Single-person financial management has both significant benefits and particular difficulties.

You have complete control over your finances as a single person. Although you won't have the security of a second salary, you will have control over how and when you spend your money.

Key Points

In case of a job loss or other emergency, make sure you have enough money.

Use employer matching and retirement accounts.

It could be beneficial to find an accountability partner if you have a tendency to go over budget.

You can end up saving a lot of money if you decide to cook your own meals.

The Drawbacks and Advantages of Independent Financial Management

The benefits and drawbacks of managing your finances alone are also present. The fact that you have total control over your spending is a significant advantage.

Money for the Mamas creator and Certified Financial Education Teacher Kari Lorz noted, "When you're single, you don't have to worry about your significant other splurging and blowing the budget."

However, bear in mind that you must handle all aspects of budget management on your own.

Advantages

The advantage of handling your finances on your own, according to financial counselor Rachel Burk of Offit Advisors, is independence. If you want to use your bonus to take a trip to Paris, there is no one else to consult.

If you're single and trying to reach a savings target, you can also put as big a cap on your spending as you like.

Managing editor of SuperMoney.com Andrew Latham remarked, "Living off steamed bundles of vegetables with peanut butter and tikka masala spices may sound logical to you, but your spouse and children may disagree."

Disadvantages

On the other hand, if you don't have a partner to hold you accountable, you can find yourself spending beyond your means. It's simple to persuade yourself that you require a Peloton, a Louis Vuitton, or brand-new golf clubs. It may be more difficult to convince your partner to join you, according to Latham.

Also, you don't have a backup source of income to rely on in case of need. Rent, food, loan payments, and other expenses will need to be covered solely by your salary.

Women who are single and made just 84% of what men did in 2020 find it particularly challenging.

Budgeting and Money Management Advice for Singles

When you're on your own, you have a lot of power and a lot of responsibility. These budgeting tips for singles may be useful if you want to increase your savings, reduce your spending, or make investments for retirement.

Establish a Budget

Making a budget is the best method to gain control of your spending. The 50/30/20 approach to budgeting is one that is frequently used. This plan calls for setting aside 50% of your income for fixed expenses, 20% for savings and debt repayment, and 30% for wants.

Even though you might need to change these percentages to suit your own circumstances, they serve as a helpful benchmark for creating a monthly budget.

Note

To keep tabs on your expenditures, you may create a spreadsheet or use a budgeting tool like Mint or YNAB.

Wait 48 hours before making any significant purchases if impulse shopping causes you to go over your budget. You can use the 48-hour waiting period to make sure you're buying the best goods available, and waiting can help you become a more responsible buyer.

"Utilize this time to browse around for the greatest offer and examine the advantages and disadvantages of each item," said Latham. If you take the time to look around, you might locate your item for less or realize you don't actually need it.

Master Meal Preparation

You can have a busy social life as a single person that involves numerous meetups at pubs and restaurants. But if you don't watch it, going out too frequently could ruin your finances. So, cooking at home is financial consultant Sophia Jones' top financial advice.

In an email interview with The Balance, Jones stated, "As a single person, you may be tempted to just order takeout or dine at restaurants, which can quickly grow pricey in the long run." While treating yourself to a lunch out is acceptable occasionally, cooking your own meals whenever feasible can help you save a lot of money.

*Note

Use coupons to reduce the cost of your food.

Jones advised making a lot of food. This will save you time and make eating at home simpler. You can simply reheat them throughout the week.

Set Retirement As A Priority

In terms of retirement savings, the earlier you can begin, the better.

If at all possible, try to set aside 15% or more of your pre-tax income. Included in such savings are any employer contributions. Your money can be placed in a retirement plan, like a 401(k) or IRA. Burk advised making contributions to a Roth account because you won't be required to pay taxes on your retirement income or distributions.

You can contribute to a Roth IRA if your income is less than $144,000 [in 2022], according to Burk. When you are married and your joint income is bigger, it is frequently impossible for you to save money tax-free. Your 60-year-old self will thank you if you do this in your 20s.

The income cut-off occurs if you get married.

"You can contribute to a Roth IRA if your income is less than $144,000 [in 2022]," Burk said. Because your joint income is higher when you are married, you are generally unable to save money tax-free. Do this now while you're still young; you'll thank yourself later.

The Roth IRA income threshold rises to $214,000 if you marry. You could put your money in a standard IRA or 401(k) if you don't meet the requirements for a Roth account.

Note

Try to take full advantage of any 401(k) matching benefits that your company may be providing. Making the most of a 401(k) match each year is important since it represents a 100% return on your investment.

Have a plan for automatic savings

Build an emergency fund or savings account that can pay for three to six months of living expenses. The best method to save money, in Lorz's opinion, is through automation.

Every month, a few days after payday, money is automatically transferred from my primary checking account to my sinking fund accounts as part of the "pay yourself first" strategy Lorz uses. "Automating it assures that it occurs without fail each and every month."

Boost Your Savings

Consider opening a high-yield savings account if you need to make sure you have access to your money but still want to maximize your interest earnings. For example, you might set up separate accounts for vacation money or car repairs.

You might wish to invest some of your funds in bonds or FDIC-backed CD accounts if you don't require immediate access to all of them.

Locate an Accountability Partner

Budgeting as a single person may be quite advantageous for you if you are the type of person who wants to manage their finances independently. But if you need some extra motivation, working with a helpful accountability partner or group could help you achieve your financial objectives.

"Try doing an online savings challenge with a social aspect if you thrive in a community but find it difficult to save," Lorz said. Anyone can join numerous Facebook groups to complete a 30-day savings challenge. Hearing advice from people who are in the same position as you and brainstorming solutions for common obstacles may be very beneficial and inspiring.

Frequently Asked Questions( FAQs)

What are a single person's typical expenses?

According to the U.S. Department of Labor Statistics, the average cost of living for a single person in 2020 was $44,876 year, or $3,740 per month (BLS). Between 2019 and 2020, numerous significant spending categories, including fashion, entertainment, and transportation, decreased as a result of the COVID-19 pandemic.

What much of money is required for a single individual to live comfortably?

Depending on their goals, needs, and cost of living, a single person will have different demands in terms of money to live comfortably. According to a Charles Schwab poll conducted in 2022, Americans claimed they needed an average net worth of $744,000 to be comfortable financially. Among the 25 biggest U.S. metro regions, the average net wage needed to live comfortably in 2022 was $57,013.