Take care of yourself and prepare for your financial future! Here are some helpful tips on building wealth as a single mom.
Building wealth involves 2 basic things:
- Make more money
- Spend less
If you want to build wealth as a single mom, you need to start by assessing your current financial situation:
- Are you in debt?
- Do you have money in an emergency fund?
- How much money do you have saved for retirement?
Even if you feel afraid of looking at your financial situation because it’s such a mess or you don’t know how much debt you really have, you have to take a step forward.
Does your debt feel overwhelming?
Do you feel unsure about investing?
You just need to start with one step.
Building Wealth as a Single Mom
After my divorce, when my life and finances felt like a disaster, I kept repeating this little mantra to myself (sometimes many, many times a day): I’m going to keep going forward.
I wanted to be a good example to my little girls and I refused to give up and just sit still, even when I felt completely overwhelmed and as if it was impossible for my life to improve.
Nowadays, when my kids feel overwhelmed by something (usually cleaning up their room!), I tell them to “do one thing first” – pick up one toy or gather up one kind of item (all the blocks).
The same principle applies to money matters.
Start with one thing.
If you want to build wealth, start by:
- Looking at your debt
- Determining how much you have saved for retirement
- Figuring out if you have enough at the end of each money to invest
THEN, you can take one step forward to a better financial future!
Check out these top tips to start building wealth as a single mom. Start with one and go from there.
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I know a lot of people hate the word budget, but if you do not know how much money you have coming in and going out then it will be difficult for you to build up wealth.
There are several different types of budgets you can use, but you definitely need to have a plan for what you do with your money each month.
Some budget types:
- 50/30/20 – this book explains it well
- Zero-based budget – your income minus your expenses should equal zero (every dollar has a job, even the ones going into savings)
- Paycheck budget – you write out a budget based on your paycheck (this can be harder if your income varies greatly each month)
2. Start saving
Set up savings account and put money into it every month. It’s best if you set up an auto-withdrawal from your paycheck or main account into your savings account.
If you have to start with $5, do it! Then, work on finding a way to make it $10 or $20 each month.
Learn to live below your means and spend intentionally.
Try the 24-hour rule – wait 24 hours before buying something. Then, ask yourself if you really need it after 24 hours.
When I was younger, I would calculate how many hours it would take me to work to buy something (like a $100 pair of jeans would take me 10 hours of work at $10 per hour). That would help me decide if I really needed it.
Then, you can put any extra into a savings account!
3. Focus on the Future
Dwelling on the past – on past money mistakes or financial disasters – will not help you move forward. Don’t waste time beating yourself up about these things!
Focus on moving forward and let go of the past and forgive yourself. You can learn from your mistakes and make a better future for yourself and your kids!
Keep moving forward and be a better example to them. I don’t dwell on the fact that I should have started IRA and serious investing earlier in my life, but I commit to going forward and making better money choices each day.
4. Set Financial Goals
Setting concrete goals provides many benefits. In order to make progress toward building up wealth, you need to make some goals on how to get there. Start small and slowly build up.
Some ideas of financial goals you can make:
- Pay off your debt
- Start an emergency fund
- Open a retirement account (IRA)
- Start saving for a down-payment on a house
5. Increase your income
Remember the 2 basic ways to save more money or build up wealth?
1. Spend less
2. Increase your income
There are many ways you can increase your income:
- ask for a raise
- look for a better paying job
- find a smart side-hustle
If you need a new job, try online. Flexjobs.com is a great source to find remote, work-at-home, flexible opportunities.
Or, check out this list of other great side-hustles for single moms!
5. Be Financially Independent
If you need child support or government assistance to get on your feet, then use it! But don’t depend on child support, alimony, or assistance forever. (Shortly after my divorce, my ex died suddenly and unexpectedly and that was the end to any child support and alimony.)
Become financially independent on your own. Do it for yourself and your kids.
6. Invest the max
Low-interest savings accounts are helpful for keeping a 3-6 month emergency fund, so you can access the cash quickly, but, because of inflation, you will earn more money by actively investing your money.
Start an investment account so your money can grow at a substantial rate.
Do you feel unqualified and unable to understand investing and what to do?
I felt the same!
This book was very easy to read and understand and gave me the confidence to start investing on my own (despite feeling like I would never understand it!)
This book is also helpful, although, in my opinion, a bit drier.
6. Don’t settle
Don’t settle for:
- low income
- just any man
- less than you deserve
Break the stereotype of a single mom being poor, helpless, and struggling.
You can do it!
7. Protect your family with insurance
If something happens to you, make sure your home and children are taken care of.
As a single mom, you need:
- life insurance
- renter’s or home insurance
- auto insurance
- disability insurance
Nothing wipes out wealth faster than a huge financial (often medical) emergency. Protect yourself with insurance.
8. Get rid of debt and stay out of debt
Make a plan to pay off debt for good. You can’t be building wealth as a single mom if you have debt to pay off.
9. Model good money habits (and mindset) for your kids
Your kids will learn money concepts and habits from you, often without you even saying anything!
Kids will see you:
- making smart money choices
- saving up for purchases
and they will learn to do the same.
Don’t complain that you are poor or can’t make ends meet. Show your kids how you work hard and make efforts to improve your situation!
10. Start an emergency fund
Money experts say to have 3-6 months of living expenses saved in case of an emergency.
If you don’t have an emergency fund, start with saving up $1000 at least and then build up from there.
11. Save each month
Start saving now!
Don’t wait until you pay off your debt or change jobs or finish school. Start putting money away, a little at a time, because you might need it! (See # 10).
12. Save for retirement through your job
Make sure you take advantage of your employer’s retirement fund. If your employer offers a 401K match, do it!
If your employer offers a 3% match and you can’t contribute 3% right away, start with 1% and try to work up to the match.
Fully fund your retirement account before putting money into your kid’s college fund. You don’t want to be a burden to your kids when they are grown. Your kids can get scholarships or student loans, but you can’t get a retirement loan!
13. Have a will
Who will take care of your kids if you die?
All single moms need a will and a plan for who will take care of their kids when they die.
14. Find support
Surround yourself with other like-minded individuals who are committed to saving, investing, getting out of debt, and building wealth. We all need support!
15. Review your Finances Regularly
Last, but certainly not least, review all of your financial statements and accounts at least monthly:
- credit cards/debt
- 401K, IRA, retirement accounts
Reviewing your finances regularly is important as you move toward your financial goals. This will also allow you to keep an eye on any fees that you can get rid of or any fraudulent activity on your accounts.
It may seem hard to take steps to building wealth as a single mom, but all you need to do is start and keep moving forward! What part do you find the toughest? What tips do you have?