Many households nowadays are dual income, with both partners working and bringing in money to run the home. Even in single-income households, having a partner can help with budgeting, paying off debts, and planning for the future. When single, you can only depend on yourself to make decisions and plan for the future. Handling finances on your own, however, can be challenging and confusing. Having been there myself, I thought I’d pass on some wisdom I’ve accumulated over the years.
A Guide for Single Ladies to Handle Finances
First things first: balance what you know you need to do for yourself with how you see your future. For instance, I know one day I want to get married, but all of my decisions today can’t be in preparation for that. I must still make decisions for taking care of myself today while setting myself up for the future.
So, where to begin:
Understand your finances first. Know your earnings, understand your options for saving and investing, and create a budget for yourself for your day-to-day expenses. To touch upon the different areas, you should be thinking about and looking into when building your financial house:
The first place to start is at your job. See if your work has a retirement plan and what that plan is. If there’s a 401k option, opt-in, and if there’s an employer match, then look into putting aside the highest amount to maximize their match.
Next, see if there are options for a 403b and/or 457b. Both are pre-tax accounts, and the maximum for each is $19,500 per year. If you’re able to, maximize these accounts and save on taxes! The next accounts to consider are Individual Retirement Accounts or IRAs. Depending on your income level, you could qualify for a Roth IRA, a backdoor IRA or you can choose a Traditional IRA.
Aside from saving for retirement, you should also be saving for a rainy day. In other words, an emergency fund. Your emergency fund should have about 6 months worth of expenses to cover emergencies and unanticipated costs life may throw at you. This money should remain untouched except in a real emergency so you never have to worry about being able to pay for it.
Investing can be scary, especially when you’re single. There’s a lot you may not know, and the idea of risking your hard-earned dollars can make anyone nervous about taking that leap. However, there are ways to invest in the market safely and still earn a return. The simplest, low-cost way to get into the market is by investing in mutual funds and exchange-traded funds (ETFs). With both, you get access to the entire stock market. However, each fund is a bundle of different stocks. So when you buy shares in a fund, you’re getting a little bit of each of the stocks within it. This not only greatly lowers your risk but also helps you easily diversify.
You can set your investments to automatic payments each month to automatically set aside money into the market and don’t have to think about it. Basically, set it and forget it. After all, the money you don’t see in your bank account is money you don’t miss, and it’s money you don’t spend unnecessarily.
Many single ladies I know defer saving and investing a portion of their funds to “enjoy living in today”. Or they focus on paying off debts (definitely not a bad idea). However, what’s important to realize is that the earlier you start putting money away, the more you can accumulate.
It doesn’t matter how much you’re investing; what matters is how long you’ve been investing for (the magic of compounding!). So any doubts you have on parting with your money for the purpose of saving and investing, try to move past them. Start with both. After all, the money is still yours; it’s just something you’re giving yourself for your future (single or not).
If you’re lucky enough to not have any student loan debt, then hats off to you. That’s amazing. Debt, in general, should be a priority to pay off, even at lower interest rates. Debt is one of those leeches that sucks the life out of you, the longer it hangs around. Be aware that not paying it off or not prioritizing it can weigh on you later. In addition, it can stifle your ability to save, to live, and to retire early (should you want to).
If you work with your hands or require physical attributes to do your job, look into disability insurance. Some jobs will provide this for you, to an extent. As a physician, I also got my private disability, so I have coverage in the long term should anything happen (god forbid). If you have a specific line of work, especially one that pays well, look into this and ask about “true own occupation” coverage.
Things to Remember as You Earn and Spend
Once you’ve got your financial house teed up (saving, investing, insurance, a debt payment plan), you need to make sure you’re spending wisely when it comes to what’s leftover. Most of the “fun” spending we do can be recalibrated. What do I mean? Take a good hard look at what it is that you purchase. If most of it is the stuff you end up not using or using rarely, then maybe it’s time to reconsider that spending. Instead, I encourage focusing “fun” spending on experiences and trying new things you’re interested in. Pushing your comfort zone allows you to grow, and the experiences you have will create memories that last long past the experience itself. Studies have shown that experiences contribute more to our happiness than material goods, so think about what you prioritize and see if it needs any adjustment. Altering your spending habits can help you stay in control of your finances, even in this small way.
Live Within Your Means
No matter how much you make, I encourage you never to spend more than you can make. Instead, always be on the lookout for a bargain, and strive to spend the least amount possible while getting the best quality. Frugal living is a great way to not only build up your savings (and your wealth), but it helps you value every dollar you earn and spend. When you prioritize getting the most out of your money, everything your purchase becomes important, and you’re more likely to appreciate what you have.
Choose Your Upgrades Wisely
As you move up in your career, get promotions, and get pay raises, you’ll also want to upgrade your lifestyle. Choose your upgrades wisely. Don’t upgrade a part of your life just because you think you have to or because it’s something “everyone does”. Do not keep up with the Jones’. Instead, choose upgrades (aka increased spending) that make your life easier, bring you real joy, or allow you more time to do the things you love and want to do.
Some examples are:
- Hiring help to clean your home so that you have more to relax
- Upgrade how you travel (get an awesome travel credit card, splurge on business class tickets, etc.)
- A nice car (especially if you spend a lot of time commuting; allow yourself some valuable comfort)
- Clothes/jewelry/accessories – pick things representing you and who you are versus what’s trending. By staying true to yourself, you’ll be more likely to value and use the purchase in the long term.
Keep Track of Everything
There are apps that allow for tracking your finances, but I keep it simple. I review my credit card statements in full at the end of each billing cycle. I do this before I pay to make sure there’s no erroneous charge, and understand where my money went during the month.
On top of that, I have two credit cards I use, and that’s it. I never use my debit cards unless it’s to withdraw money from an ATM. I also never open random accounts at stores, no matter how much discount they entice me with. By limiting your credit cards, you reduce the chance of forgetting what you have, limit mistakes in paying things off, and reduce overall confusion. To keep finances simple, simplify your process. So, use a finite number of credit cards; pay them off each month; review your statements every month; review your bank accounts regularly (stay aware of your balances).
Don’t Be Afraid to Take Chances
When you’re single, it can be scary to take a leap and invest money or consider buying a house independently. However, if you can spare the cash and have saved a down payment, you should keep yourself open to the possibilities. The good thing about being single is that you aren’t responsible for anyone else. So, yes, while it’s hard to take a risk when you don’t have anyone to lean on, you also don’t have to worry about anyone leaning on you. So, take advantage of this freedom, so to speak, and allow yourself to take some chances.
As I mentioned earlier, it’s tough to balance what’s best for now and what you may want for yourself later (i.e., marriage, kids, etc.). In this case, you can think about what you want, but continue to do what’s best for you now. The future is unpredictable, no one knows what can happen, but things happen for a reason. No matter what you may dream for yourself, life happens today, and as far as you know, you’re the only future you have. So, make decisions that make room for future possibilities, but don’t let those decisions stifle your ability to live now, (an example of this, when I bought my home, I made sure to buy one that made me happy, but also had room to grow, and was in a neighborhood that I could quickly sell or rent should I have to leave).
To summarize, pay yourself first (save and invest for retirement, build your emergency fund, pay off debt), spend your money wisely (where it matters most to you), try to stay frugal, and live within your means, and allow yourself to take some risks. Always remember, there’s no such thing as a get rich quick or make money in a hurry scenario. The people who build wealth start investing and saving early, and they do so consistently. The thing about finances is, if you’re doing it right, it’s going to be tedious and unglamorous. So, stay boring, stay simple, and watch yourself grow strong in your finances.