Financial Advice for Single Parents with Credit Card Debt
This blog provides financial advice specifically tailored for single parents dealing with credit card debt. It explores common reasons for accumulating debt, strategies to manage expenses and pay off debt, advice for explaining budgets to children, the pros and cons of pursuing debt consolidation, tips for avoiding defaulting on payments, and resources available for single parents.
Raising kids alone isn’t easy. If you’ve recently separated or if you’re a long-time single parent who doesn’t earn enough to make ends meet, using credit cards might feel like the only way to cover your monthly expenses. But high-interest debt can create a vicious cycle of always playing catch-up and never being able to save. Here are some steps you can take to change the cycle.
Common Reasons Single Parents Land in Credit Card Debt
Single parents wind up with credit card debt for many reasons, and quite a few are difficult to avoid. You might recognize your situation here. You’re not alone.
It’s very difficult to make ends meet with only income-earner in the house, especially if you have multiple children. Many single parents lean on credit cards to cover the difference.
Limited earning opportunities
Juggling work and childcare can restrict your ability to pursue higher-paying jobs or work longer hours, which can limit income potential.
Your responsibilities may require expensive childcare services or after-school programs, which can quickly exhaust your budget.
Medical and healthcare expenses
If you’re solely responsible for your children's healthcare expenses, these costs can become burdensome, especially if a child develops a serious medical condition.
Lack of savings or other safety net
Even with sufficient income, it’s difficult to weather financial challenges with only one income-earner in the household. It’s even harder to build savings and an emergency fund.
The cost of divorce and separation
Lawyer fees, moving to a new home, and child support or alimony are all added obligations that can strain finances if you’re going through a divorce or separation.
Unfamiliarity with managing money
If a former partner handled the money, you might struggle with not knowing how to budget, overspending, and accumulating credit card debt.
Stress and coping mechanisms
Raising children alone is emotionally demanding. Spending money on interesting things can be a way to destress or compensate for feelings of guilt. Sometimes people feel compelled to out-spend their former partner.
Strategies to Manage Expenses and Credit Card Debt
Paying down your credits cards as a single parent isn’t easy. It means taking a hard look at your expenses and very likely making substantial changes. But it is possible. These tips will help get you started.
Develop a realistic budget and stick with it
Categorize your expenses and make debt repayment a priority. Use a budget to track your spending and ensure you're progressing towards reducing your credit card debt.
Reduce your expenses
Analyze your monthly expenses and identify areas to cut back, such as going out to eat or buying new clothing. Redirect whatever you can towards debt repayment.
Increase income if at all possible
Consider a part-time job, freelancing, or a side gig to generate some extra some cash.
Avoid adding new debt
Once you've made progress paying down your debt, stick to paying off the full balance each month to avoid steep interest charges, and only charge what you can afford to pay back in a timely manner.
Reach out if you’re falling behind
Defaulting on credit card payments (not making a payment for 180 days) damages your credit score, which can have lasting effects. Plus, you’ll start getting collection calls, which only add more stress to the situation.
But if you’re worried about falling behind on payments, contact your creditor immediately to see what relief options might be available. You might be able to defer payment for a few months, or the creditor might be able to reduce your interest rate or monthly minimum payments.
Put your family’s wellbeing first
Keep in mind, if you’re weighing your options between necessities for you and your children and making a credit card payment, your family’s health and wellbeing come first.
Setting priorities with a clear hierarchy of spending helps you make tough decisions when money is tight. Your child wants new shoes? Your newly created detailed budget allows you to see every dollar coming in and going out and more accurately decide whether buying new shoes is possible right now.
Explaining the Budget to Your Kids
Be open and honest with your kids and set expectations. You don’t have to share all the budget details, but you should give your kids an idea of what to expect, especially while you’re focused on getting caught up on your debt.
At the same time, you should celebrate progress, and avoid making the process all work and no play. Set milestones and celebrate victories as they come. Maybe you buy the family pizza and have a movie night to applaud your progress.
Don’t punish yourself for setbacks, either. Just focus on doing the best you can every day.
To Consolidate or Not to Consolidate?
If you’re struggling to balance many different payments, consolidating into one loan or payment program can ease the pain of tracking multiple payments. If the consolidation option has a lower interest rate or more affordable payments compared to what you have currently, that’s something you should explore.
But it’s crucial to understand the consolidation option’s terms and whether it actually helps you get out of debt. Transferring a balance or opening a consolidation loan to buy some time or avoid the problem for a little longer won’t help you.
Resources for Single Parents
If you have a qualifying income, assistance programs may be available to take the pressure off your monthly expenses. Start by looking for organizations in your community or state. Most assistance programs are administered on a local or state level.
Other organizations that can help include the following:
- HUD rental assistance: Depending on your situation and location, you could be eligible for public housing or a housing voucher program.
- Temporary Assistance for Needy Families (TANF)
- Women, Infants, and Children (WIC) program
- Supplemental Nutrition Assistance Program (SNAP)
- Head Start
How to Avoid Debt in the Future
If you’re able to successfully pay off your debt or even make tangible steps toward paying it off, congratulations! Try to keep up the same budget structure and habits so you can put the extra money you’ve regained into savings to prepare for future emergencies or major/costly events. These could be seasonal things like the holidays, back to school expenses, or property taxes. Focus on building a safety net when you’re able.
If you’re feeling overwhelmed by credit card debt, a debt management plan from MMI may be the right solution. We can help reduce your interest rates and create an affordable consolidated monthly payment. Even better, it’s not a loan, so there’s no credit check and you can cancel anytime. Get started with your free analysis today to see how much you can save.