Tips for Saving Money When You're Single
Being single presents some unique financial planning challenges. Whether you’re single by choice, or as a result of a recent breakup or divorce, there are a few things you need to keep in mind when managing money just for yourself. Since you’re the only one earning income and you still have bills to pay, you need to be sure that you’re making the most of what you have when there's not a partner to fall back on.
Create a Budget
Budgeting is essential for anyone regardless of their situation, but it’s even more important when you’re single. Every dollar you make should be accounted for, and you need to have a clear understanding of where that money is going and how you can allocate money to fund your financial goals.
Ideally, you should be living below your means each month, meaning you have money left over to save, invest or pay down debt. If you're in a situation where more money is going out than coming in, it’s time to adjust your budget accordingly. That means reducing or eliminating any non-essential spending. Using a budgeting app can make it easier to keep tabs on your expenses.
But what if you don't have a budget? The first step is creating one. The simplest way to do that is by adding up all of your expenses, then comparing them to your income. Your budget should be as detailed as possible without being overwhelming.
Some people find it’s helpful to track every single penny while others find it sufficient to track things in terms of general spending categories. Do what works best for you, because if you find it’s too much work to maintain your budget, you’ll just stop using it and that won’t be any help.
Save for Retirement
Your retirement rests squarely on your own shoulders when you're single. While there may be some supplemental income in the form of Social Security, that alone won’t be enough. And chances are you don’t have a pension, so it’s up to you to plan for your future.
If you’re young and single, retirement is probably the furthest thing from your mind, but if you delay planning for your retirement by even just a few years you can find you’re spending the rest of your working life playing catch up.
The key to retirement savings is to make it automatic so you don’t have to worry about it. If you have a 401(k) or 403(b) plan where you work, enroll. These plans are set up so that money is taken directly out of your paycheck before you even see it.
If it doesn’t hit your bank account, you can’t spend it and you can’t forget to make that deposit. It doesn’t matter if you're only able to save $20 a week, something is better than nothing. And the more time your money has to grow, the better off you’ll be.
If you don’t have a retirement plan at work, you need to set up an IRA. If you’d like to receive an up-front tax break, consider a Traditional IRA, which allows for tax-deductible contributions. If you qualify and would like tax-free withdrawals in retirement, think about a Roth IRA instead. Again, the sooner you begin to put money aside, the longer it has to grow, and the better off you’ll be in retirement.
Create an Emergency Fund
One of the drawbacks of being single is that if a financial crisis comes up, it’s up to you to solve it. If you lose your job, that means no income since you may not have a spouse or partner with a job that still brings in a little money. This is why it’s so important for someone who is single to have an emergency fund.
The last thing you want to do in an emergency is turn to credit cards or take on more debt just to get through it. This can only make matters worse. So, if you can set aside even a little money it can help you when something does come up. Just like with saving for retirement, the best way to create an emergency fund is to make it an automated process. By creating an automatic savings plan you can begin saving money with little effort.
How big should your emergency fund be? If you're single, you may have fewer expenses and can get by with a smaller amount. Generally, however, it's recommended that you stash three to six months' worth of expenses in a liquid savings account that you can easily access when a rainy day comes around.
Learn How to Cook
How much money do you spend each year going out to eat? If you’ve never calculated it, I bet you’d be surprised. Consider this: even if you only spend $10 a day grabbing lunch or dinner out at a restaurant, you’re spending $3,650 a year. If you spend an average of $25 a day on all your meals, that’s over $9,000 a year! And this is just for one person. If your take-home pay is $35,000 a year you may very well be spending 25% of your income on food.
Obviously, when you’re single, going out to eat might be a regular occurrence. You need to spend time with friends and may possibly be dating, and going out is one of the most common forms of entertainment. Unfortunately, that can also be one of the biggest strains on your budget.
So, take the time to learn how to cook meals at home. With a little practice and smart grocery shopping, you can make restaurant quality meals for a fraction of the cost. Even if you were to replace two days a week with home-cooked meals, you could save a few thousand dollars a year. Downloading a coupon app to your mobile device can add to the money you save, which you could use to fund your retirement or build up your emergency savings.