To me, money is a tool I use to accomplish my goals, not a goal itself. There’s nothing wrong with money accumulation being a goal. Nothing at all. It’s just not a goal of mine. My life goal is joy accumulation. Money matters to me in that it helps me and my children find our joy through fulfilling relationships and activities.
I needed to review my finances after I got divorced. I don’t create a monthly budget as many families do. Instead, I have a general idea of where my money is going and where I want it to go.
I pride myself on being financially independent, as does my ex-husband. When we split up in March of last year, we didn’t see any need to bring lawyers into the mix. We just split our shared savings down the middle and each walked away with our own retirement savings. He took the house. I took the furniture. He took the cat. I took the kids. We agreed to a child support payment based on the difference between rents on a house for three and an apartment for one, plus half the kids’ groceries.
The split was amiable. My ex is prompt with his child support payments. I was the primary breadwinner in our marriage. Our 7-year-olds attend public school. Despite all these marks favouring my financial health, there simply wasn’t going to be as much money coming into our family as there had been before. I couldn’t just tighten my belt for a while until things got back to normal, because my income plus child support is now our normal. I took some major steps in adjusting my expenditures to make things work.
My ex-husband and I had purchased supplementary life insurance from Primerica and reviewed our finances when we were married, and I was happy with the experience. Once the initial whirlwind was over–my ex moving out, signing the divorce papers, my buying a new house and moving back to Central Texas from El Paso, the kids getting settled at their new school–I met with a rep from Primerica and took a serious (but free) look at what my finances looked like. I could always follow up with a real financial planner later if I needed. I looked at what was coming in, what was going out, what I had saved, and where I could cut. I was already in the market for additional life insurance. If something were to happen to me, I wanted money not to be a concern for my ex, since he would likely have to change careers to raise the children.
I highly recommend meeting with a financial planner, but aware that not all planners are made equal. Choose carefully. Look for someone who is ethically bound to put your interests first (a fiduciary), not someone who earns a commission for selling you something, unless you’re fully prepared not to buy and have the wherewithal to see through self-serving advice. I wasn’t looking for a new job, so I knew I’d stand firm against the whole recruitment aspect of the Primerica experience.
The most important short-term goal I had for my finances was for my children not to see a major change in their lifestyle. Divorce is hard enough on them without the girls picking up on the financial challenges that come with it. My ex-husband and I have kept our discussions during and after our divorce focused on the kids’ well-being. Co-parenting, for us, just is not about money.
Here’s how I go about being financially responsible as a divorced single mom:
Know how much money is coming in and how much is going out
This is hard and painful and ugly. It makes me twitchy thinking about it. I wrote out all my monthly expenses: bills, groceries, entertainment, clothes, pet care, school costs, childcare, healthcare, gas, parking. I looked at what comes into my bank account in the form of my salary and child support. I decided that I could afford to keep my lawn service, but that I needed to stop eating out with the kids. The girls could take dance lessons, but piano would have to wait. Now that I had closed on my house and paid off my college and car loans, I could afford to put the annual maximum in my Roth IRA again. I’d reduced my contributions when my ex informed me that he would be leaving.
This is a little counterintuitive. You might think that saving for college would be the most urgent focus. I think of my retirement investments as a gift to my children, in that supporting me financially in my old age won’t be their problem. The more I put into retirement now, the more I’m earning interest on for longer. I looked at my current health, my lifestyle choices, how old I’d like to continue working and how much I’d like to have to live on, and mapped out how much I’ll need squirreled away for age 70 and on.
Expect the best, but plan for the worst
I don’t expect things to go wrong. I seem to keep landing on my feet, thanks to amazing friends, exceptional daughters, and years of therapy. I try to plan for the worst. I have a will that specifies who would take custody of my children if something were to happen to me while they were still little. (Their dad first, of course, but if something happened to him, his parents. If something happened to them, it would be close family friends.) I have life insurance that would cover the girls’ needs through college tuition in the event that someone else did have to raise them without my income coming in. I may let my policy lapse once they’re done with the college. They won’t need my financial support any more at that point, most likely.
I have health insurance and go to all my scheduled check ups. I upped my car insurance, paying an extra $5 monthly for a $500 reduction in my deductible. I don’t plan to get in any accidents, but I’m willing to pay for the peace of mind that comes with knowing that I could manage if I did.
Set priorities on all other expenses
I want my kids to grow up to be happy, healthy, wholesome, productive adults. I invest in the things that contribute to that goal. I don’t need to pay for anything else. It’s a challenge for me, but I choose to prioritize for my family, not keeping up with the Joneses. My daughters take tap and ballet lessons because it fulfills them and brings them joy. They’re not longer taking soccer, which is Daddy’s passion, or piano lessons, which is mine.
Do I need to buy as many books as I like to? No, I can check them out of the library and move my margin scribbles to a notebook. Do I need to hire a babysitter once a week so I can go to choir practice? That’s a hard one, but I really just can’t afford it.
I’m celebrating my birthday tomorrow night with friends. My birthday was in May, but this weekend happens the girls’ paternal grandparents are in town. It’s not just a matter of being able to afford a babysitter or cashing in on a babysitting favour. It’s also that I enjoy the time I have with my children, which is limited since I work outside the home. I don’t particularly feel like leaving them to go out without them. This weekend, though, they’re brilliantly happy to be spending time with their Grammy and Grampy, so it’s time for me to hang out with my friends for a bit. Budgeting isn’t just for money. I also budget my time.
Make wise investments
I could have rented a home after I moved, but I knew that I wanted the money I spent on housing to be an investment. I swallowed my pride and accepted a gift from my mother to help with the down payment. It helped that I had near-perfect credit. In order to keep it that way, I avoided anything that could negatively affect my credit until after I closed on the house. I didn’t apply for anything that might involve someone checking my credit. I kept my credit card balance at zero. I had paid every bill on time for the previous decade or more. My mortgage payment came out to $450 less per month than rent for comparable homes in my neighborhood, per month.
Do I miss the granite countertops and tile floors of the first home I owned? Absolutely. Given my current financial reality, though, I can’t afford something like the house I had when I was married. If you already own your home, look into refinancing. Yes, rates are going up, but they may very well be less than what you already have. It doesn’t cost you anything to look, and costs surprisingly little to complete.
I also take advantage of the flexible spending accounts offered by my employer. I can put tax-free money aside for childcare and medical expenses, up to $5000 per year. I max out my daycare allotment, since I’ll spend significantly more than that on after school care and summer camp. I just have to send in my receipts on a monthly basis to get reimbursed. I put less aside for medical expenses, enough to cover our prescriptions, my glasses and contact lenses, our dental co-pays and my medical co-pays. Thanks to the army, the girls don’t have co-pays or deductibles.
Pay off debt
I’ve generally avoided credit cards, using them only to build up my credit and paying off the balance in full every month. Last year, though, I allowed myself to go into debt immediately after I got divorced. Moving from El Paso to Central Texas wasn’t cheap, and I had to pay for help moving, since I knew hardly anyone there. Even with the gift from my mother, paying for all the little things that go into setting up a new home added up, and I felt that it was very important to buffer my children from the financial fallout from the divorce. (Perhaps that was wrong. I just didn’t want to pass on the type of bitterness I’d seen during the unravelling of my parents’ marriage.)
Now, I’m really focusing on paying off my debt. I’m choosing to pay extra on both my mortgage and the card that is costing me the most in interest in any given month. Of course, that requires me to think and review my balances and interest rates monthly. Some people advise to just put extra against your debt with the lowest balance. When that’s paid off, shift all the money you were paying into that debt into the next highest debt until you’re debt-free. There’s something to be said for paying money for convenience or simplicity. There’s no one right way to get out of debt beyond making the effort and prioritizing it.
Minimize debt accrual
I’m not putting anything new on credit cards or taking out any new loans. I want to be getting out of debt, not getting deeper. Some people cut up their credit cards. I’ve even heard of freezing a card in a block of ice to keep from using it on a whim, but having it around for an emergency. Fortunately, I have the self-control to carry my cards and not use them.
Know when it’s worth paying more
Saving money is not my highest priority. Joy is. There are some things that are worth paying for, slowing the march towards my financial goals, to maximize joy. My lawncare service and pest control company fall in that category. So do my chocolate habit, my love of baking for friends, our annual cookie decorating party, the occasional theatrical production. There are luxuries worth spending on. I hope to never be in a financial position to have to cut every one of our wants out of our budget.It really boils down to wants and needs, that simple dichotomy I keep preaching to my children. We fulfill our needs first: love, housing, nutrition, safety, kindness, education. Then, with what’s left, we choose carefully between our wants to decide where we want to spend what time, money and energy is left.
Do you plan out your finances?
Sadia (rhymes with Nadia) has been coordinating How Do You Do It? since late 2012. She is the divorced mother of 7-year-old monozygotic twins, M and J. She lives with them and their 3 cats in the Austin, TX suburbs and works full time as a business analyst. She retired her personal blog, Double the Fun, when the girls entered elementary school and also blogs at Adoption.com and Multicultural Mothering.