With no savings, Slowe spends $760 per month on housing and $260 on transportation, including gas and auto insurance. She spends about $650 on other living expenses. Her children are enrolled in after-school care that costs $264 per month. On the bright side, Slowe has no credit card debt. Even so, she’s living pretty close to the edge.
There’s little wiggle room in Slowe’s current situation, namely because moving into a less expensive apartment isn’t an option. “If I get a cheaper apartment, I may end up in a bad neighborhood,” she laments. “As a single mom, that would be pretty dangerous.”
Doug Robinson, owner and financial adviser at DouglasBradley L.L.C. in Bel Air, Maryland, says Slowe’s biggest budgeting issue is not spending, but income. With $21,600 a year coming in, and two young children to raise on her own, Slowe earning even another $5,000 a year in income could have a marked effect on her budget, Robinson says. He advises Slowe to focus her energy on searching for a job with a target annual salary of $28,000 or more. She should also pursue some form of child support.
“If she wants a better-paying job, she has to get out there and start looking,” says Robinson. “She should also set clear financial goals and create timelines to stick to.”
Slowe might also consider sharing living space and housing costs with another single mom (perhaps someone she meets through church or a community group) in order to reduce her expenses. “Her No. 1 expense is housing, but she shouldn’t move into a bad neighborhood just to save a few bucks a month,” says Robinson.
The arrangement could last for just a year or two—enough time for Slowe to gain some financial footing. “It doesn’t have to be forever, but if sharing space and increasing her income helps her achieve her goal of financial independence by 40, then she needs to get started with these strategies today.”
Family status: Single, with two children
Primary budgetary goals: “I want to organize my bills, plan for the future, and achieve excellent financial standing by my 40th birthday.”
Ideal Budget for Najla:
Based on her current income, here’s what Najla Slowe should ideally be spending, maximum, on each expense:
After-tax monthly income: $1,800
Housing costs: $630 (if she were to find a roommate to share expenses with)
Transportation costs: $260
Other expenses: $360
Monthly savings: $180
Monthly surplus would be: $110
Key suggestions: Find a roommate with whom she can share housing expenses; look for ways to increase annual income.