How to Master Money When You’re Single
These top 7 financial tips will help you manage your money as a single person.
Singles have many advantages when it comes to managing finances. For example, singles don't have to worry about their partner overspending, they have full control of all financial decisions, and they alone can best prepare for their long-term financial goals.
For those who are single and maybe looking for an eventual partner, mastering finances right now as a single person will provide for a much better transition to combining finances in the future. Whether you're happily single, planning on remaining single, or looking for a future relationship, we have you covered with our top 7 financial tips for singles.
7 Financial Tips for Singles
Follow these tips to manage your money and conquer your financial goals as a single person.
- Create a monthly budget
- Start knocking out debt
- Build your emergency fund
- Invest for your future
- Have the right insurance
- Work, work, work...
- Resist impulse purchases
1. Create a Monthly Budget
Creating a monthly budget is the foundation of good financial management. As the saying goes, what gets measured, gets managed.
When you start off with a monthly budget, you are telling your money where to go instead of wondering where it went at the end of the month. To start, determine what your monthly take-home pay is. To make this simple, ask yourself how much money hits your checking account between the first and the last day of the month.
Next, determine how much you are spending each month. The best way to do this is to print 90 days' worth of bank statements and determine what goes out in the form of fixed expenses each month. These are things such as your rent or mortgage payments, insurance premiums, cell phone bills, cable bills, and anything else that remains the same each month. The good news, once you determine your fixed expenses one time, you can rinse and repeat for every month going forward.
Now look at the expenses that can fluctuate throughout the month. These are called your flexible expenses and will include things like groceries, going out to eat, gas for your car, and online shopping.
Lastly, add up all of your fixed and flexible expenses, and make sure they are equal to your monthly take-home pay. If more money is going out than coming in, then it's time to cut back on some things to make sure you don't overspend throughout the month. On the other hand, if you still have money left after you complete your budget, give those extra dollars a job in your budget or they will disappear!
2. Start Knocking Out Debt
If you have any non-mortgage debt, it's time to start paying it off. High-interest debt, like credit card balances, can be a significant drain on your finances. Create a strategy to tackle your debts, either by focusing on paying off the highest interest rate debt first (debt avalanche method) or paying off the smallest debt first (debt snowball method).
Eliminating debt not only reduces financial stress but also frees up resources for future savings and investments.
3. Build Your Emergency Fund
As a single person, having a healthy emergency fund is crucial to manage the unexpected financial storms that come when you're least prepared for them. The goal is to save three to six months' worth of living expenses in a readily accessible savings account . Your emergency fund will act as the cushion between you and your next financial disaster. Instead of panicking next time your alternator goes out or the hot water heater fails, you simply write a check and go on with life.
The best way to get started building your emergency fund is to create a category in your monthly budget dedicated to building up your safety net. Look for areas inside your monthly budget where you can temporarily cut back so you can send more money towards your three- to six-month emergency fund and have your safety net in place sooner than later.
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4. Invest for Your Future
Whether you plan on remaining single for the rest of your life or you have plans to find a partner, either way there will be a day when you retire. The best time to start saving for your golden years is right now.
As a single person, the responsibility for your retirement savings relies 100 percent on you. The best place to start your retirement savings is through your employer-sponsored plans such as a 401k, 403b, 457 or a TSP. However, if you're self-employed or your employer doesn't offer a retirement plan, then you can take advantage of a Traditional IRA or a Roth IRA and contribute regularly.
Try to put away as much as possible into your tax-advantaged retirement accounts. If you're looking for a good starting point, try to contribute at least 15% of your income towards retirement. The power of compounding over time will work in your favor and your future self will thank you.
5. Have the Right Insurance
As a single person, it's crucial to have enough insurance coverage to protect yourself and your assets. If your employer doesn't offer health insurance, you must purchase health insurance on your own. In fact, the number-one cause for bankruptcy is due to the lack of health insurance combined with costly medical bills.
As a single person, you may not think you need life insurance, however you may want to still consider it. For example, if you ever plan on getting married down the road, getting life insurance today will be less expensive since life insurance tends to increase as you get older.
Beyond health and life insurance, other types of insurance to consider are renter's insurance, long-term disability insurance, and identity theft protection. These are often overlooked, but you'll be glad you have them in place when you need them.
6. Work, Work, Work…
As a single individual, you have the flexibility to prioritize your career and pursue growth opportunities. Invest in your professional development, acquire new skills, and seek promotions or salary increases. This will allow you to increase your earning potential and enjoy greater financial stability. Consider side hustles, part-time jobs, or even freelancing to supplement your income and create multiple revenue streams.
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7. Resist Impulse Purchases
One of the greatest benefits of being single is you're not required to consult with a partner about the finances. However, this can also be a huge drawback. Without the need to manage money with someone else, singles often have the freedom to make impulsive buying decisions. The key is to have a system in place to avoid these costly mistakes.
One best practice is to give careful consideration before making a purchase. Ask yourself if the item or experience aligns with your long-term goals and if it brings value to your life. Another best practice is to have a 24-hour rule in place for any large purchases. This means when making a large purchase, you must wait 24 hours from the time you decide to purchase to the moment you actually purchase the item.
Mastering your finances as a single individual is empowering and liberating. By following these seven money tips, you can establish a strong financial foundation, secure your future, and embrace the opportunities that come your way. Remember, being single offers unique opportunities to focus on your financial well-being. With discipline and foresight, you can achieve financial stability, independence, and a prosperous future.
- Create a monthly budget before you do anything else.
- Debt holds singles back from saving and building wealth.
- The best time to start retirement savings is today.
- Singles can take advantage of prioritizing their careers.
Chris “Peach” Petrie is the founder of Money Peach. Money Peach partnered with OneAZ to provide free financial education to members across the state. To learn more about OneAZ’s partnership with Money Peach, click here.
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APR = Annual Percentage Rate