Key takeaways

  • If you’re living on your own and responsible for your own finances, additional planning may be needed as you work toward financial security.

  • A few key steps to take include planning early for retirement, building out your emergency fund and looking into disability and long-term insurance.

More people than ever live in one-person households. Living independently offers you freedom, flexibility and the opportunity to take full responsibility for your own finances.

This may require some additional planning for life’s milestones — and for the inevitable bumps in the road. Here are 5 tips that can help you feel more confident in your financial future.

Living independently offers you freedom, flexibility and the opportunity to take full responsibility for your own finances.


1. Plan now for retirement

Preparing early for retirement matters for everyone, but it becomes particularly important when you have to rely on a single income to support your retirement needs.

If you have a 401(k) account through your job, contribute at least enough to receive your employer match. If possible, contribute up to the maximum amount allowed per year. When you’re age 50 or older, you’re able to add more to your 401(k) account through catch-up contributions.

If you don’t have access to an employer-sponsored retirement plan, a traditional or Roth IRA also offer a good opportunity for savings. Most people are eligible to open an IRA and they’re yours to keep and contribute to throughout your life.

Make sure to track how much you’ll have saved by the time you stop working and what you’ll expect to spend in retirement. You may decide to increase your contributions to your retirement accounts or to wait longer to retire. These decisions can help you build up a larger financial cushion.

Another consideration if you were previously married, your marriage lasted 10 years or longer, or you’re widowed is Social Security benefits. Under certain conditions, you can receive Social Security benefits based on your ex-spouse’s earnings record.


2. Build your emergency fund

Living on a single income can make it easier for an emergency to knock your finances off course. You don’t have the additional support of someone else’s income or to share the cost of big budget items. That means having readily accessible funds in case of a job loss, illness or major unexpected expense is even more important.

A typical recommendation is for households to have the equivalent of three to six months of living expenses saved in an easily accessible account. However, you might want to consider increasing your emergency fund to nine to twelve months of expenses.

Set aside money each month until you reach your target. Consider where you might reduce expenses to increase your savings rate.


3. Prepare to buy a home

Nearly 40% of single adults own their own homes.1 If you’re contemplating buying a home, consider working with a mortgage loan officer. They can help you determine the best home loan option for your budget. Different mortgage loans have different interest rates and recommendations for how much you should contribute to a down payment.

To make sure you can manage ongoing expenses, buy a home with mortgage payments that fit into your existing budget. And don’t forget to take emergencies into account. If an unexpected expense comes up, you want to have enough to cover it so as not to go into debt. You might consider home warranties as a way to prepare for the usual wear and tear that comes with owning a home. Another possible strategy is to find a roommate who can help with rent, split household bills and lend you additional financial stability.

If you’ve separated from or lost a partner, it can be smart to postpone any major financial decisions, such as buying a new home, for at least six months. You can use this time to take inventory of your accounts, determine how much cash you need to cover your expenses and, when you’re ready, begin making plans for how to move forward.


4. Consider your insurance options

Protecting your future also means protecting your assets. Pay specific attention to long-term disability insurance coverage, as your employer is unlikely to cover an extended time away from work. Purchasing your own policy has many benefits, including keeping your coverage if or when you change jobs and collecting benefits tax-free if you become disabled.

As part of your healthcare planning, you also may want to consider buying long-term care insurance. This kind of insurance policy helps to cover expenses if you need in-home care or to move into an assisted-living facility or nursing home.


5. Name your beneficiaries

Preparing an estate plan and choosing who will make financial and medical decisions for you can be less clear-cut. If you don’t write a will, and you don’t have a spouse or children, the inheritance laws in your state will determine which family members, such as your parents or siblings, will receive your assets.

If you prefer to name your own beneficiaries, which could include people or charitable causes, you’ll need to specify in writing who you want to inherit your estate. You may want to enlist help from an estate planning attorney to make these plans.

Once you have an estate plan, regularly revisit your will and the names of the designated beneficiaries for specific assets, such as insurance policies and retirement and other investment accounts. You may find that you designated a parent who has since died, or that you named a friend who is no longer closely involved in your life.

When you’re designating your beneficiaries, also determine who you want to have as your power of attorney. This person can make financial decisions on your behalf, such as signing your tax returns, should you not be able to. Also consider designating a healthcare power of attorney to make decisions about your medical treatment if you’re unable to. Finally, you may want to create a written healthcare plan, known as an advance directive or living will, with clear instructions about your wishes for medical treatment.

Living single is often rewarding and empowering. By considering these suggestions for long-term planning, you can prepare for unexpected challenges, build your assets and create a strong financial future.

When it comes to creating a financial plan, you don’t have to go it alone. Learn about our approach to financial planning.

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  1. Single homeowners break century-old record. Haus, February 24, 2020.

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