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!
-
Ask the Editor — Tax Questions on What Congress Will Do NextAsk the Editor In this week's Ask the Editor Q&A, we answer questions from readers on what Congress will do next with taxes.
-
When Tech is Too MuchOur Kiplinger Retirement Report editor, David Crook, sounds off on the everyday annoyances of technology.
-
When You Need Capital Quickly, Think 'Ready, Set, Fund': A Financial Adviser's StrategyInvestors must be able to free up cash to meet short-term needs from time to time. This strategy will help you access capital without derailing your long-term goals.
-
I'm an Estate Planner: Moving Family Assets to a Safe Haven Abroad Could Be a Huge Headache for Your HeirsIn troubled times like these, wealthy clients may seek financial refuge outside of the U.S. But that could cause more tax and estate problems than it solves.
-
Fall Is Tax Time? Yes! Act Now to Make Needed AdjustmentsReview your withholdings, contribute to tax-saving HSA and FSA accounts, manage a bonus' impact and adjust for major life events such as weddings and job changes.
-
Board Service in Retirement: The Best Time to Join a Board Is Before You RetireMany senior executives wait until retirement to take a seat on a corporate board. But making this career move early is a win-win for you and your current organization.
-
A Financial Professional's Take on Long-Term Care Insurance: Buy or Not?Unless you have about $6,000 burning a hole in your pocket every month, you should make a plan in case you need long-term care. Luckily, you have options.
-
How to Unearth Sustainable Investment in Mining: A Financial Professional's GuideMining is likely to play a critical role in the global transition to more environmentally friendly energy resources. Here's how you can balance the opportunities and the risks.
-
Don't Be a Sucker: The Truth About Guarantor and Cosigner AgreementsThere are significant financial and relationship risks involved if you agree to be a cosigner or guarantor. Make sure you perform your due diligence, and know exactly what you're getting into, before agreeing to such a commitment.
-
The Hidden Risk Lurking in Most Retirement Plans: Human BehaviorWhat's one of the differences between a good financial adviser and a great one? The ability to use behavioral coaching to guide clients away from emotional decision-making and toward retirement success.
