There are a lot of benefits to being single. You get to enjoy a great deal of freedom, flexibility and choice in how and where you spend your time and money โ but being single also leaves you more vulnerable to a few financial mistakes. Here are some big ones to avoid and how to recover if you do experience a money misstep in your single life.
Not Contributing to Retirement
Retirement, also known as your 401(k), may feel like something you don’t need to worry about until you’re settled down and established, but the best time to save for retirement is now โ thanks to the power of compound interest. The longer you give your nest egg to earn and compound interest, the more likely it will be to grow exponentially.
If your employer offers a 401(k) plan, this may be a great way to start saving for retirement. And, if your employer offers an employer match, be sure to contribute at least the minimum amount required to receive your employer’s contribution (that’s free money!). If a 401(k) is not an option, you can also look into opening an individual retirement account (IRA) or a brokerage account so you can invest extra savings for the future. These are available at most financial institutions.
Having Too Much Insurance
If you have life insurance, then good on you for having foresight many singles don’t โ however, you can have too much. If no one depends on you financially, you may be paying for coverage you don’t need. Review your policy and make sure it provides enough to cover end-of-life costs and any debts you have. If you don’t have any financial dependents, you don’t need much beyond that.
Overspending Your Disposable Income
Nate Byers is a certified public accountant (CPA) with JBC Wealth Advisors, and the biggest mistake he sees single people make is overspending. “I see single people mindlessly spending money because they simply don’t know what else to spend it on,” he says. Cars and clothing are two common budget-busters for singles.
Byers says you can avoid these financial mistakes by remaining mindful of your future goals. “Spending money today takes away from a purchase in the future,” he explains. “Don’t be afraid to stash extra money into savings or investments and buy future days of freedom.” Try using an itemized budget to track your spending and saving. While a spreadsheet works fine, apps like Mint are also available to help you keep track of where your money goes.
Missing Out on Accountability
Not having financial dependents makes for a smaller budget and fewer responsibilities, but it also means there’s no one to hold you accountable for what you do with your money. “This could result in fewer contributions to retirement, more consumer debt, lack of awareness around budgeting, less disability insurance coverage, riskier investment allocations and so on,” says Danna Jacobs, a certified financial planner (CFPยฎ) at Legacy Care Wealth.
Avoid this money mistake by finding support. You could set goals and share them with friends or start a group with fellow single coworkers. Encourage each other, share ideas and find ways to stick to your financial plan. You can also work with a financial advisor. A financial advisor is an expert who can analyze your specific situation and make recommendations that can have a huge, positive impact on your financial future. Look for someone who is a fee-only fiduciary with CFP designation. If you have access to the LifeCare Employee Assistance Program, it can assist you in finding a financial advisor.
Made Financial Mistakes? Here’s How to Recover
Everyone makes financial mistakes, and they don’t need to be the end of the world. “When you make a mistake, stop and take action to correct the issues, ” says Peter J. Creedon, CFP of Crystal Brook Advisors. Creedon explains that ignoring money problems just compounds the issue. “They just get bigger and more difficult to resolve and require more time and resources,” he says. “Be patient and realistic with yourself. Take action with a reasonable timetable and stick to it.”
By keeping your sights on your future life goals, being savvy about saving for retirement and seeking financial advice if you need it, you’ll be able to protect your financial future while enjoying the freedom and flexibility of single life.
