Years ago women often delayed major financial decisions like home ownership and investing until they married. As more women marry later in life, choose to remain single or find themselves single again, here are a few ways to make the best use of your single life from a financial standpoint:
PROTECT YOUR INCOME AND ASSETS: Job loss or disability can be financially catastrophic for singles who depend on their salary as their sole source of income. Two ways to prepare are building an emergency fund and purchasing long-term disability insurance. Six months of living expenses is generally a good starting point for an emergency fund. Disability insurance provides an efficient way to replace lost income due to health issues. While this insurance policy does not replace 100 percent of your income, it will prolong the life of your emergency savings if you become disabled.
Another concern for singles is the kind of care they will receive as they age. Most people hope for excellent health in old age, but that is not everyone’s reality. Long-term care insurance may be a viable tool to protect and extend the life of your retirement assets. Depending on the type of policy you purchase, you can use the benefit to receive in-home care, adult day care services or reside at an assisted living or nursing home facility.
IMPROVE YOUR INVESTMENT KNOWLEDGE: Developing a basic understanding of investments can go a long way when laying the foundation for your finances. There is no need to become an expert in Modern Portfolio Theory, but it is a good idea to know why a money market account may be preferred for your emergency fund rather than the balance of your IRA. If you need income, then it is beneficial to know which types of assets produce reliable income in the most tax efficient way. By making an intentional effort to educate yourself about the principles of investing and personal finance, you can improve the likelihood of making informed decisions that align your investments with your goals.
Perhaps one of the biggest advantages of developing an understanding of different types of investments is that it tends to make people more comfortable as they endure the ups and downs of their portfolio’s market value. While you still may not enjoy reviewing your statement when the account value decreases, it does enable you to make investment decisions that are driven by the fundamentals instead of emotion. After all, your investment decisions need not be complex; they only need to be sound.
ESTABLISH AN ESTATE PLAN: In a perfect world, you will have the capacity to make all of your health and financial decisions until the day you die. In reality, however, that might not be your situation. As a single person, it is imperative that you establish an estate plan that articulates your wishes for your health and money during life and after death. Make a point to legally nominate someone to care for your financial and medical affairs in the event you are incapable of doing so yourself. And, keep your beneficiary designations, will, and trust documents current at all times. Doing so will ease the transition of your decision making rights and assets should you become incapacitated or pass away.
Living the single life has its share of benefits and challenges. Nonetheless, be sure to take steps now to put yourself in the best financial position for the long term.
Life is a journey. Plan for it.
Ashleigh Brooker, CFP, is the principal of A.J. Brooker Financial Associates in Columbia. Reach her at info@AJBrooker.com or (803) 724-1235.