Achieving independent economic status as a low-income single mother is not easy, more so when there is debt involved and an infant. This article presents an expansion of the working hypothesis, transforming owing money into having money with an emphasis on income negotiations, investments and insurance. Let’s see how earning income can be put in wealth creation using a practical case of a low-income single mother with debts and a child to look after.
Step One: Listing Down Primary Financial Goals
Achieving considerable success from a position of hopelessness a first and the foremost point of concern is quantifying financial goals. Two of the most critical sections in cases of such matters or hardship would be:
Maximize Monthly Income: Reach out to the employment market in search of working opportunities that at least maintain the income or better the pay.
Eliminate Debt: Prioritize paying off high-value loans to be able to become financially independent and stress free.
In this case, Sonali, a single mother with ₹ 26,000 as her current income has a huge debt to look out for as well. Her mortgage demands her to pay an EMI of ₹ 21,000736 and hence she is left with hardly anything to live off. The case of Sonali nicely supports how having a plan in place along with having the right set of priorities helps tackle the problem of an high debt and a low paying job.
Step 2: Assess your Current Income and Rework It
Sonali’s primary income is credited to her salary while on a mortgage, she has a rental income of ₹7,000. Now when these two incomes are combined, it sums up to ₹33,000, but with such an amount, after paying EMI along with some basic expenses, the income left is quite low. Here are some of the steps that can be taken in order to increase income potential of the individual:
Skill Development for Filling Job Openings: Skill development and gaining certification can help unlock roles that earn better pay, while side opportunities based on existing jobs can also be leveraged.
Look For Part Time Jobs or Freelance Work: Part time work or even freelance work webinars on the skills that a person possesses can help him or her earn more in a bid to not compromise with ongoing work.
Consider Increasing Rent: If the location of the property is appealing, consider the option of increasing the rent. If it is possible, check if rent can be raised to market standards.
Step 3: Using Debt Relief via Assets Sale
Sonali is contemplating negotiating a sale of the mortgaged asset. Assuming the market estimates for the property hover around 26-28 lakh, that would ease the burden of repaying the hefty EMIs. It allows for a number of advantages:
Immediate Relief from EMI Payments: The sale of property will free her from the monthly mortgage payment thereby giving her over 21,000 a month for savings or other necessary bills.
Possible Cash In Hand After Sale: In case she sells off the property for 28 lakhs, she would go ahead and pay off the loan taken amounting to 18 lakhs, which means that she has a balance of 8-10 lakh (post tax).
Flexible Living Arrangements: She would further decrease the cost of living by going to stay with her parents for a short period that can also increase the income earned from the other funds.
Step 4: Try and Save More by Making the Same Amount from Few Investments
Once the debts are any reduced or wiped out. The next aim that needs to be accomplished is to concentrate and create a strong financial base for themselves. Here’s how Sonali (or someone with a similar problem) can utilize the liquidated incomes from selling the property:
Start an Emergency Fund: Keeping 3-4 lakhs in a Fixed Deposit is a great way to make sure you don’t lose the money and can have quick access to it. This amount is breakable in case of any sudden expenses that would occur and would not lose the person’s earnings.
Health and Life Insurance: Term and health insurance policy is a necessity when one has dependents. A suggestion will be to set aside some of Sonali’s funds for herself and her daughter’s health insurance policy and also for a term life policy. These kinds of policies tend to assist in the long term.
Start a Fund SIP: A part of the rest amount can be invested in mutual funds by availing of the Systematic Investment Plan (SIP). Even if a person puts a little amount every month into a SIP, over time that amount can turn into a significant amount. For example, today if one invests ₹3000 every month, this amount could balloon when her daughter goes to college.
Starting in Step 5: Decrease in Monthly Costs and Future Financial Planning.
However, a few more costs are incorporated in the transition from house ownership into renting — these include the rent cost and the cost of bills. Based on what others are paying Sonali could be paying rent and living expenses between JD 12,000 and JD 15,000 for Jalandhar city. Yes, her monthly cost will go up in case she did not receive rental income for her property but incase she properly planned her expenditures so that she did not surpass her income.
Set Aside Funds for the Future: A planner or a budget works well in determining crucial costs from the non-crucial ones meaning that non-essential funds will be available to be put either into saving accounts or investments of any kind.
Increasing SIP Contributions Over Time: If your income increases, it can be in your best interests to add a part of any salary increases into increasing SIP contributions, thereby enhancing future earnings.
Focus on Long-Term Financial Goals: As an example, let’s take SIP contributions for her daughter’s education and wedding, enabling such funds to be available at the most appropriate time.
Step 6: Retain Financial Flexibility and Debt-Free Scenario
An EMI free life or a life without debts increases the financial independence of Sonali which would enable her to take decisions that suit the needs of the family instead of being influenced by loans. Following are the important points for remaining free from debt:
Avoid New Loans: Sonali must clearly don’t qualify to take on new loans until her income expands greatly, including mortgages and even consumer debt.
Invest Wisely for Future Purchases: Where the aim is buying a house, there is no need to be debt-ridden under a mortgage, for it’s advisable to pool together resources or cash in specific investments for a good percentage deposit instead.
Automate Investments and Insurance Payments: Monthly contributions to investments and insurance plans are better done automatically with the help of technology as a way of ensuring that financial plans are realistic and little human financial management is required.
Concluding Remarks: Making The Best Out Of Tough Financial Conditions
I can imagine how complicated life must be to those people who are struggling in finances, as there is so much to do in succession, first to be clam and earn simple goals, to work within the ability of the situation. For Sonali, she has a pretty clear strategy, which transforms her debt into a money making vehicle, focusing on increasing income, funding necessary insurances and formulating comprehensive financial models.
These practical measures constitute a grounded plan not only for withstanding the difficult moments in finances, but also for establishing a solid financial foundation for her and her kid.
