“I’m single, do I need to do anything differently with my finances?”
According to a recent Forbes article, “5 Financial Planning Strategies For Singles,” most of the advice on this topic isn’t very different from what’s given to married couples. Nonetheless, here are a few tips to consider, especially if you’re single.
Start saving for retirement now. Many of us will bank on Social Security along with our own personal savings in retirement. Some may have a pension or will possibly continue working in retirement. Whatever the exact plan, a good retirement savings objective is 15% of your salary and include your employer match, if you get one in your 401(k) plan. If you don’t have a plan through work, consider starting a personal IRA.
Prepare for the unexpected. Singles don’t have the luxury of second income as a fall back, so build up an emergency fund that can cover three to six months of expenses. Singles should aim toward the six-month cushion, so any unexpected expenses can be paid off without having to use your credit cards or retirement savings. Keep the money in a liquid account.
Consider insurance. Life insurance can be a replacement income for those who depend on you. With no dependents, it might not be needed, but consider a small policy to cover funeral expenses.
Estate planning. Perhaps you think you don’t need an estate plan, because you’re single. However, you should have certain documents prepared, if you become incapacitated, so a trusted friend can make health and financial decisions on your behalf. This document is called a health care proxy or a durable medical power of attorney. You need this, along with an advance health care directive and a durable power of attorney for financial and legal matters.
If you’re single and have minor children, have a will drafted to designate a guardian to care for them. Likewise, if you’re single, most of your assets are in your own name. It’s important that your beneficiary information is up-to-date. In addition to your will, beneficiary designations on your retirement accounts and life insurance policy will direct how those assets are to be distributed. You can also title some accounts to “transfer on death” to move the account directly to another person.
Take time to prioritize a financial and estate plan and review it regularly. Share this with your trusted family members so that you all will have peace of mind.
Reference: Forbes (July 5, 2017) “5 Financial Planning Strategies For Singles”