Guest post from Gary of Gajizmo!
You have to be in absolute awe at the strength, courage, and skill of single moms. Let’s be honest – life is hard. Between the cost of living, staying healthy, taking care of and raising great kids, planning for retirement, maintaining some type of social life, and trying to enjoy a happy life, it’s a challenge even when you have help from a partner. But to tackle all that on your own – wow!
This immense respect for single parents is the reason I very much admire Alexa and what she has been able to accomplish with SMI in such a short time. Just look at this first post 2 years ago– how could you bet against a woman with that kind of mindset? Now compare it to her most recent financial update and you’ll see what hard work, discipline, and execution can result in.
If you’ve been following Alexa’s blog for a while, she provides a strong foundation for budgeting, starting a business, income growth, financial planning, and retirement, but here are a few more tips to help single parents save even more money, accelerate their financial independence, and grow their retirement nest egg.
Earn A Second Income
After the recent recession, there has been a huge emphasis on frugality. Here’s the issue – you can only really cut your expenses so much. Your expenses can never amount to $0 and there comes a point where you put so much stress on yourself to save money, it stops being rewarding.
On the other hand, your income potential is limitless. That’s one of the best things about starting a blog. For a minimal startup investment, which includes $10 for a domain and $5 a month for hosting, you can build a business online. But starting a lifestyle blog doesn’t need to be your only source of online income – your website can be a marketing tool for freelance services, such as writing, editing, graphic design, or social media management. The best part of this strategy is that, while your blog grows gradually, you can supplement your income with immediate cash from freelance work.
Investing For Retirement – Start Early
While there are many different investment strategies and opportunities, the most common vehicle is the stock market. Unfortunately, if you don’t know what you’re doing, the stock market is one of the easiest ways to lose money. Yet not all is lost if you want to open a brokerage account and start investing wisely.
A low-cost index mutual fund from Vanguard or Fidelity can do it all for you. Index funds are constructed to match the components of a specific market index, such as the S&P 500 Index, thereby providing broad market exposure. This means that, instead of becoming a stock picker and choosing which specific company’s shares you want to buy, an index fund automatically diversifies your risk by exposing you to hundreds of different stocks.
However, Vanguard and Fidelity have minimum account balance requirements that some young or first-time investors may not meet. If that’s the case, discount brokers called robo-advisors (think Alexa’s recommendation Betterment.com) are a great option because many of them have no minimums. You can start with as little as you want and make a monthly contribution to grow your retirement account.
Ultimately, starting young and minimizing costs are crucial. From the beginning of 1980 to the end of 2014, the stock market has averaged a 10.13 percent annual return, despite the United States experiencing 4 recessions in that time period. While past performance is not an indication of future returns, you can bet that it is in the best interest of Wall Street to keep the market trending higher in the long-term.
Insurance is a boring subject. Woody Allen probably characterized it best when he said: “There are worse things in life than death. Have you ever spent an evening with an insurance salesman?”
Yet insurance is an exceptionally important concept. For example, what if you could guarantee, that if the worst case scenario played out and you died unexpectedly, your young children and financial dependents would be taken care of? Isn’t that peace of mind worth something? Well, that’s what life insurance is.
If you are a fan of this blog, there is a good chance you are a mom, and I know every good mother worries about their kids, so what about your children? Who would take care of them? Term life insurance is designed to pay out a death benefit (lump sum cash payment) to your beneficiaries if you tragically pass during the term period, which can be 5, 10, 15, 20, 25 or 30 years.
So, if you’re a healthy, non-smoking 30 year old mother, you can buy a $500,000 term life policy for 30 years of coverage for $350 to $450 per year in premiums. For a round figure, that comes out to $30 to $38 per month. But you don’t have to take my word for it. You can always get free quotes online from some of the top life insurance companies.
However, under no circumstances should you buy a whole life insurance policy. Unless you’re wealthy, any agent, broker or representative who tries to sell you a whole life policy is a red flag. And for that matter, if you’re healthy, there is also no reason to buy a guaranteed issue, no medical exam, or high risk life policy. Really, if you need life insurance, stick with a very affordable term life policy and you shouldn’t have any problems.
Once you have a solid financial footing, such as a steady income or career, disciplined budget, a full emergency fund and a growing savings account, then you can start thinking about these next steps of building long-term financial security.
Author Bio: Gary Dek is the founder of Gajizmo.com, a personal finance blog dedicated to improving financial literacy and independence. Gary is a former investment banking and private equity analyst turned internet entrepreneur.