If you have recently become a single parent, you will quickly discover that life has changed, particularly in the area of finances. While you typically find general information pertaining to budgeting, I wanted to get into some detailed issues that really need to be addressed. For starters, I strongly suggest you create a will and/or estate plan. This way, your wishes for the future would be known.
Within both of these documents, you should outline what you want to happen, specific to financial security for your children. This means being able to secure your home and pass it on to the children. Most importantly, by making your wishes known, you avoid your family fighting over what they “think” you would have wanted, which can become a huge problem. Keep in mind that you do not have to own a mansion to have an estate plan. Everyone, regardless of financial standing, should prepare for the future. For instance, if your children are under the age of 18, a trust fund could be established to protect any interests in case of your death.
Another area to consider has to do with disability insurance. While you might think you will never need it, you may be surprised. I know I had taken out disability insurance when I was working in the business world. After becoming a single parent, I wanted to make sure I covered all my bases. Although I had to cut back elsewhere to afford it, I was so glad I had done this after becoming injured in a car accident. Although it only paid 75% of my salary, it was certainly better than zero.
There are ways you can save on taxes as a single parent. In this case, you would qualify for head of household, which means a number of savings. Many newly single parents believe they should file as a single person, which is a costly mistake. When you file head of household, the status carries lower tax rates. In addition, you would be able to take advantage to a better tax bracket, as well as more, standard deductions.
Finally, if you find yourself upside down with finances after your divorce, consider working with a credit counseling services. Typically, these services will work as the middleman between you and your creditors. These professionals are able to secure lower interest rates and work out better repayment options. Although some of your credit might be affected initially, most people can get out of debt in a matter of three to four years opposed to 20.