“Hi Tash, I’m separated and we have just sold our property. Something that I would love advice on is where I should put my money that I receive from the sale. I can’t afford to buy, but want to know what is best? I do want to purchase a couple of items of furniture, but what percentage should I budget for that? I’ve also been told to put money into super (I’m 40) as I haven’t been working full time since I had a baby who is now almost 5. I’ve been working two jobs and building a small business of my own – but money is tight!”
First of all, well done on being a single mother, working two jobs AND building up your own business!
Now, there is a bit to do here, so I’m going to tackle this one over two weeks. This week, getting the basics in place, and next week, the investment side of things.
First thing’s first – get the basics in place.
If I were you, my first focus would be taking care of myself, letting the dust settle on the separation (depending on how long ago that was) and getting the fundamentals taken care of, which in the short term means parking the money somewhere safe while you figure out your next steps.
All investment comes with risk, and now that you are a single parent the buck stops with you. So let’s make sure you have your back-up plans in place first and then we can talk about investing. Here are a few suggestions to get you started.
Step # 1: Do your budget
The first starting point would be to make sure you have an excellent grip on all your personal and business expenses. If for any reason you were unable to work for a few months, do you know how much money you would need to get by? If you need a helping hand figuring it out, the Women with Cents Budget Organiser is a great tool which you can download here.
Step # 2: Set up an emergency saving fund
Now that you know how much money you would need quick access to, I would use the money from the settlement to set up an emergency fund – about 3 months of living expenses is a great starting point. This is money that is best kept in something low risk like an online savings account. Comparison sites like Mozo and Finder can help you find a great deal.
Step # 3 : Map out some goals.
Have a think about your short, medium and long term goals (personally and for the business). These will help you to decide what to do with any remaining settlement money. Have a look here for more tips on goal setting.
Step # 4: Check your super and consider talking to a family lawyer
Depending on the circumstances and how long you were with your spouse, you may be entitled to transfer a portion of his super into your super. Also check what life insurance you have in your super and that you have updated your binding nominations and your will, and appoint an enduring power of attorney.
Step # 5: Develop a long term backup plan.
You are at the age where life insurances (in particular income protection and trauma insurance) start getting expensive because the risk of illness increases with age. Income protection is important, but if affording it could become an issue you might want to consider a combination of other insurances inside your super (something is always better than nothing!), saving a larger buffer of emergency funds and having some trauma cover on the side. I would get help from a financial adviser to review your insurances and put together a long term strategy, including insurance for your daughter. As a single mum it is more important than ever to make sure all these measures are in place first before you think about investing.
Stay tuned next week for my thoughts on how to approach investing!
WAIT! What about the furniture?
As for how much to spend on furniture, that is ultimately up to you! Work out what you think you can afford without compromising your financial security, and your goals (although I have heard that second hand is the new black!).
If you need a helping hand with figuring out your goals and taking the steps to get there, I would also suggest you check out our Making Cents of Money program – it has been a real hit with our community!
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The information provided by Women with Cents is general in nature. It doesn’t take into account your objectives, personal financial situation or needs. Think of it as educational material in which to help you make more-informed decisions. We recommend you obtain financial, tax and credit advice specific to your situation before making any investments or financial decisions.
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