Financial management is a critical skill for everyone, but it takes on added significance for moms, who often juggle the financial well-being of their family with numerous other responsibilities.
This is particularly true for single and/or working mothers who face unique challenges when it comes to financial planning. While the task can sometimes feel overwhelming, there are many financial planning tips for moms that can help you manage your family’s financial future.
The Fundamentals of Financial Planning
Financial planning is not just about managing money—it’s about setting a course for a sustainable future. This can be difficult for women, who have longer life expectancies than men, as well as reduced earning potential due to the gender pay gap.
Once children come onto the scene, the task is further complicated, especially for young families that may not have reached their full earning potential.
Layer in the financial hardships often faced by single mothers, and the need for a holistic financial plan becomes even more pressing.
These realities make it crucial for moms to understand the basics of financial planning, which include assessing your current financial situation, setting realistic financial goals, and developing a detailed plan to reach them.
Beyond enabling you to address short-term needs, such as paying off debt or starting a savings plan, careful planning can help you finance your children’s education, buy a home, retire in comfort, or meet your other long-term financial objectives.
Financial Planning Tips for Moms
The financial plan that’s right for you will depend heavily on your personal needs. What matters to you as a new mother may be different than your priorities once your children are grown, or if you find yourself the primary caregiver for both your children and your aging parents.
By reviewing the following tips, you can begin to craft a plan designed to help you navigate each phase of your financial journey.
Set SMART Goals
Goal setting is the cornerstone of financial planning. As a mom, you will likely have both short-term goals (e.g., paying off debt or taking a family vacation) and long-term goals (e.g., saving for college or retirement). Start by defining these goals as clearly as possible—and aim to make them specific, measurable, achievable, relevant, and time-based (SMART).
For instance, rather than setting a vague goal to invest regularly, specify how much money you plan to invest each month in a particular investment account. This specificity will help you turn an aspiration into an actionable outcome. And automating the investment can make it even easier for you to stay consistent.
Create a Budget
A well-thought-out budget is a great way to manage your household finances. The idea is to list your monthly income and expenses to see how you’re spending money and where you can potentially save.
Once you understand which costs are fixed (like your mortgage or rent payments) and which costs are discretionary (like eating out), you can gain a sense of how much income you can realistically save or invest. To make things easier, consider using an app to track your income and expenses in real time.
Plan for Emergencies
While everyone should have an emergency fund for financial rainy days, these are especially important for single mothers who may not have a secondary source of income to fall back on. Start by saving small, manageable amounts each month, with the goal of building a fund that covers at least three to six months of living expenses.
Keep this fund in a separate, easily accessible account to avoid the temptation to dip into it for everyday expenses. Beyond enabling you to cover unexpected costs, from medical bills to home repairs, an emergency fund can help you avoid taking out high-interest loans or cash advances during times of need.
Understand Debt Management
Effective debt management is critical in maintaining financial health. While some types of debt, like mortgages, may be necessary, high-interest debts such as credit card balances or payday loans can sap your savings power.
That’s why you should prioritize paying off higher-interest loans first before addressing your other debts. If you hold considerable debt, strategies like debt consolidation or refinancing can help reduce both your interest rates and monthly payments, giving you momentum to gain control over your finances.
Invest for Success
Once you have a handle on your debt and have set aside an emergency fund, it’s time to start investing to grow your wealth. If you’re not sure how to build a risk-aligned portfolio diversified across various asset classes (such as bonds, stocks, and real estate), a financial advisor can help.
By assessing your financial goals and risk tolerance, an advisor can work with you to build an investment plan tailored to your personal needs and financial realities.
Speak to a Wealth Enhancement advisor about financial planning today.
Save for Education
While it may seem premature to start saving for education while your kids are young, college tuition rises by roughly 6% each year. This makes it important to invest in education as early as you can.
A good place to start is by learning about the different education savings accounts available to you, such as a 529 plan. Additionally, exploring scholarships, grants, and other funding opportunities can supplement your savings and lessen the financial burden when the time for college arrives.
Explore Insurance
Unexpected circumstances are a fact of life. Insurance can help you provide financial planning in the face of unforeseen challenges. Home, auto, and health insurance can help you in the event of property damage, a car accident, or a medical emergency.
Disability insurance can help you cover your bills if you suffer an injury or illness that keeps you from working. Life insurance is also important for moms who want to make sure their children don’t suffer financial hardship during a time of grief and loss. This makes insurance a critical part of any financial plan.
Build a Retirement Plan
Financial planning for moms is about more than saving and investing. It’s also about planning proactively for your future needs. The earlier you start saving for retirement, the longer your money has to grow thanks to the power of compound interest.
With tax deferred retirement accounts, like a 401(k) or Individual Retirement Account (IRA), your funds grow on a tax deferred basis, meaning you only pay taxes when you make withdrawals during retirement.
Tax-advantaged accounts, such as a Roth 401(k) or Roth IRA, are funded with after-tax dollars, allowing you to make future qualified withdrawals on a tax-free basis. Making regular investments over time, while taking advantage of any employer match available to you, can position you to set aside substantial retirement savings.
The Bottom Line
Although navigating the complexities of financial planning can be challenging, you don’t have to do it alone. By working with a trusted financial advisor, you can get personalized advice based on your specific financial situation, putting you on track to take control of your finances for yourself and your family.
If you’d like to uncover additional financial planning tips for parents, single mothers, or families, contact a Wealth Enhancement advisor.
Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor and affiliate of Wealth Enhancement Group®. Wealth Enhancement Group is a registered trademark of Wealth Enhancement Group, LLC.
