A single girl's seven-point financial manifesto
Earlier this month many of my friends were stressing about finding reservations for a romantic (and most likely pricey) Valentine’s Day dinner.
Meanwhile, I was deciding between yoga and spin.
One thing I wasn’t doing was feeling shame about being single. The number of single adults is growing. A recent report from the Federal Reserve here in the US, Are Millennials Different?, found there has been a steady decline in US marriage rates amongst 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 financial challenges.
I’m not 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 splitzies
As much as I love doing stuff by myself, I cover the full costs. That sounds obvious, what I mean is: if I go to the movies alone, I’m not sharing the popcorn. Solo travel costs more. I’m not sharing a room.
Long-term financial burdens
Planning for retirement on dual income has its advantages. You could 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.
Do these challenges mean I’m frantically looking for a partner 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.
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 when it comes to weddings: “Be comfortable with saying no. Your friends understand that when it comes to other commitment 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 some hidden benefits in your employer sponsored retirement plan (that’s what we call our workplace pensions in the US). You could discover you’v been missing out on my 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, including auto-enrolment for those in the UK, 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.
As we’ve already explained on MoneyLens, 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.
Meanwhile in the UK you might have similar employer benefits - the season ticket loan or Cycle to Work scheme.
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.