Bend these 3 “golden” rules to be single and successful

Posted by Manisha Thakor on  posted on Dec. 18, 2017 12:00:00 PM
Whether you’re single or married, there are certain financial rules of thumb that hold true no matter what. Such as: Keep up with your monthly credit card payments, rather than the Joneses.
However, when you find yourself unattached, some “golden” rules need a few caveats attached:

Rule #1. Your emergency fund should be bigger.


When you’re going it alone, financial catastrophes can hit you like a freight train—you need a bigger buffer to protect yourself. If you’re heading up a single household, there’s no other half to pick up the financial burden in the event that job loss or illness deprive you of an income—no significant other to share the cost of a collapsed roof. So, aim to save enough to cover 6-12 months—not the 3-6 months usually recommended. Be deliberate as to how many months of expenses you need to cover, calculate how big your cushion needs to be—and start building it up, month by month. But don’t forget, this is just essential living expenses—not your current average monthly expenses. Even with a buffer in place, you’ll still need to cut back on wants and spend only on essential needs.

Rule #2. You may not need life insurance.


It seems like something all responsible adults should have, but if you don’t have dependents—loved ones who rely on you for financial support—do you really need to incur the expense of life insurance? Whole life insurance, which combines a death benefit with a “cash value” savings account, is generally quite expensive—and therefore, a potentially good estate planning strategy for high-net-worth individuals. But as tax-deferred savings vehicles go, a 403(b) is a better deal for the vast majority of people. If you do have children who are dependent upon you, life insurance should be a necessity, and term life insurance will likely be your best choice. Whereas, if you don’t have family members to support, life insurance makes little sense for you.

Rule #3. You may be better off renting.


Renting is throwing your money away, while buying is an investment. That’s the assumption of many stability-seeking singles and dauntless divorcees. But any decision to buy should depend on personal factors, such as: How long you plan to stay in the home; how comfortable you are with a hefty down payment. Renting gives you flexibility to uproot your life, to take advantage of opportunities in another city—some people prize that freedom, some don’t.
Personality plays a big part. But so do brute economics: The costs of buying are considerable, and are often only worth it if you plan to stay rooted to the spot for at least 5-7 years. And say you decide to marry at some point in the near future, and merge households? Renting out your property may sound like a viable option, but there’s no guarantee that you’ll be able to find good tenants—plus being a long-distance landlord comes with challenges. From a purely return-on-investment standpoint, a 403(b) may be a better option, especially since it requires less logistical work and upkeep. However, everyone’s circumstances are different.

Bottom line: Rules of thumb can be useful for most people, most of the time. But depending on your personality and other personal factors, you sometimes need to bend the rules to be single and successful.
 
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