Managing finances as a single mom with high debt

When Manju Singh, a 37-year-old mother of two aged 8 and 5, decided to separate from her husband, her biggest fear was managing her finances and continuing to support herself and her family. her two children while continuing to pay her IMEs. “In the months following the separation, I applied for a loan to renovate my parents’ house. Although my parents were not completely dependent on me financially, it was my responsibility. At that time, I had no idea that within a few months my marriage would completely fall apart,” Singh says.

Although Singh’s husband continues to provide financial support for the children and Singh considers herself lucky to have always had her own source of income, being a single parent, whether by choice or by fate, is a challenge. The emotional upheaval, judgment and hostility that stem from twisted perceptions of single mothers weighs on countless women. Amid these, navigating their caregiving roles with little support can be daunting, especially if money has been a sore point after the separation.

Singh says: “I am now in a much better position mentally, but at that time I remember how financial worries, especially because I had taken out loans, fueled my anxiety. I blamed myself for not planning the separation and postponing the loan for the renovation of the house later. Finances are the trickiest part of a separation and it’s so much harder for women who don’t have the privilege of falling back on a financial safety net.

As a single mom, managing finances with the burden of loans and high credit card bills can be a difficult climb. Singh recalls, “I remember during the early days of my separation, I used to have cravings to seek solace and drown my sorrows through retail therapy. However, I also realized quite early on that I had to provide for my children beyond what their father provided and also secure my future while repaying my loans. It had a sobering effect on me. I realized that every penny I saved could help me get out of debt sooner and it would help me improve my financial situation.

Singh says a strict budget strategy and regular inventory of her cash flow, expenses and goals have helped keep her running smoothly financially as a single mom. “I’ve gotten used to mapping my progress towards my goals with my salary, my alimony while taking into account my loan repayments. Loan repayments can’t be random and they have to be ranked in order priority based on their interest rates.Once my liability for bumps could be reduced to less alarming levels, I began to systematically invest in mutual funds for my long term goals and I also secured adequate health insurance coverage for myself and my children. I learned along the way that there are no financial products for single mothers as such – financial planning for single mothers is similar to that of single-income households.

Aditya Birla Sun Life Mutual Fund has launched a special initiative called For Her which focuses on the financial inclusion of women and aims to provide them with means of financial security.

Preeti Zende, Founder of Apna Dhan Financial Services, says, “Often we see investors prioritizing wealth creation over debt management. But if you don’t get your debt under control, it can have a huge impact on your long-term wealth creation policy. Debt management focuses on priority repayment of the loan at the highest interest rate. Things can be more difficult for those who are heavily indebted single mothers. If you have different types of loans, such as a credit card loan, personal loan, car loan, and home loan, you should focus on getting the most expensive loan first. Credit cards and personal loans are the most expensive.

Zende also iterated by ticking repayment obligations as soon as possible to avoid unnecessary leaks in the future to accrued interest payments. “You can just pay off that loan monthly with your savings to get rid of it. If repayment is not allowed immediately due to some blockage, you can use a simple RD to accumulate corpus to repay the loan in a lump sum. You can also use an arbitration fund to accumulate the amount. This option is more tax efficient. If you only have one home loan, you can manage it alongside your usual investments. You can invest in the Nifty Index fund, the Flexicap fund for your long-term goals and the hybrid equity fund for your medium-term goals, and liquid and arbitrage for your short-term goals.

Singh says that for single mothers, it’s also important to be extremely careful when choosing investment instruments with varying risk quotients. “At first I got carried away and made the mistake of jumping into mid and small caps and direct stocks. While stocks for long-term goals are an absolute must, no investment should be made in hopes of hitting a jackpot.As a single mom, it’s important to keep in mind that a drastic drop in your financial health will cost you and your dependents dearly and in all likelihood you may have to climb out of this chasm without the help of an extra pair of winning hands.”

Key points to remember

– As crude as it sounds, you need to have a plan ready for your child’s well-being in the event of an untimely death. A solid term insurance policy is absolutely essential if something bad happens to you.

– Once your children have reached a suitable age, it is a good idea to educate children about financial issues and equip them with basic financial literacy. This way, they can be better prepared for emergencies and have good financial habits as adults.

– We see that investors favor wealth creation over debt management. But if you don’t get your debt under control, it can have a huge impact on your long-term wealth creation policy.

– You can simply repay your loan monthly with your savings to get rid of them. If repayment is not allowed immediately due to some blockage, you can use a simple RD to accumulate corpus to repay the loan in a lump sum. You can also use an arbitration fund to accumulate the amount. This option is more tax efficient.

– While stocks for long-term goals are an absolute must, no investment should be made in the hope of hitting a jackpot.

This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.