18 February 2014
Living On Your Own? 7 Financial Planning Tips for Singles

Singles are becoming a more important demographic in the U.S., as data from the U.S. Census Bureau shows that only 49.1% of adults are married and living with their spouses,* and 27% of households consist of only one person.**

The objectives of financial planning are likely to differ between married people and singles. Married-with-kids might require a financial plan designed to protect loved ones. Singles may be better served with a sound investment strategy and sufficient insurance coverage to protect wholly-owned assets. Each case is different, so talk to a financial expert about a plan that takes your circumstances into account, but here are a few basics:

1. Insure Your Household Income

As the sole source of household income, that salary is essential for maintaining your lifestyle. What would happen if you couldn’t work? Could you pay the bills? Talk to your insurance agent or financial advisor to calculate how much coverage you need to make sure the money keeps coming in if you become disabled.

Disability coverage may be important to a two-income household as well, but singles don’t usually have a fall-back option, so taking care of your household income is important, even if the premiums hurt a little.

2. Build a Budget

Two-income households split the cost of rent or mortgage, heat and utilities, insurance – with two incomes, married couples simply have more options to cover monthly expenses. Singles see the same bills their wedded friends see, but with only a single income to cover expenses.

Singles may have less discretionary cash each month as the sole source of income, so creating a budget of fixed and variable expenses may simplify allocation of resources.

It may be worth the expense to talk to a money management expert, who can find some ways to cut spending down to size – and maybe even start you saving for a more secure future.

3. Start Saving for the Future

Having two incomes often makes it easier to save for the future.  Dad may have a 401(k) at work accumulating security for the future, while Mom contributes the maximum each year to a personal IRA.

In the case of single people, you may be the only source of supplemental income when you retire, above and beyond what the government pays. If you don’t see a pension in your future, it may be totally on your shoulders to start saving today for a better tomorrow.

4. Build a Contingency Fund

Who knows what tomorrow will bring? Having money in the bank can help smooth the bumps in life’s road. When you’re hit with an $800 car repair bill, savings can allow you to cover the cost with a contingency fund at your bank.

Make sure you’re ready for whatever comes your way with some cash stashed in the bank, and sleep better at night knowing you’re prepared.

5. Make It Legal

Talk to an attorney or a financial consultant to determine what documentation you need on file to prepare for the future, and draw up basic documents to protect yourself. A basic will, especially if you have significant assets, can help ensure your wishes are followed.

Assign power of attorney to a trusted relative or friend in case you’re incapacitated, and create a “living will” (an advance medical directive) that will be administered by your representative if needed.

6. Go Back To School

One way to boost household income for a single person is to learn more to earn more.  Become certified or accredited. Add a diploma to your résumé. In many cases, going back to school is an investment in you. With more education and training, you can earn more each year you’re on the job – and that increases household income and opportunities to save.

7. Get Life Insurance

Like insurance may seem unnecessary if you don’t have dependents, but if you’re not around, you may still leave debts that must be paid. Whether you’re fresh out of school, or enjoying a restful retirement, consider purchasing life insurance to offset outstanding debt. Final expenses can run into many thousands of dollars that may have to be paid out of your estate.

How much would it cost to clear the slate and eliminate all your outstanding debt, and cover final expenses for a nice sendoff? Do the math. Talk to a life insurance expert and get a policy that protects those you leave behind.

Talk to your accountant, financial management professional, and attorney about setting up your finances to enjoy life as an independent, responsible single who knows how to manage assets.

*www.census.gov/hhes/families/data/cps2013A.html

**http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_12_5YR_B11016&prodType=table

 

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.

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