Financial Planning for Single Parents

Tuesday Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.

It’s hard enough for a couple, but for a single parent, the managing of the family, running the house, and holding down a job is next to impossible; but you do it. Dropping the kids at daycare, chauffeuring them to little league or dance, cooking up breakfast and dinner, helping with homework. I could not do it, but I’d like to make a few suggestions in the financial planning area which are also suggested by various CPA societies.

.

• Take some time to think about what is most important to you in the short term and in the long term. Then, set priorities within this list – not all can be accomplished at one time. Plan how to accomplish each item. Finally, keep track of your income and expenses for about three months so that you can establish a budget to work into the goals. In other words, “Plan Your Work, and Work Your Plan.”

.

• An emergency cash fund of at least three, but closer to six months income is suggested. This is especially important when there is only one bread winner in the house, and no one else to bring in any additional funds.

.

• As with any long-term investment plan, the earlier you begin to save, the longer the horizon for the need, which allows a longer growth period. The NY State section 529 college savings plans is an excellent tax-free savings program if you live or work in New York State. Plan this program with a former spouse, grandparents, or siblings.

.

• Life insurance, a necessity for anyone with dependent children, can give you the peace of mind that your children will be financial secure. How much insurance do you need? This depends on the number of children you have, their ages, your income and debt, and your assets. A rule of thumb is about six to eight times your annual salary. The least expensive is ‘term’ insurance, which like the coverage on your car, runs out after a set period of time. Ask if you are covered through work, or suggest a plan be started. Work group coverage is fairly inexpensive.

.

• I believe the statistics say that one is 10 times more likely to need to collect on disability than on any other type of insurance. If you couldn’t work, who would pay the monthly bills? Transport the kids? Prepare meals? Ask if you are covered through work, and supplement with a private policy if needed.

.

• Is this guy kidding? Establish a cash reserve, start a college fund for each child, buy life insurance, consider disability insurance, and now plan for retirement! On my salary? Most financial advisors suggest you give this a higher priority. Kids can get student loans for college, but you can’t get a loan for retirement. Be apart of your company’s 401(k), a MUST if the company matches any part of your contribution. Cash might be king, but growth-oriented investments would be a better choice for the long term.

.

• No matter what your age, or income, a will is the most important document to insure your kids’ future. Even if you have no money, it directs who will serve as their guardians – or would you prefer some judge put them into foster care while your parents, ex, brothers, friends, etc fight over custody. In addition to stating who you want to be the guardians for your children, a will also states who will inherit your assets – house, property, etc. And while you meet with the attorney, set up a ‘living will,’ and a ‘durable power of attorney’, in case you become terminally ill or incapacitated.

• An experienced tax advisor will be able to keep your tax bill as low as possible, and therefore keep more of what you earn.

Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.