Challenges and Benefits of Managing Your Money Alone
Managing your money as a single person has both pros and cons. One major benefit is that you have complete control over your budget. “When you’re single, you don’t have to worry about your significant other suddenly splurging and blowing the budget,” wrote Kari Lorz, Certified Financial Education Instructor and founder of Money for the Mamas. But keep in mind you also have to manage your budget completely by yourself.
Advantages
“The benefit to managing your money as a single is, of course, freedom,” Rachel Burk, financial advisor at Offit Advisors, wrote in an email to The Balance. “There’s no one else to check in with if you want to spend your bonus on a trip to Paris.” As a single person, you can also restrict your spending as much as you want if you’re looking to hit a savings goal. “Living off steamed bags of vegetables with peanut butter and tikka masala spices may sound reasonable to you, but your spouse and children may disagree,” said Andrew Latham, Certified Financial Planner and managing editor of SuperMoney.com.
Disadvantages
On the flip side, you may find yourself spending past your means without a partner to offer accountability. “It’s pretty easy to convince yourself that you need a Peloton, a Louis Vuitton, or a new set of golf clubs. Getting your spouse on board can be a little harder," said Latham. In addition, you don’t have the safety net of a second income to fall back on in an emergency. You’ll have to figure out how to pay for rent, food, loan payments, and more from your income alone. It’s especially difficult for single women, who made just 84% of what men did in 2020.
Money Management and Budgeting Tips for Singles
Budgeting as a single person gives you both great power and great responsibility. Whether you’re looking to save more, spend less, or invest for retirement, these budgeting tips for singles could help.
Create a Budget
The best way to take control of your finances is to create a budget. One popular method of budgeting is the 50/30/20 method. With this strategy, you allocate 50% of your income for fixed costs, 20% for savings and debt repayment, and the remaining 30% for your wants. While you may need to adjust these percentages to fit your individual situation, they’re a useful guide for budgeting your money from month to month. If you find yourself spending past your means because of impulse shopping, wait 48 hours to make any large purchases. Waiting can make you a more responsible shopper, and you can use the 48-hour waiting period to make sure you’re buying the best product available. “Use this time to research the pros and cons of each purchase and comparison shop for the best available deal,” said Latham. By taking the time to shop around, you might find your item at a lower price or decide you don’t need it after all.
Master Your Meal Planning
As a single person, you might have an active social life that involves plenty of meetups at restaurants and bars. But if you’re not careful, too many nights out could break the bank. That’s why financial analyst Sophia Jones’ top financial tip is to cook at home. “As a single person, you may be tempted to simply order takeout or eat at restaurants, which can easily get expensive in the long run,” Jones wrote in an email interview with The Balance. “While it’s okay to take yourself out once in a while, cooking your own meals as much as possible can save you a lot of money.” Jones suggested cooking meals in bulk. That way, you can just reheat them throughout the week, which will save you time and make it easier for you to eat at home.
Prioritize Your Retirement
When it comes to saving for retirement, the earlier you can start, the better. If possible, aim to save at least 15% of your pretax income. Those savings include any employer contributions. You can put your money in a retirement account such as a 401(k) or IRA. Burk recommended contributing to a Roth account, since you won’t have to pay taxes on your earnings or distributions during retirement. “If you make under $144,000 [in 2022], you can contribute to a Roth IRA,” Burk said. “This allows you to save tax-free money that you often can’t when you are married and your joint income is higher. Do this in your 20s—your 60-year-old self will thank you.” If you get married, the income cutoff for a Roth IRA increases to $214,000. If you don’t qualify for a Roth account, you could invest your money in a traditional IRA or 401(k).
Create an Automatic Savings Plan
You’ll want to build a savings account or emergency fund that could cover three to six months’ worth of living expenses. According to Lorz, the most effective way to save involves automation. “I follow a ‘pay yourself first’ method where every month, a few days after payday, money gets automatically transferred from my primary checking to my sinking fund accounts,” said Lorz. “Having it automated ensures that it happens without fail every single month.”
Maximize Your Savings
If you need to make sure you have access to your money but still want to earn as much interest as possible, consider opening a high-yield savings account. You might create multiple accounts earmarked for specific goals, such as car repair or a vacation fund. If you don’t need to access all of your savings right away, you might want to put some of your money in an FDIC-backed CD account or in bonds.
Find an Accountability Buddy
If you’re someone who prefers to manage their money alone, budgeting as a single person could be a huge advantage for you. But if you’re looking for some extra encouragement, teaming up with a supportive accountability partner or group could help you meet your financial goals. “If you thrive in a community and find it hard to save, try doing an online savings challenge with a social aspect,” Lorz said. “There are lots of Facebook groups where people join together to do a 30-day savings challenge. It can be very helpful and motivating to brainstorm ideas for common roadblocks and hear tips from those at the same level as you.”
