As a single woman, it's critical to start saving and investing as early as possible. Why? Because when it comes to your personal finances and your financial success, you alone are entirely responsible. And that includes building long-term wealth for your future self.
Without a dual income, it's important that you have your finances in order because you are essentially the only one responsible for your financial wellness. Even if you intend to get married or manage your finances jointly with a significant other, it's still important that you have a firm handle on your finances on your own, beforehand.
People are single for a variety of reasons including choosing not to get married, divorce or loss of a spouse. In fact, according to the census, 45.2% of the US population over the age of 18 is single with about 53% of those being women.
Being single, you may benefit from only having to take care of yourself (if you have no kids) but at the same time, it's also necessary to keep in mind that you may not have anyone to take care of you in the event of an emergency or in your old age.
That being said, let's discuss exactly what you should have in place for your finances if you are a single woman.
1. Go the extra mile with your emergency savings
The typical recommendation for emergency savings is 6 to 12 months of your essential living expenses. However, if you are single and on your own, it's a good idea to have a larger buffer. Twelve to 18 months' worth is a good start. It should be enough to cover you in the event of a job loss or financial crisis.
If you have no other source of income, then you want to make sure that you have a nice "cushy" cushion to fall back on. If you have kids, be sure to include their essential needs in your emergency savings as well.
2. Get disability insurance
If you are single and employed but unable to work (health issues, surgery, etc.) your entire source of income could be jeopardized if you need more time off than what your work leave policy allows. That's why having adequate disability insurance is critical (especially if you are a single parent). If your employer offers both short- and long-term disability plans, take advantage of them.
Having disability insurance in addition to your emergency savings will be a solid buffer that can help you weather a difficult time. You can also get disability insurance outside of your employer at a premium. If it's something your job does not offer, you should seriously consider obtaining your own. You can compare quotes on platforms like Policy Genius or by asking your local insurance provider.
3. Start saving for retirement ASAP
Whether or not you decide to get married or manage your finances with a significant other in the future, you should start investing for retirement as early as possible. You'll be able to take advantage of the time you have as well as the power of compound interest.
If you do settle down with someone else, you'll have more money for your future from the combination of your portfolios. However, if you don't, you'll wind up just fine, if you've been saving on your own. Also keep in mind that on average, women live longer than men so you will need more money for yourself long term.
Start investing by contributing to your employer-sponsored retirement savings accounts and/or IRAs. Your goal should be to max out your contributions if possible.
4. Fall in love with budgeting
Make your budget your BFF... for real. Find a budgeting style that works for you and put it into practice each month. Budgeting is a great practice to master your money. It will help you with tracking your income and expenses and planning out your savings and investments.
In a relationship or planning to settle down?
Fidelity did a great study that shows just how single women are thinking about their finances as it relates to their relationships and life partners. For instance:
- 64% of single women said financial stability is the second most important characteristic in a partner (right behind honesty/integrity at 82%)
- 55% of single women would prefer to disclose financial baggage when a relationship becomes exclusive vs. only 47% of single men
- 52% of single women said, “being controlled by a partner when it comes to financial choices” is a deal-breaker vs. only 32% of single men thought this was an issue
These are all critical aspects of money in a relationship. They also highlight how important it is for you to have your finances in order when you approach the topic of money with your significant other.
What it all boils down to is this: No one can care about your financial future more than you, so it's important that you start saving and investing consistently as soon as you can!
What key things have you implemented in managing your personal finances as a single woman?