This article was written by Lisa Hay for Betterment.com.
Single parents have a lot to handle--not only do they act as the sole provider of care and emotional support, but they may also be the only financial provider for their children.
Here are some of the first things for single parents to consider when coming up with a prudent money plan.
1. Estate planning is your first priority.
- A will that specifies who will take care of your children if you die and how you will pass your assets down to them. One of the most important functions of a will is to name a guardian for your children. When selecting an executor, you should choose someone whom you trust, but that person should also be well-organized and have some knowledge of financial matters.
- A "power of attorney," which gives someone the legal right to make decisions on your behalf if you are unable to do so.
- An additional power of attorney specifically for healthcare, which gives someone the right to coordinate with doctors about your care if you are incapacitated
2. Have a cash flow plan.
It's important to plan ahead by projecting your future income over several time periods. If any of the amounts will change, you have two choices: Either make up the loss of income from other sources or adjust your lifestyle. The important thing is to have a plan.
You may also want to set up a trust to provide for your children. A trust is a legal structure in which your assets can be held for the children and is overseen by a trustee. You should consider similar attributes when naming a trustee as you do when choosing an executor.
3. Create a safety net.
4. Plan ahead for health costs.
5. Purchase life insurance.
6. Explore disability coverage.
7. Prioritize your retirement savings over education.
As a single parent, you know how difficult it can be to stay on top of everything. That's especially true of money matters. While getting your finances in order may involve an initial investment of time, addressing these issues will ultimately create financial peace of mind and a stronger financial future for you and your children. Remember, financial situations vary, so it's important to speak with a professional for advice based on your own circumstances.
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