Have you ever thought “I’m single. Do I need to do anything differently with my finances?”
- Do you feel the pressure or weight of managing your finances on your own?
- Are you concerned about having enough money to take care of yourself?
- Are you too busy or just haven’t gotten around to thinking about the “big picture” of your finances?
You are not alone. Today, there are more women living independently now than ever before in the U.S. In fact, the Pew Research Center (2016) reported that 69% of women are living without a spouse. Moreover, at some point in their lifetime, women will find themselves on their own, which means they will be the sole financial decision-maker for their household (CNBC, 2018).
These trends, which do not appear to be reversing, make it clear that single women face special challenges when planning for the future. So, if you have never been married, are divorced, or have lost a spouse, it’s imperative that you plan ahead for your personal and financial security. What follows are a few key strategies to help you safeguard your financial future and ultimately provide peace of mind.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
No. 1: Give yourself a Cash Cushion
For many, it’s not a matter of whether you’ll find yourself in need of an emergency fund, but when. The general rule of thumb for an emergency account is to save somewhere between three and six months’ worth of take-home pay. However, I recommend six to nine months’ worth or more for single women. Why? It may take single women longer to find that next job or recover from a crisis, which is problematic if they have no other source of income to fall back or rely on.
No. 2: Make Investing a Habit
Women have longer life expectancies than men but tend to have fewer retirement savings to serve as a nest egg for their future. So, when it comes to investing, begin with your retirement contributions first. Make sure that you are at a minimum contributing enough to get the employer match, if offered – otherwise, you are leaving free money on the table! If you are contributing enough to get the match and can contribute more, consider investing in a Roth 401(k) or Roth 403(b) if your employer offers it. Doing so can give you an income source that won’t be taxed when you withdraw it at retirement. Also consider a Roth IRA or a Health Savings Account (HSA). An HSA allows you to invest with pre-tax money and withdraw funds tax-free to cover qualified healthcare expenses.
If you have additional discretionary income, start investing for other goals, such as starting a business, traveling or just plain building your wealth. The sooner you can get to this point, the better thanks to the magic of compounding interest – meaning, earning money on top of the money you earn.
No. 3: Prepare for the Unexpected
A commonly overlooked financial concern for ALL women is planning for unexpected life events that could derail your finances. These include things like sudden death, disability, a long-term illness, or a terminal illness – all of which demand serious financial decision-making. Because more and more women are engaged in high-paying careers and are therefore earning more money, they tend to own more assets which means they have more at stake financially when faced with unexpected events. So, it’s important to know what your options are so that you won’t be blindsided in the future.
What are the options? Simply put, it’s insurance protection, such as income replacement or disability insurance, life insurance and long-term care insurance. In the case of long-term care insurance for example, you may not have a friend or family member to help you if your health declines due to normal aging or medical issues, which can result in less-than-optimal care when it’s most needed later in life.
Keep in mind that some of these coverages are offered as benefits by your employer. Make sure you take advantage of them if provided. If you already have these in place, make sure you have adequate protection, meaning review your coverage to ensure you have enough to meet your potential needs. If not, consider increasing your coverage.
No. 4: Get Your Affairs in Order
Another area of personal finance that many single women (and men) ignore or postpone is getting their affairs in order. Why? They assume that estate planning is for married couples because couples have spouses who rely on each other or because couples need to make contingency plans for the care of their minor children. But, to assume that single women do not need to have an estate plan in place is false.
For example, ask yourself these questions: “Who would pay my bills if I became incapacitated?” “Who will make investment decisions on my behalf?” “Who will make health decisions or confer with doctors if I am unable to voice an opinion?” These are roles that normally fall to spouses. However, an estate plan enables you to provide for your own protection and ultimately lay the groundwork for allowing someone else to make financial and medical decisions on our behalf if you are not able to do so.
So, please don’t leave yourself, family or friends stranded! Add beneficiaries to all of your financial accounts. Make your wishes clear on your health decisions and ensure that your administrative affairs will be under control in the future by acting now – while you are still fully functioning and competent – to designate someone to handle them for you if you can’t at some point.
No. 5: Improve Your Financial Acumen
Make a commitment to improve your financial knowledge. With the plethora of online resources available, there’s really no reason not to – you simply need to carve out the time to do it. You can start by asking yourself “What financial information would I like to know?” Try identifying two or three financial topics that you’d like to learn more about and make the commitment to educate yourself on those topics. If you want to learn about financial terminology, consider reading online encyclopedias, such as Investopedia. Reading books and finding financial applications on your smart devices can also help you increase your financial acumen.
In sum, as single women, the buck starts and stops with you. That’s why it’s crucial for you to educate yourself about your finances and make wise financial choices. Take the steps necessary to develop an effective plan or strategy(ies) today to ensure that you will have a better tomorrow. Notice, I said today, which means don’t procrastinate. Instead, make the choice to feel empowered by your financial future!
-
Cord Cutting Could Help You Save Over $10,000 in 10 YearsHow cutting the cord can save you money and how those savings can grow over time.
-
The '8-Year Rule of Social Security' — A Retirement RuleThe '8-Year Rule of Social Security' holds that it's best to be like Ike — Eisenhower, that is. The five-star General knew a thing or two about good timing.
-
You Were Planning to Retire This Year: Should You Go Ahead?If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get ItThe Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning PlaybookConsider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Your Home + Your IRA = Your Long-Term Care SolutionIf you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
I'm a Financial Planner: Retirees Should Never Do These Four Things in a RecessionRecessions are scary business, especially for retirees. They can scare even the most prepared folks into making bad moves — like these.
-
A Retirement Planner's Advice for Taking the Guesswork Out of Income PlanningOnce you've saved for retirement, you'll need your nest egg to support you for as many as 30 years. For that, you need a clear income strategy, not guesswork.
-
Why Smart Retirees Are Ditching Traditional Financial PlansFinancial plans based purely on growth, like the 60/40 portfolio, are built for a different era. Today’s retirees need plans based on real-life risks and goals and that feature these four elements.
-
To My Small Business: Well, I've Been Afraid of Changin', 'Cause I've Built My Life Around YouWhile thinking about succession planning might feel like anticipating a landslide (here's to you, Fleetwood Mac), there are strategies you can implement to manage the uncertainty and the transition.
