As a single parent facing financial challenges, clearly you know budgeting. Now you want to build an emergency fund, manage debt wisely, explore additional income sources, and consider consulting a financial advisor for tailored strategies to secure your financial future.
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“Feel like time is running out. I am a single solo parent of a preschooler. Full-time salary = $128,000 (public sector, so redundancy may be on the cards, who knows). Debt = $318,000 left on the mortgage (equity of almost $1 million, but I hope to pass the house to my child rather than cash it in for retirement). Assets = $73k in KiwiSaver (Pathfinder), paying 3% into a growth fund. No savings and no emergency fund. My $1700 (after-tax, after-KS, after union fees) weekly income barely covers expenses: EXPENSES Mortgage $737 (increasing to 807-817 after refixing in Feb) / Interest on revolving credit debt 35 / Paying off other debt 10 / Power 50 (averaged over summer and winter) / Water 15 / Rates 70 / Insurance – car, house, contents 64 / Insurance – health for me and my child – 40 / Insurance – life & critical illness – 22 / Internet 20 / Mobile phone 15 / Spotify, Netflix, cloud storage 7 / Childcare 300 / Groceries 150 / Petrol 40. Total weekly expenses = $1575 (1655-1665 from Feb). There are literally a few dollars left over each week for clothes, gifts, home and car maintenance, unexpected expenses, etc.”
(Original question on Reddit)
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It sounds like you’re facing financial challenges as a single solo parent, and you’re concerned about your financial situation and the future. Here are some suggestions to consider:
Budgeting & Cost-Cutting:
Being a single parent, you are no stranger to budgeting and cost-cutting. Shopping around for providers or calling your existing utility providers and asking if they can apply some loyalty discount to your accounts, can free up money for other essential expenses.
Emergency Fund:
Building an emergency fund is a fundamental part of financial security. Aim to save a portion of your income regularly into a separate savings account, even if it’s a small amount, and I mean small. $2-$3 a week small. The goal is for the first three to six months to teach yourself the rule of paying yourself first. Before you pay any bills or put money on the mortgage or your child’s daycare. Once that habit is in place, you can start working on having three to six month’s worth of living expenses in this fund. Having this financial cushion will provide peace of mind and protect you from unexpected financial setbacks without having to rely on credit or loans.
Debt Management:
Your mortgage and other debts need to be strategically managed. Prioritise paying off high-interest debts first, as this will save you money over time. Consider discussing options with your lender to refinance your mortgage for more favourable terms. Reducing debt will free up more of your income for other essential expenses and savings.
Income & Redundancy Planning:
If your current income barely covers your expenses and you’re concerned about potential redundancy in the public sector, consider diversifying your income sources. This might involve seeking part-time work, investing in your skills to pursue higher-paying jobs, or exploring opportunities for career advancement. Preparing for redundancy should include updating your resume, expanding your professional network, and researching job prospects in both the public and private sectors.
KiwiSaver Scheme & Risk Assessments:
You also have a very important asset going into retirement that you have 14 years until you have access to; your KiwiSaver. If you decide you wish to work part time beyond 65 because you like working and you do not need to use your KiwiSaver that makes for an even longer investment horizon. It is important to assess are you making the most of that time with your fund choice, while of course it being in line with your appetite for volatility.
Moreover, you have several insurances in place. Having an annual review on your risks and the products you use to cover those risk is imperative to assure you are getting the best value for money out of your insurance.
Financial Advisor:
To receive personalised guidance and strategies tailored to your unique financial situation, consulting with a financial advisor is a valuable step. They can assist you in creating a financial plan that aligns with your circumstances, which may include recommendations for savings, investments, and debt management.
By implementing these strategies and seeking professional advice, you can work towards achieving financial stability and securing your long-term financial future as a single parent.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
