for saving around your house, you may find it easy to put money back into your pocket by following in simple strategies like cutting the time you spend in the shower, unplugging devices once they are charged, and making a habit out of cutting your lights out when you are no longer in spaces. Just following a couple of these tips could a high electric bill and amount to a few hundred dollars each year. Even better, you can get your kids involved in cutting off unnecessary expenses to assist you in your savings efforts.
Douglas Keller has been a financial expert for 20 years, helping people reach financial stability. He now provides personal finance tips on his blog Peak Personal Finance, where he helps people save money on their bills every month.