Money and happiness | Single parent, zero savings?

In Money and happinessour journalist Nicolas Bérubé offers his thoughts on enrichment every Sunday. His texts are sent as a newsletter the next day.

Clever people like me often advise people to start saving and investing years before becoming parents. Those who do so reduce the stress that comes with the arrival of a newborn.

That said, even a good financial situation can be tested.

For example, what happens in the case of a separation? Or if a woman decides to have a child alone?

“When you become a solo parent, you have to review your finances,” explains Maude Gauthier. Yes, it can be expensive. But there are solutions. »

Maude Gauthier decided to become a single mother at 32. An experience that she recounts in her book Solo parents, cash flow heroes: how to raise a successful family without a partner (Quebec America), published in the summer.

When she had her daughter seven years ago, M^me Gauthier owned a condo that didn’t cost him “too much.” She had a few investments with a financial advisor. She considered herself a thrifty person.

“But beyond that, I didn’t know much about it,” she said. I would rate my level of financial knowledge at 5 out of 10 at this time. »

Holder of a PhD in Communication, M^me Gauthier works as a freelance writer. Her clients include publications specializing in personal finance, as well as financial companies, for whom she writes blog content.

“Through the reading I did for my work, I understood that there were lots of things I could improve in my finances. It opened my eyes. »

Becoming a single mother quickly made her realize that society is not adapted to this family reality.

To reduce housing costs, single or separated parents are choosing to move away from more expensive urban centers – especially if they can telework.

“But, at the same time, they can’t go too far either. They have to think about the daily life of the children, who will also live with their ex. »

After living in Montreal, Maude Gauthier now lives in a house in Sorel-Tracy, where she is from. The dollar spent on housing goes much further, she notes.

In her book, she also talks about the risks of using multiple credit cards to get there. She gives different scenarios for dividing family expenses between what is essential and what is not – an important analysis for all parents, but one that becomes vital for a solo parent.

One of the habits that has helped her the most is tracking her expenses monthly, she says.

“Often people pay for an app that does this. But it’s not necessary: ​​I have a simple Excel file where I write down every expense at the end of the month based on my credit and debit card statements. It helps me understand where my money is going. It’s revealing, and it’s often more useful than making a budget. »

By learning more about investing, M^me Gauthier also realized that his financial advisor was costing him a lot in management fees. “And he didn’t do much for me, so I thanked him. »

She manages her investments herself in her Disnat account. It invests primarily in index exchange-traded funds (ETFs) with low management fees and does few transactions.

M^me Gauthier also no longer has payments to make for his car, a Kia Forte which is fully paid for.

A few years ago, when she landed a contract to teach at the university, a colleague said to her, talking about her car: “Now you could change it. »

A telling remark, she said.

Despite “average” income (she writes that she earned $57,000 last year), Maude Gauthier says she is up to date with her TFSA contributions, which she maximizes each year, particularly because her house does not cost her excessively. She also puts money in her RRSP. “Tax-sheltered growth is going to pay off in the long run,” she says.

If she keeps up, she expects to reach financial independence within five to seven years, when she will be in the latter half of her 40s.

To calculate the amount of investments to accumulate in order to make a living from them, M^me Gauthier simply applied the 4% rule, which states that you can disburse 4% of the value of a portfolio of stocks and bonds each year, and adjust the amount to cover inflation, for the 30 coming years with very low risks of running out of money.

Another way to calculate it is to multiply your annual expenses by 25. The result is the amount you need to have in financial assets in order to achieve financial freedom.

“That’s my medium-term goal,” she says. I realize that the need to work for money limits me. I have several projects, I would like to write other books, and it would be nice to be financially independent to be able to do it, so as not to have any worries in that regard. »