Like being a single parent isn’t hard enough, you also have to think about your retirement. But if you don’t do it, no one else will.
There are a few things every single parent should do in order to save enough for retirement. It is everything but easy, but again — these are the steps only you can make.
Some sacrifices will be required and some habits will need to be changed, but it’s worth it. The steps you need to make are as following…
1. Start with a budget
It’s not that complicated. Create a simple two-column spreadsheet or put it on paper. On one side there’s income, and on the other – expenses. This second column is much bigger and you should differentiate between must-have expenses such as food, utilities, transportation and gas; and those optional expenses, which involve the stuff and services you can live without. Things like cable TV, gym membership, haircuts and dining out are all the things you can live without.
It is important to be as extensive as possible, to write it all down as that will provide you with a better picture of your finances. From there, you will be able to make cuts to create room for savings.
What you want to come up is one number that represents your average monthly expenses. Now subtract this number from your average monthly income, and you’ll get the amount you should be able to save every month. If that doesn’t sound enough, it’s time to make cuts in those optional expenses. It won’t be easy, but if you want to save for retirement, you have to do it.
Also, this is a good opportunity to re-think your spending habits. Speaking of which…
Related: 5 Ways to Save on Your Monthly Expenses
2. Do NOT overspend
Many single parents I know buy their kids more gifts than I do (I am married). From what I understand, it is a part of their efforts to make up for whatever challenges they and their children face. This, however, seldom leads anywhere, but it does hurt their budgets. And consequently their retirement savings.
Don’t get me wrong — there is nothing wrong with treating a child with a gift every now and then. But if you’re on a mission of building a retirement fund, you will have to make some adjustments. And your boy/girl will have to learn to play with toys they already have. And I’m sure they have a ton of it.
Also read: 11 Quick Tricks to Help You Delay (and Even Cancel) Purchase While In the Store
3. Create an emergency fund
Even before starting to save for your retirement, you should establish an emergency fund, to use cash — rather than a credit card — when something unpredictable happens.
Experts suggest to have at least $1,000 in an emergency fund so that you can act when an emergency occurs. And it will occur, have no doubts about it. Whether is an urgent emergency room bill or car repair, you’ll want to have some money put on the side for that.
However, you should NOT use this money for stuff that are not deemed emergencies. This won’t lead you anywhere.
After securing those $1,000, it is time to proceed to the next step.
Also read: 7 Frequently Asked Questions About Emergency Funds
4. Use tax-advantaged investment vehicles
Whether you are a single parent or not, you don’t want to pay taxes if you don’t have to. So start with a 401(k) plan, which is offered by many employers. Your contributions to this plan are made with pretax dollars from each paycheck. This means that the IRS will treat your income as smaller than it actually was, and as a result — you will pay a lower tax.
On the other hand, if you don’t have access to a 401(k), put your money in a traditional IRA, which is tax-wise treated the same way.
5. Retirement comes before college savings
It’s a tough call to make, but you will have to make it. Your retirement must be put before your child’s education. That being said, you will want to help your child go to the college, but priority is your retirement.
In order to do so, set a monthly target for your retirement fund and when you hit it, put everything else to the college fund. Also, you may want to help your child advance in school so he/she could score some scholarship. He/she also has other options like a community college or less expensive university; or they could seek financial aid and work their way through school.
On the other hand, as time flies by, you won’t have that many options…
Read next: Are You Saving Enough for Retirement? Go Through This List to Find Out