Single moms are often going through financial crisis and they are compelled to take loans and get into the debt trap. In this context, it is interesting to note here that single moms and single women on average are known to earn marginally more as compared to the married women, according to https://www.forbes.com. However, while the income of married ladies has gone up by 8 percent during the last ten years, the average earnings of single moms have dipped by 6 percent. So often single moms are in a dilemma whether to invest or pay off their existing debts.
Consider Paying off Debts then Invest
Some experts firmly believe that single moms could pay off any existing high-interest student loan debt, credit card debts, or other liabilities before considering investments. They should pay off the student loan and consider it as a top priority. Student loan debt could be the toughest to discharge in terms of a bankruptcy. You must keep on paying down your student debt until you eliminate it completely and you must stop adding to the loan at all costs.
It is a good decision for single moms to become totally debt-free so that you would not have to worry about your assets being taken away from you. There have been numerous individuals including single moms stayed clear of any form of investing until they paid off their student debts, owned their own house, and set up a substantial emergency fund. During their middle age, these individuals had a robust foundation which boosted their investible assets. Managing your debt is the key to your road to investing. You may get in touch with nationaldebtreliefprograms.com to learn about various relief solutions.
Come Up With a Safety Net
As per https://www.huffpost.com, one of the most critical steps in managing your finances is setting up a substantial emergency fund that would be acting primarily as an effective financial safety net for both the mom and her kids. As a standard, you must keep aside a minimum of six months’ funds that would go toward the non-discretionary expenses, separately in an account. This emergency fund should not be used for handling daily expenses. That could be a low-risk investment or a savings account. Let us explore some investment tips that single moms must follow when debt-free and happy to invest in bonds.
Do not Consider Reaching for Yield
Often single moms make the mistake of reaching for yield. This usually occurs when interest rates seem to be low or may have declined recently or when some investors are feeling that they are not getting the rate of return that they actually, require. Do not be lured by higher yields which are offered by bonds that have lower credit qualities or concentrate solely on gains that took place during the previous period. Remember yield is just one of the several factors that must be considered by the investor while purchasing a bond. Do not forget that higher yield could be accompanied by higher risk.
Define Precisely Your Goals
What are the financial goals of your investment in bonds? You must know your aspirations clearly. Did you invest for getting enough funds to meet your kid’s college education expenses? Did you invest in bonds to live happily and comfortably during your retirement years? If yes, you need to ascertain the degree of comfort you are looking for. You must be having several goals. Determine all of them and be precise. Define clearly your financial goals vis-à-vis your investment in bonds. Do not forget that if you are rudderless and do not know where exactly you are heading, you would never arrive.
Examine Your Risk Profile
Different bond funds and bonds like stock funds and stocks would be carrying different risk profiles. You must do adequate research and understand the risks involved in an investment before taking the plunge. It could be a good idea to write the risks involved so that you could see them and effectively evaluate the risk.
Do Your Homework
Single moms who are investing in bonds are definitely off to a great start but you need to keep going. You must keep reading articles and books relating to bond investing. You may browse the Internet or visit the library in your locality. Follow the financial news shows. You must learn about bond math. You must read carefully the offering statement of the bond you are investing in. This should be containing detailed information on the characteristics of the bond right from the call schedule to the yield of the bond.
Moreover, if you are purchasing a bond fund, you must compulsorily read the prospectus very carefully. Read attentively all portions pertaining to the bonds. Pay attention to the fees. Remember individual bonds would also be having a prospectus that gets information directly from the bond’s indenture which is supposed to be a legal document which would be defining clearly the agreement between the bond seller and a bond buyer. A single mom must necessarily ask the broker for getting her a copy of the indenture or the prospectus to read it before committing to investing in bonds.
Choose the Right Broker
If you are purchasing individual bonds, you must locate a legitimate broker or firm specializing in bonds. You must consider talking to several brokers and determine which one suits fine with you. Choose a broker only after doing a thorough background check and only when you are satisfied with him. Your broker must be told about your risk tolerance and your precise objectives. Go through broker disciplinary histories. You must understand all the fees and costs involved in buying and selling a bond. You must ask upfront how the broker and brokerage firm are being actually compensated for the entire transaction including commissions, mark-downs, and mark-ups.
Bonds are an investment hence, they involve risks. Bonds are certainly safer as compared to stocks. However, if the corporation goes bankrupt, they would consider restructuring the bond and even reduce the amount to be paid back to you. You must think twice before investing as all investments involve risk and you may end up losing your money.