FINANCIAL PLANNING FOR SINGLE PEOPLE By Christina Mae Olson, CFP®
The 2000 U.S. Census classified 25.8% of us as “householders living alone.” How many of these are LGBT? How many might also be LGBT couples reporting as living alone? The Census Bureau recorded 601,209 unmarried same-sex couples on the 2000 census (8,232 in Wisconsin) and estimated there were over 770,000 LGBT households in 2005. The Human Rights Campaign says that these numbers are probably double what the U.S. Census Bureau calculates. The official census must have figured all singles were straight and didn’t ask who might also be LGBT.
Financial planning for true single people can be similar to planning for an LGBT person who is also in a relationship. The main difference is that a single person doesn’t have the benefit if their partner’s income to help pay the bills or meet financial goals. In our country, LGBT couples are financial and legal strangers to each other and are treated as “singles” in most jurisdictions. The following tips are for the truly single person – but couples should pay attention, too.
SAVE! SAVE! SAVE! Start saving 10% -15% of your income (can you save 20%?) as early as possible and commit to saving that much as long as you are working. You are not giving up that money – you are setting it aside for your future self. You should first accumulate an emergency fund to cover six months of living expenses. Next, pay off all of your credit/bills. Third, fund your 401(k) or IRA. Finally, save and invest what is left over for your other financial goals.
SPEND LESS. You can save more for your future self if you can live on less than you make. This sounds easy enough but it is really tough. Many singles live from paycheck to paycheck no matter how much money they earn. In fact, most singles rely on credit to get them through to the next paycheck. Find a way to actually spend less money than you are earning. Don’t rent a two bedroom apartment if you only need one bedroom. Have the goal of never needing credit to pay for anything. My philosophy is this: if you cannot pay cash for something then you cannot afford to buy it in the first place! You can live happily like this. You can do it.
GET ORGANIZED. Keep good records of all of your bank accounts, IRA’s, income tax returns, etc. Make sure you have specific beneficiaries on all your accounts. If something happens to you – a friend or relative should be able to easily sort out your situation and take over your bill paying and other responsibilities until you can do it again for yourself.
HAVE ADEQUATE INSURANCE. You only have yourself to rely on. If you get sick or disabled – how are you going to pay the bills? You must have health insurance. Consider also disability insurance (a group or individual policy) that will pay you an income if you become disabled and can’t work. Some single people also need life insurance if others depend on them for financial support.
MAKE FINANCIAL GOALS. Formulate concrete goals. Do you want to buy a house some day? Have children? Go back to graduate school? Do you want to retire at age 50 and join the Peace Corps? Make your goals and map out a way to make them happen. Quantify the objective and break it down into manageable steps. For example, to save for a $10,000 down payment on a house – that will require saving $75 every paycheck in a conservative mutual fund for 5 years. Consider talking to a financial planner – you don’t have a partner to discuss these things with – maybe a professional can help you set financial goals and ways to achieve them.
ESTATE PLANNING. This means you need a will, powers of attorney, and advance directives. Your will names a personal representative to handle your affairs when you die. A durable power of attorney appoints someone to handle your affairs if you are sick or disabled and can’t do it for yourself. A power of attorney for health care names someone to make medical decisions for you if you are in the hospital and can’t speak for yourself. Advance directives explain to doctors and loved ones how you want to be treated in case you need life support, feeding tubes, etc. If you don’t have these documents in place when you need them – then the state will take over and decide how to manage things.
Chris Olson is a licensed Certified Financial Planner™ Practitioner in private practice. You can contact her at CMOney@centurytel.net or 608-525-9818.