10 Smart Money Moves for Single Women in Their 20s
Making smart movies is essential at any stage of your life, but if you're a single woman in her 20s, there are some specific steps you should take that will prepare you for wherever life takes you.
You may stay single, end up with a partner, or even start a family, but the positive financial choices you make in your 20s can set you up for success, no matter where life takes. you.
Start Planning for Retirement
Thinking about retirement probably isn't at the top of your priority list. But one of the most important things you should do is save for retirement. Contributing early and regularly to your retirement fund will ensure that you're set up for success down the road. Another bonus? Early contributions mean you can get by with contributing a lower overall percentage of your income and you do not need to worry about catching up later.
And even if you end up getting married, it makes sense to plan your retirement as though you are going to stay single. This will help you set appropriate savings goals, and will make sure you're able to fund your retirement all on your own. And if you do get married? It's just that much more money to share.
If your workplace doesn't offer a 403(b) or 401(k) yet, open an IRA and set up regular monthly contributions. Experts suggest contributing 10-15% of your income to your retirement fund. And if you do qualify for a 401(k) through your employer, be sure to take advantage of your employer’s match even if you are working on other financial goals. Remember, it's basically free money.
Save for Your Future
In addition to retirement savings, it is important to set aside money for your other financial goals. There may come a time when you want to purchase your own home or condo to build equity, or start your own business.
Achieve those goals by jump-starting your savings. Set more money aside by sticking to a monthly budget, taking on a side gig, or getting a roommate. You'll be surprised at how fast your savings grows with just a little extra push.
Create a Financial Plan
A financial plan is another great step to take. If the idea seems overhwelming, start out with a five-year plan instead. Where do you want to be in five years? What do you need to do financially to get there?
Then break it down into yearly and monthly goals and steps. Be sure to include long-term goals like retirement as part of your plan. This may include going back to school to further your career growth.
Focus on Climbing the Career Ladder
Now is a great time to focus on climbing the career ladder. It takes time and hard work to move up. Make clear goals and determine what you need to do to reach them. This may mean switching companies, moving to another city or going back to school. Or it may mean that you do side work or create a professional network and find a mentor to help you reach that goal.
And remember, it's OK to switch directions at some point and choose to go a new direction if you find a better fit for you. Dreams can change, but the key is to keep moving forward toward that dream.
Make Sure You Are Budgeting
Budgeting is one of the most valuable tools to managing your money properly. When you are single, it is easy to justify not creating a budget. Your expenses are straightforward and if you pay your bills what does it matter when and how you spend your money?
However, your budget can help you find areas you can cut back on spending to put more money toward savings or paying off debt. Make your income a tool by budgeting effectively. This does not mean you should deprive yourself and never have any fun. Rather, determine how much you can afford to spend while working on your financial plan and stick to that amount.
Take Care of Your Credit/Debt
Your credit and debt can affect your ability to take your next financial step from buying a home to taking out a business loan. Paying down your debt will free up additional money you can use
Additionally, taking the time to fix any past mistakes and clearing up your credit report will make it easier for you reach your goals in the future.
Make Sure You Have the Right Insurance
It can be frustrating to see a portion of your income going to insurance each month, but it is there to protect you. When you are a single, procuring short-term and long-term disability insurance is a good move , especially if you do not have a large emergency fund.
This insurance will protect you if you are suddenly not able to work due to an injury or illness. Health insurance can keep you from going bankrupt when you are suddenly ill or injured, while renter’s insurance can help you avoid the stress of replacing everything if your home is burglarized or damaged.
Don’t Forget Life Insurance
When you are single, you may be tempted to skip need life insurance, especially if you do not have a child or anyone you are financially responsible for. But regardless of your marriage or family situation, you should have a life insurance policy large enough to cover funeral costs, as well as any outstanding debt you might have. This will avoid leaving the burden of those expenses on your family or friends.
Many employers offer a basic policy that will cover those costs. If you are responsible for helping someone out financially, you may want to consider taking out a larger policy that they can live off for a few years or longer.
Build Your Emergency Fund
An emergency fund is essential if you are single. It can be the thing that save you from being homeless if you were to suddenly lose your job. It can also help cover unexpected expenses like home repairs, a pet's illness, or an unexpected trip.
For people living on one income, a year’s worth of expense is a good goal, though you can start with six months if that seems unrealistic.
Put Everything in Order
Finally take the time to put everything into order. It may seem like you're too to worry about it, but having a will and final wishes can make things easier for your loved ones if you were to pass away unexpectedly or if you were to become ill suddenly. Making decisions about a living will or DNRs, organ donation, funeral plans and who to contact if you pass will not take long, and once done, you do not need to worry about it again.
A document that includes any insurance information, bank and loan accounts will make it easier for someone to help you out if you need it. Usually a parent, is a good person to give that information to, but if not you can give it to a trusted friend.
Updated by Rachel Morgan Cautero.