Tips for Single Moms to Consider Investing for Your Child despite Debts
If you are a single mom, you are bound to encounter challenges particularly relating to your finances. But if you cleverly focus some thoughts into investments, you would do well in the future. We know that many single moms have been compelled to take loans at some point in time to meet certain unanticipated issues. But you must make a firm decision whether you would pay off all your debts and then consider investing or you would want to carry on investing despite debts.
Take the Decision Whether to Invest or Pay off Your Debts
Both paying off your debts and investing are necessary for a stable financial life for single moms. In such a situation, it is quite a challenging task to decide between the two. Paying off all your existing debts would imply a reduction in risks, lower stress levels, and a boost in the ability to withstand all kinds of personal emergencies. Living debt-free would make life easier and you would have much more flexibility to take financial decisions and that would help in maximizing your personal happiness.
Now investing implies building a reserve for protecting your family from any financial crisis in future and for providing you with adequate passive income sources. For single moms, no spouses would be there to cover their expenses during retirement. An investment would prove to be quite important as it implies accumulating enough funds for retiring comfortably.
So what would you like to do, invest or pay off your debts first? Theoretically speaking, the most intelligent step would be coming to a concrete decision only after comparing two variables. They are:
- The after-tax interest rate you are currently paying on the debt.
- The after-tax return rate you are expecting to earn from your investment.
If you are able to earn a much higher return from your investment as compared to the interest due on your existing debt, it would be a wise decision to go ahead with the investment. Get in touch with nationaldebtreliefprograms.com for learning more about effective debt management.
Let us explore the best ways how a single mom could be coping with her financial situation and still consider saving and investing for herself and her kids.
Determine a Suitable Cash Flow Plan
https://www.huffpost.com says that as a single mom, you must be having irregular income streams. If you are widowed or divorced, you must have got a lump-sum as Social Security benefit or an Insurance payment for your kids. Moreover, you may be getting some alimony payments and even child support. Remember these payments would reduce or even stop with time. So it is crucial to plan well ahead of the time. You may project your future earnings over multiple time periods. If any of these amounts change, you would be left with two choices. You may either consider making up for the income loss from some other sources or alternatively, you must try modifying your lifestyle. The most critical thing is to necessarily have a plan.
Alimony & Maintenance
In case you are a divorced single mom getting maintenance or alimony, you would be getting that either as monthly maintenance or a lump-sum amount according to the verdict at the time of the divorce proceedings. This would be varying from one case to another and has some legal intricacies associated with it. In case you are getting a lump-sum, you must invest at the earliest possible. It is a wise idea spitting the funds into different interest-bearing deposits. This would give you a nicely balanced portfolio. You would be getting a regular income while still enjoying access to your funds. You may also, consider investing in some other assets including real estate.
Get Term Life Insurance Coverage
Your kids’ financial well-being and security should be your prime concern suppose you are no more to take care of all their needs. Life insurance would make a lot of sense. Treat it as an essential investment and not an expense. A term life insurance policy would be guaranteeing your nominees an amount of money in the event of your death. You must, however, remember that there are different kinds of life insurance and so choose the type that aligns perfectly with your financial goals and aspirations.
Tax Planning Effective as Investments
A single mom’s tax planning should be doubling up as investments meant for the future. It implies that the tax planning option chosen by a single mom must be designed carefully to cater to an upcoming expense. For instance, she could be taking a ‘child insurance plan’ that covers her life, as well as, provides funds for her kid’s college education when her kid becomes 18. This should be coming under tax planning and she would be getting income tax exemptions. Moreover, she could consider investing in ELSS schemes on a regular basis. These investments would be of great help for meeting expenses about three years later such as planning a vacation or celebrating a milestone.
Although the very thought of not having proper health insurance could be pretty nerve-wracking, the fact remains that many single moms simply cannot afford to buy health insurance. However, in this context, it pays to remember that you as a single mom must take good care of your health if you wish to take care of your kids. If you are not well you would not be able to perform your responsibilities and your duties towards your kids well. It is important to see healthcare specialists from time to time to make sure that you are hale and hearty and to rule out any issues.
This is certainly not a cheap investment so many single moms choose to do without the luxury of medical insurance. But you need to be smart. Choose the perfect health insurance then you would be successful in waiving most of the fees. You simply cannot take your health for granted; after all, you have kids to look after. So it is an intelligent move to get medical insurance and treat the matter seriously. If due some health issues you are admitted to a hospital, it would prove to a huge comfort to know that all your hospital bills would be taken care of thanks to the medical insurance.
It is best to hire professional investment specialists’ right from the beginning. However, some single moms are investment-savvy but do not have the time to monitor the investments on a regular basis or devote time to research or identify good investment options. It is best to seek professional assistance for making the right investments.