A Single Woman's Seven-Point Financial Manifesto
Every February, many of my friends stress about the finding reservations for a romantic (and most likely pricey) Valentine’s Day dinner or the perfect gift for their significant other. Meanwhile, my toughest decisions are choosing between yoga and spin or taco and salad for dinner.
One thing I don’t stress about is being single. After all, the number of single adults is growing. A recent report from the Federal Reserve found there has been a steady decline in US marriage rates among 20-35 year-olds ever since the so-called Silent Generation (born between 1928 and 1945).
So as I settle into my mid-30s single and happy, I’m focused on being financially comfortable regardless of my relationship status. This is important, because being single comes with its own financial challenges.
- No sharing rent and other day-to-day costs - Renting is expensive in New York City, where I live. It can cost almost 40% more to rent a studio compared to splitting the cost of a two bedroom apartment. That’s before the costs of utilities and streaming services.
- No date night or travel "splitsies" - As much as I love doing stuff by myself, I cover the full costs. So if I go to the movies alone, I’m not sharing the popcorn. Solo travel also costs more, because I’m not sharing a room.
- Long-term financial burdens - Planning for retirement on dual income has its advantages. You can have double the retirement pot and split the long-term costs of living.
- Gender wealth gap - As a single female, I face the additional hurdle of the gender wealth gap. For every dollar a man makes in the US, a woman gets 80 cents, according to a report by the Economic Policy Institution. The report estimates the long-term difference can range between $530,000 and $800,000 over a lifetime!
While we’re on the subject of gender, women also invest at lower rates than men, which means missed opportunities (though performance is never guaranteed) to benefit from compound interest. Sallie Krawcheck, Founder of Ellevest, has estimated that this could cost women almost $1 million over a 35-year career span.
Do these challenges mean I’m frantically swiping on dating apps? Not at all! I celebrate my choice, but I have started to think more about my single-person budget. I am taking these steps to improve my financial situation, regardless of whether I get coupled up or not.
[Related: What Does Your Tax Style Say About You?]
1) Keeping monthly housing expenses down.
I’m paying close attention to my fixed monthly housing costs. It is recommended that you do not pass a certain percentage threshold compared to your overall income. A common suggestion is that your monthly housing costs should not exceed 30% of your income.
2) Being wary of gift giving.
I personally believe an asymmetrical burden exists in gift-giving for some singles. There are more milestones for couples and family that are celebrated with gifts. My colleague Natalie suggests that when it comes to weddings, “Be comfortable with saying no. Your friends understand that when it comes to commitments and budgets other than their wedding, it is okay to say no.”
The number of people who expect gifts for birthdays and holidays can also increase as friends get married and have children. Consider establishing a "no gifts" policy for birthdays, or draw names during the holidays. This way the single adult is not stuck buying multiple gifts for the family of four.
3) Understanding my pension.
There could be hidden benefits in your employer-sponsored retirement plan (that’s what we call our workplace pensions in the US). You could discover you’ve been missing out on your employer’s matching benefits, essentially “free money.”
Whether it’s employer matching or tax breaks, chances are there is a retirement benefit that can help you reach your goals quicker. Understand your options and take advantage of any benefits that can increase the savings, if you can afford it.
4) Considering investing outside a pension.
If you can afford to put away money for long periods and have an emergency fund, then you might want to consider investing. Markets can be volatile, but over longer periods, there’s a better chance that the ups and downs can be smoothed out.
Compound interest can be an incredibly powerful tool. But remember that your money can go down as well as up, and you may not get back the original amount invested.
5) Establishing a “pay your future self” strategy and reviewing once a year.
One way to ease the pain of saving is to think of it as paying your future self. So when your pay arrives, siphon a little off before you start to spend on discretionary expenses. Review this on an annual basis and consider annual increases to your savings and/or retirement contributions as your pay increases.
6) Taking advantage of pre-tax benefits.
Here in New York I take part in a commuter benefit plan, which means I put pre-tax money into an account to use for transport. I use it on a daily basis. Health Savings Accounts and Flex Spending Accounts are other ways to save money through pre-tax benefits.
7) Speaking up about my career.
For many of us, we are in the process of setting objectives and goals for 2019. Consider opportunities for growth.
Let’s say you are earning $40,000 a year and contributing 6% of your salary to retirement. If you never change the contribution percentage, but average an annual salary increase of 3% every year compared to 1%, your retirement contributions over 20 years will increase by 20% more in your first few decades of working.
Maggie Sullivan is a proposal specialist (RFPs) and writer with 10+ years of experience in the financial industry.
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