Millions of Americans depend on monthly child support checks to help cover the bills. In fact, for many single parents, those checks are a vital part of household income.
It’s not easy to properly manage the bills as a single parent . You have groceries, credit card bills, a mortgage or rent — plus all those non-essential expenses. It can seem almost impossible to consider saving even a portion of that check.
Being spread thin is tiresome. So, how do you beat the vicious cycle of bills and no savings?
The best way is to make a habit of allocating a portion of your household income to a savings account every month. Don’t worry, it’s doable.
What Child Support Covers
Before diving into how to save money, it’s beneficial to review what your child support check is supposed to cover because, according to FindLaw, there is a growing misconception that child support should only cover necessities, such as the following:
- Basic necessities, including food, clothing, mortgage, rent, utility bills and phone bills
- Education, including uniforms, books, and classroom or lab fees
- Transportation, including insurance, gas, and car maintenance to get the children to their destinations safely
- Extracurricular activities, including camps, sports, and gym fees
The rules vary for medical coverage and whether child care is covered, which typically depends on the work schedules of and agreement between parents. “Medical coverage varies across America,” said attorney Maxwell Hills, founder of Hills Law Group in Newport Beach, Calif.
“In California, for example one party is credited with the medical care,” he said. “So, if the father is supposed to pay $2,500 a month in child support but has his child under his medical care plan, then that amount will get slashed to something like $2,250.”
How to Start Saving Some of Your Child Support Check
Figure out how much you spend. You have to know where your money goes before you can create a budget. If you like taking pen to paper, then write down your expenses over one month. Writer Gail Vaz-Oxlade offers a spreadsheet on her blog, listing variable and fixed expenses, as well discretionary cash that she calls “jar money.” Or, you can download a finance app. Include everything: bills, essentials and non-essentials. Nothing is too small.
Calculate expenditures for each child. It offers you peace of mind knowing exactly what you provide for your children, and this exercise has a tendency to become therapeutic. “This can be beneficial from a legal standpoint,” said Hills. If your ex ever questions your spending habits, then you will have a leg up knowing the monthly expenditures.
Make a monthly budget. Always use your net income (after-tax income) and not your gross income (before any deductions), so that results are accurate. For example, if you earn a $60,000 salary every year, that’s your gross income; the $42,000 that you receive after taxes and deductions is your net income.
With your income and your child support check combined, ideally you want to allocate the following percentages for each fixed expense:
- Housing: 35 percent
- Transportation: 15 percent
- Debt: 15 percent
- Savings: 10 percent
- Non-essentials: Remaining 25 percent
Yes, savings is a fixed, non-negotiable expense.
Budgeting Tips for Single Parents
Write down what you spend each month for each category. If you have money left over, that is considered your discretionary income or money for non-essentials. If your fixed expenses total more than your income, you need to lower your expenses or increase your income.
There is no one-size-fits-all approach with budgeting. These percentages are a general guideline that should give you an idea of where you need to slash spending:
- Savings are crucial for everyone, but especially for single parents who are responsible for all household expenses. That’s why this savings portion will include emergency savings, retirement savings, or investments and money for your children’s future and education. If 10 percent is too high for you, then pick a percentage of your income that you can absolutely save every month. If you’re not currently saving anything, then any number is better than zero.
- Stick to your budget. Most people have a tendency to stick to their budget for the first few months and then slowly revert back to old habits. The best way to keep this in check is to track your spending and set time aside every month to review how much you are allocating for various expenses.
- Be flexible. Life happens, and you’re going to have to be able to adjust your budget. Christine Benz, Morningstar’s director of personal finance, points out that spending is rarely flat for anyone, so don’t be afraid to tighten your belt some months and allocate more money for non-essential spending in other months. Christmas is a good example of a high-spending time for many people, so allocate accordingly.
What’s the Payoff?
Benefits of putting some of your money toward savings each month include but are not limited to the following:
- “You teach your kids to budget,” said Hills. If kids are old enough to understand budgeting, then they can help keep the family’s budget on track. Many kids will relish this opportunity and help set financial goals. Plus, it teaches children to view money realistically.
- You’re prepared for your children’s future. College is expensive. According to the College Board, for the 2014-15 academic year, the average cost for an in-state public school was $32,762; the average cost for a private college was $42,419. The goal isn’t necessarily to pay for all of it. If you can contribute some money toward their college education, it will assist them and leave you with a sense of pride.
- It’s empowering. You will be in the driver’s seat every month, and it’s encouraging to be in control of your finances. This practice will not only benefit your financial health but also your overall well-being because you will feel more positive in others aspects of your life. According to a 2014 study by Northwestern Mutual, people who saved are happier overall. That’s because the more discipline people have with their financial planning, the more financially secure they feel in the present and the greater likelihood they’ll be happy in the future.
Don’t Stop Saving
Vaz-Oxlade likes to say that you’re working hard for your money. Put that money to work for you so that it serves your needs and wants.
To do that, you must save every month. And don’t be discouraged if you veer off course, because you likely will at some point. It’s all a part of the budgeting learning process. Any savings is better than no savings.