Tips on financial planning when single
Credit to Author: JESI BONDOC RFP| Date: Fri, 22 Feb 2019 16:19:07 +0000
Some people chose to be single; others might be a result of a circumstance like breakup or passing of the better half. Whatever the reason of single blessedness is, there are a couple of things to keep in mind when managing your solo finances.
Financial planning on a solo income can tremendously help in achieving a brimming financial future without sacrificing today’s enjoyment.
Here are several financial tips to help you navigate your own course with your finances:
1) Create a budget/spending plan
Budgeting is important for everyone regardless of our status. The importance of it is more highlighted when you’re single. Effectively managing your solo income is the first step towards achieving a healthy and balanced financial life. A “spending plan” is a great tool in helping you keep track of your expenses. Start by writing down all your monthly necessity expenses like food, rent, utility bills, etc.
Ideally, you should be living below your means but within your needs, meaning you should have something left to save or invest for your financial goals. It is recommended that your necessity expense do not go beyond 60 percent of your monthly income to provide space for your other expenses. Whatever is left from your income after deducting your necessity expense is your “free portion”, the amount that you can allocate either for savings, “wants” or both.
Create a budget or spending plan that suits you. It should not be restrictive and should be easy to execute to make it sustainable.
2) Build financial cushions
Financial disasters such as job loss, hospitalization or any event where you suddenly need a sizeable amount of money can happen to anyone, regardless of age and social status. That’s the reason why you’d like to dedicate a portion of your income towards saving for your emergency fund.
Being a single earner leaves you no choice but to tackle the financial disaster by yourself. Preparing for such possible eventuality provides you with indispensable hedge in your financial life. It is recommended that you establish between three to eight months worth of your expenses as your emergency fund. From the “free portion” in your cash flow, carve out an amount that you can save regularly until you reach your desired emergency fund size.
The second financial safety net you’d like to establish is your health and life insurances. Being single doesn’t mean that you do not need any kind of financial protection like life insurance. Life insurance is a great financial tool to ensure that we do not cause any unnecessary financial burden to our loved ones in case of untimely demise. If no one in your family is dependent on your income, get an insurance equivalent to the expenses that your family will immediately spend after death such as funeral cost, etc.
3) Invest for a retirement
Create your own financial pipeline for your golden years. The unique situation you have is your retirement planning rests entirely on your own shoulders. If you’re young, you might think of delaying investing for retirement just for now thinking you still have plenty of years ahead of you before retiring. While that is true, consider that ‘time’ is also a core advantage of being young. Handle this advantage like a gift that if you start early, your rewards in the future are exponential rather than playing catch up if you delay investing.
If you are having trouble consistently making deposits towards your retirement fund, consider making an arrangement with your bank to auto debit your account for your retirement fund.
4) Enjoy
One of the perks of being single is being in the driver’s seat and having total control over your money.
Enjoy your situation and at the same time proceed with prudence in managing your finances.
With proper financial planning, you can ensure a life filled with positive possibilities in the future without neglecting your present needs and wants.
Jesi Bondoc is a Registered Financial Planner of RFP Philippines. He is the Director of My Wealth MD and Partners, Inc. specializing in investment advisory. You can send your money questions at jj_bondoc@yahoo.com and they’ll be answered on his next article. For more info about Registered Financial Planner program, e-mail to info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.
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