How to Manage Finances as a Single Parent? How to Avoid Going into Debt?

Debt can be so very overwhelming that often debtors feel too away from the mainstream of life and happiness. In fact, debt is a slow killer that gradually strangles you to bankruptcy if you do not take the right steps on time to avoid debt or eliminate debt. As a single parent, you face much more problems than conventional families, and that’s because you take all the financial and decision-making load on your shoulders as the sole earner.

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That’s the reason single parent debts are much difficult to handle and solve than conventional family debts. The responsibility of the child and the need to meet all the child’s needs on your own without any helping hand in earning is a big responsibility. It often burdens a single parent to a huge extent to get out of their budgets and fill up the void with small loans every other month.

Why single parents tend highly to go into debt

Single parents often go into debt for several reasons. Generally one becomes a single parent after a divorce,or demise of the spouse. Sometimes the person chooses to be a single parent without ever marrying, and that’s a different issue. Normally before a divorce or before the demise of the spouse the household in most cases gets a two-way income from both the parents. And a split in the marriage results in the person suddenly being all alone in earning, raising the child, and doing all household and external world chores alone. This sudden feeling of responsibility is handled differently by a different parent.

Someone who had no idea of handling money may get paranoid with the huge change in responsibilities, and someone who handled money matters earlier can strive to cope up. The ones who get confused and struggles to cope up need help then. Help may come from a friend or relative or family member who can advise well on money matters. Or one may decide to get self-help by reading helpful finance and debt management materials and ideas. Interesting sources like nationaldebtreliefprograms.com can be taken help of for self-educating. 

Steps to stay out of debt

There are many methodical ways to stay out of debt. If your income is limited, and you know you will somehow have to manage in this limit only, then you must do the following:

·         Separate at least 20% of your income for savings before you start spending

·         Separate another 5 to 10% for emergency funds

·         Make a budget of the remaining amount and make plans of where to use what amount of money. Include all monthly expenses like utility bills, travel expenditures, grocery, medicines, school or college fees, house rent, car insurance, other insurance premiums, mobile recharges, cable TV recharges, community service charges,and all such things in the budget. If all does not fit well, then you must cut down on some things as much as possible to make things forcefully fit into it.

·         Avoid using your credit cards totally. And if you don’t have a credit card then in this situation you are blessed.

·         Think hundred times before getting into any big expenditure which will impose part payments or EMIs on you. You must calculate if you can accommodate that in your monthly budget and then only plan it.

·         If you need funds suddenly then your emergency funds are there to help you. And if they also fall short, you may talk to a friend or relative or colleague to borrow temporarily. That’s a much better option than to opt for high-interest loans.

The trick is in removing the savings and emergency funding money first, and then accommodating all expenditures into the remaining somehow. That is what the biggest arithmetical and management test your life takes of you like the single parent which no school ever took of you.

Why avoid debt

A debt is a vicious cycle, which often keeps on eating up your earnings and savings and never lets you stay well and build wealth. Hence you must avoid any such expense which compels you to go for installment payments for a long time which may later get unaffordable for you. However, there are exceptions. You may buy car insurance on an installment which otherwise you may not be able to pay fully upfront. And this is a necessary investment for safety. You may buy a house or a car on the mortgage after gala research to get the best loan at a low-interest rate, just because on paying back the loan fully the house or car would be your asset. Hence such investments do make sense.

But if you are investing in things which won't become assets ever or give good returns in the future, then there is no meaning in getting into debt for those things. Medical expenses, however, are exceptions again, and they must be done. But then again taking a good medical insurance cover to get help in medical emergencies is the right and smart step when you are all on your own.

What to do when you are submerged in debt

The first thing to know when you are in debt is that you must save your reputation and credit score on time, and you cannot spend your savings to get over the debt. If you let your savings go to pay off debt, then you lose all chances of financial stability in the near future. Hence, the options that can be considered are either a debt settlement attempt by hiring the experts on this, or getting a debt consolidation loan. Bankruptcy, which many prefers is basically another name for disaster because once you declare yourself bankrupt, you lose all chances of building a healthy credit history in the next few years. And this can pose restrictions on all your future plans of financial growth and asset multiplication.

Finally

Managing debt sensibly, and even before that managing finances sensibly to never get into debt, is the best you can do for yourself and your child. Your responsibility asa single parent would grow with time, and the sooner you learn the art to manage your money the healthier would be your future.