Amanda Thompson is the owner of Endurance Financial and is a single parent and Ironman triathlete. She has first-hand experience of being a single parent and living on one income. Here she speaks about how to create wealth as a single parent and some ideas you may not have thought of.
I grew up in a single parent family and as a single parent myself, I now know what my mum went through to provide for us. She worked so hard to make the dollars work for my siblings and I and often went without to ensure we were well looked after; whether that was physically with a good diet or emotionally, not made to feel “poor”. My Mum is one of many women of her generation who retired with only a handful of superannuation dollars, something I am determined not to happen to me.
I married young and had just started out in my financial planning career when I had my first daughter. Just eight years on I found myself single with two little girls. I made plenty of mistakes during my separation, I left my marriage with no assets except for my car and had to start again from scratch.
I wanted to be able to provide for my girls and enjoy experiences with them, which meant saving money to be able to do things.
I started my own business in 2018 and again, it was a risk that meant that cashflow had to be reassessed. I had savings that had been directed towards this goal and when I achieved it, I jumped into Endurance Financial, my financial planning business. For me being able to provide the “wealth” of knowledge I have gained over the years on my terms was a huge goal of mine and now here I am living a dream.
These tips below are not just from my professional opinion but also my lived experience. These are not about starting a side hustle to earn more but to make easy changes in your day to day to increase your wealth in a simple manageable way on a single income that you may not have thought of but are right in front of you.
Understand your current financial situation
It sounds simple but to create wealth you need to find the money to commit to your chosen wealth creation path. Ask yourself, do you really know where my money goes? To create a positive relationship with your finances you need this understanding.
Start with a basic excel spreadsheet – in seeing how things add up over time you will be spurred into wanting to save money. Also make sure you are obtaining all the financial assistance you are entitled to including Family Tax Benefits (A & B), single parent supplement, low-income earner health care card, rent assistance and COVID payments.
There is a simple, free budget tool on the MoneySmart website, which is a handy starting place.
Further reading: What benefits am I entitled to as a single mum?
Set clear goals and commit
You need to be clear on your goals and what they mean to you. Be patient and commit to your goals. Set up a different account and commit an amount each pay cycle and stick to it. Look for bonus inflows such as a tax return but don’t expect it and don’t factor it in to your budgeting, consider it as bonus money to put towards your wealth creation.
Protect your wealth and value yourself
As a sole income household, you need to ensure your income is protected, after all, your ability to earn is your biggest asset.
What happens if you become too ill to work for a period? If you don’t have income protection either inside your superannuation fund or external, seek some professional advice. Make sure you have a current will and that your superannuation beneficiaries are current and legal. If you are a business owner or sole trader, make sure you value yourself, your product or service and charge accordingly.
Further reading: 6 Things that can go wrong if you don’t write a will.
Create a Family Share Trading Account
One thing I have done with my family is open a share trading account. You can choose a platform that has a relatively low brokerage cost for single investments. I recommend to many of my clients with older children and teens to make this a family thing – everyone needs to bring a share, company or sector to the table a bit like a share committee.
If you want shares to be your thing but the fear of choosing a single company is too much like gambling, then choose to use an Exchange Traded Fund. These mechanically track the ASX200 and will provide you with a diversified portfolio of shares that track market indices that are ‘self-cleansing’ ie. as businesses become more profitable and enter an index, they’ll be added to the fund while businesses that become less profitable drop off the index and are sold. For example, 25 years ago the US index funds didn’t own any Google, Facebook, Apple or Amazon shares. Today these companies are in the top 10 largest index holdings. The index funds automatically added them to the portfolio, replacing underperformers like Kodak. This means you as the index investor do not need to do any research rather the Fund does the work for you.
Join a Real Estate Investment Trust
If you want to invest in property but are not able to enter the market, have a look at Real Estate Investment Trusts (REIT) a good way to invest in property through shares. Investors buy ‘units’ in a portfolio of investment properties, which is run by a professional investment manager who works on behalf of unit-holders. Whilst the shares will increase in line with the upward revaluation of the properties in the portfolio, that’s not the only factor in making an investment decision – you should also focus on the income. REITs offer all the upsides of property investing with none of the hassles that come with standard investment properties.
Keep it Real
Make sure you are accountable for any new habits you make. Create review dates so you can analyse how you are doing and make any adjustments. I recommend doing this every quarter. Ask yourself, have I paid down any debt? Can this extra money be added to my wealth creation plan? Are there other investment options you would like to try?
Remember that good financial habits and being respectful of money are actually great things for our children to learn – when the time comes for them to be out on their own, they will be in a good place when they understand the value of money. www.amandathompson.com.au