FSS Newsletter :: August 2003

Money Matters :: Advice for the Single Mom

I became a single mother in 1994 when I chose to leave an abusive marriage. We had our share of problems including our different opinions about money. My ex was a compulsive spender and was usually at any given time half a year's income in debt. I on the other hand have always been a saver. I do not know if this was a learned behavior, perhaps, since my mother required me to save 10% of my allowance and later my income and tithe another 10%.

On my own, these numbers have increased to 30/10. I live off of 60% of my income. This is not easy but it is do-able. Here are the steps I recommend taking:

1. We all know this one : set up a budget. if nothing else track your expenditures. I have a ball park figure that I try and stay under. I use quicken to track my money.

2. Take a cold hard look and make a list of all the non necessities that you buy. Go back and number them in order of importance. Eliminate (or reduce) the least important ones. Remember a penny saved is more than a penny earned due to taxes.

3. Pay down debt. Figure out what you are paying the highest interest on and work on that first. Remember, there is a big difference between simple interest and compound interest. This can cost you big $ if you don't know the difference.

4. Start saving. I invest in several different vehicles and methods. (see below) It makes you feel good to see a result from your efforts.

5. Raise your income earning potential. There comes a point when you simply can not cut back any more. I only earn 18,000 a year and live in a expensive part of the country (wash DC metro area) I know for a fact that I qualify for food stamps, but I feel comfortable without them. (If you are in need, take them, that's what they are there for and there is no shame in it!) I continue my education and own a small business that I run from my home, that I do not draw an income off of yet, (I fold the $ back into the business) but hope to work from full time before my son enters grade school.

6. Take full use of any and all benefits your employer offers you. I use direct deposit and almost never carry cash. I use both medical and daycare reimbursement accounts which uses pre tax dollars from my paycheck. I use my 401k and put the max. of 15% of my income in it. I also have an Individual Retirement account that I put 166.66 a month into (also the max.) this amount, because my income is so low is fully deductible off my taxes. I also have money directly deposited into my "emergency fund" that is for serious emergencies and once a year payments.

7. Be creative. For instance does someone in your home have a hobby? try turning it into a part time business. If you create a profit motive (keep very tight records on this and consult your accountant) you can write off a lot of your costs and earn some extra money too.