How to fashion a financial safety net: 5 steps for single moms

Many mothers are multitasking machines, tending to the dozens of jobs that must be done to keep the family happy and healthy. But between the homework help, the play dates, the cooking, the laundry and the bedtime stories, family finances are easy to overlook.

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For single mothers, it can be especially difficult to find the time to devote to long-term financial planning, yet doing so is critical to ensuring the prosperity of your family. Here are five steps to get started.

1. Track income and spending

Don't let fear stop you from facing financial facts.

"Sometimes clients think, 'If I don't think about it, and I don't look at it, everything will be OK,'" says Court Creeden, a MassMutual financial professional and founder of Parent Financial, a financial planning firm in Charlotte, N.C., that specializes in working with families.

But assessing your situation is the first step to alleviating financial anxiety.

Write down every expenditure for a month to see where money is going, and compare the total with income. Look for ways to trim the budget if there's nothing left over for savings or essentials, such as insurance.

"Until you get a clear handle on how much you make and how much you're spending, you're not going to get anywhere," Creeden says.

2. Make sure you have adequate life insurance coverage

Thirty-nine percent of single moms say if they died, their families would be in financial trouble immediately, and another 33 percent say their families would be able to get by for only several months, according to 2011 research by LIMRA.

"If, God forbid, something should happen to them, then without life insurance their children would be in jeopardy," says Catherine Theroux, a spokesperson for LIMRA, a global research and consulting group that tracks the life insurance industry.

Don't assume you are adequately protected just because you have life insurance through work. Typically, those policies are for small amounts. Evaluate how much your family would need if you died, and get life insurance quotes from highly rated insurers.

Affordable life insurance is easier to come by than you might think. A 20-year, $250,000 level-term life policy for a healthy 30-year-old costs about $150 a year -- less than three bucks a week, according to LIMRA.

In addition, make sure your ex is covered if you and the kids depend on child support or alimony, Creeden says.

3. Protect yourself in case of disability

Young women face a larger chance of disability because they face some risks men don't, such as pregnancy-related conditions and uterine cancer. They also face a higher risk for breast cancer and melanoma, says Barry Lundquist, president of the Council for Disability Awareness. Illness -- not injuries or accidents -- accounts for the majority of long-term disability claims.

Read the fine print if you have disability coverage through work, Creeden says, and talk to a financial adviser to get additional coverage if necessary. (See: "5 group disability myths ") Typically, employer-sponsored disability benefits provide just 60 percent of your base income if you become disabled and can't work. Bonuses and commissions are not counted as part of the base, and if the employer pays the premium, the income from the insurance coverage is taxable. That's often not enough coverage for families.

4. Get health insurance if you're uninsured

One big medical emergency can lead to bankruptcy. If you and your ex lack employer-sponsored coverage, check to see if your kids qualify for free or low-cost health insurance coverage through the Chidren's Health Insurance Program, a combined effort of the federal and state governments. If the children don't qualify, shop for individual health insurance. Under federal health care reform, health plans cannot charge higher premiums or deny coverage to children under 19 because of pre-existing conditions. That rule will apply to adults in 2014. In the meantime, if you can't qualify for insurance because of a health condition, check out the Pre-existing Condition Insurance Plan in your state.

5. Build an emergency savings fund

Creeden says he recommends enough savings to sustain you for four to six months in case of job loss or other emergency, and up to a year if you're in an industry with heavy layoffs.

Don't wait until the end of the month to see how much is left over for saving. Decide on an amount, and transfer it to savings at the beginning of the month. No room in the budget for savings? Creeden says one client found money by cutting cable television. Painful? Sure, but which is better -- the Food Network or food on the table?

Creeden says another way to squeeze money from a tight budget is to make sure you're getting all the discounts you can from your current home and car insurance company, or to shop around for less-expensive coverage. (See: "Discount auto insurance").