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There are few things more challenging than managing a household as a single parent. There’s less room for error and there is usually less money, which can complicate your planning for future goals. It can be more difficult when you have short-term goals that have to be met in addition to your longer term goals which are usually larger, more expensive and more important.
Where people get into trouble is they focus so much on meeting their short-term goals, they find themselves falling way behind on their long-term goals. Being able to find that balance in meeting your short-term needs while not forgoing your long-term needs is critical, requiring thoughtful planning and a greater amount of discipline; but it can be done.
What are Short-Term Goals?
A short-term goal is anything you need or want to achieve financially within the next two to three years. Short-term goals can include:
- Paying off debt
- Buying a new car
- Taking a special vacation
- Making a major purchase
- Starting a business
- Establishing an emergency fund
Planning for Short-Term Goals
If you haven’t established an emergency fund, that should be your top priority. As single parent, you have a greater need for a financial cushion, and you don’t want to rely on credit cards to cover unexpected expenses. A cash reserve of six to 12 months of living expenses should be your minimum goal. Once you have your emergency fund in place, you can target your next priority.
Because they need to be achieved in the short-term, you don’t have the luxury of time in planning for them. Your planning needs to be more precise and you need to have the discipline to stick with a plan. The key is to clearly define what it is you want to accomplish, quantify it with a dollar amount and set a target date for achieving it. Once you have determined what your goals will cost, commit to a monthly savings amount that will get you to your goal assuming a very low rate of return. You will then need to track your progress to your goal at least quarterly and hold yourself accountable for staying on track.
What is a Long-Term Goal?
Long-term goals have a longer timeframe for achieving them – typically several years or longer. Typical long-term goals include:
- Buying a business
- College for children
Planning for Long-Term Goals
There is no short- or long-term goal more important than securing your retirement. As a single parent, relying on your own capital for your retirement, it must take precedent over all else. It is important to set a clearly defined goal of when you would like to retire or, at least have the option of no longer working. The sooner you start on your goal, the less it will cost you to achieve it. If you have access to a 401(k) plan at work, take full advantage of an employer match is available. If you don’t have access to a 401(k) you should maximize your annual contribution to an IRA or Roth IRA. Once you are on track with your retirement savings, you can then turn your focus on your next priority.
Balancing Short- and Long-Term Goal Planning
In terms of prioritizing your goals and balancing your resources between short- and long-term goals, you can start with your top two priorities – establishing a sufficient cash reserve and getting on track to a secure retirement. Those two goals should be your primary focus until they are achieved. Then it becomes a matter of determining what is most important to you. With limited resources, you can’t expect to accomplish everything. Some goals may be essential to achieve while others may be “nice-to-haves.” Focus on your most important goal – define it, quantify it and commit to a plan to achieve it.
Budget Like You Mean It
The biggest challenge for single parents is having to adjust to a new budget. Any planning for short- or long-term goals starts with a strict budget that creates the cash flow necessary to achieve them. Once you have defined and quantified your most important goals, you can create a spending plan that centers on creating the savings to apply towards your goals. If your target savings amount is $500 a month, all other spending should be adjusted so you can comfortably hit your target.
The key to keeping your savings commitment each month is to pay yourself first. The majority of banks offer automatic deductions from your paycheck or checking account. If you overspend in any category, you should adjust your spending in another category other than your savings. Most importantly, do not accumulate any debt. If you can’t pay for something with cash, it means you can’t afford it. Instead of paying for something in arrears with interest costs, adjust your budget so you save the money you need to buy it with cash. Your goal should be to increase your cash flow so you can tackle another short- or long-term goal.