Single women have different budgeting needs than married couples. You don’t have two incomes to help pay your bills, but you’re in total control of what you do with your money.
“It’s harder to budget as a single person because you are covering all your expenses on one income,” said Mari Adam, a certified financial planner in Boca Raton, Florida. “However, there is also a silver lining to being single, and that is you can focus on what is important to you and there is no need to make compromises. You can focus very clearly on achieving your personal savings goals, and also on directing your money to what really matters to you. Your money decisions can be much simpler.”
As a single woman, however, you may need to work harder to prepare for some extra expenses. For example, there’s a greater need to save for retirement because women live longer than men. It can be tougher to reach those savings goals, though, because women typically earn less than men. Women may also have more variability in their income throughout their lives, especially if they take some time off from paid work while caring for children or aging parents. And women who are suddenly single, whether through divorce or death of a spouse, need to adjust their budgets to their new financial reality.
“I find, in general, that my single clients are very satisfied with their money and budgeting decisions,” Adam said. “I think being in control, even when the budget is limited, creates satisfaction and makes for a happier person.”
Budgeting Tips for Young Single Women
When you’re young and single, you don’t know what life will eventually bring. You may stay single, or you may get married or have children at some point in your life. No matter what ends up happening in several years, now is the time to lay the groundwork for your future financial goals.
Get Into the Habit of Budgeting
“When you’re young and single, this is the time that you typically have the most flexibility with your budget. Use this as an opportunity to set good budgeting habits that will carry you through the rest of your financial life,” said Rachael Burns, a certified financial planner and founder of True Worth Financial Planning in Folsom, California.
As you’re starting in your career and divvying up your first paychecks, you can set a budgeting foundation that you can follow for decades — and that you can continue to use when your life gets more complicated.
“Consider grouping your expenses into two categories — fixed expenses and flex expenses,” said Natalie Taylor, a certified financial planner in Santa Barbara, California. “Fixed expenses are those that are the same (or about the same) every month and can be put on autopay — everything from your mortgage to your music subscriptions. These are expenses that you’ve already committed to, and tracking them daily won’t really make an impact on your budget. Flex expenses include all of your daily spending — restaurants, gas, clothing, home supplies, personal care, etc. Flex expenses happen whenever you hand over cash, swipe a card or click ‘purchase’ online. These are the expenses that you have the most influence over, so this is the spot to focus on if you’re trying to manage spending.”
You can still benefit from budgeting without having to go into too much granular detail when tracking how you spend your money.
“Keep your budgeting categories broad to make tracking easier to stick with long-term,” Taylor said. “For example, instead of having separate categories for restaurants, groceries, fast food and coffee, use a single category for food to capture all of those expenses. By having fewer categories, you’ll not only be able to categorize all of your spending more quickly, but you’ll have more flexibility within each category to spend where you’d like.”
Start Saving for Retirement
Even if you don’t have a lot of extra money in your budget now, make saving some money for retirement one of your top priorities.
“Set your retirement savings before you figure out what you can afford on everything else,” Burns said. “Build the rest of your budget around your retirement contributions.”
The money you set aside now will continue to grow for the future, no matter what ends up happening in your life — even if you have children and cut back on work in a few years.
Making automatic contributions from your paychecks into a 401(k) or another retirement plan at work makes it easier to budget the rest of the money. If you sign up to make contributions when you start a new job, you never get used to having that money. Contribute at least enough to get the full match from your employer, if offered, and increase your contributions whenever you get a raise or bonus. If you don’t have a 401(k) at work, sign up to make automatic contributions to a traditional or Roth IRA. If you have any income from self-employment, you can make tax-deductible contributions to a Simplified Employee Pension (SEP) or a solo 401(k).
Pay Down High-Interest Debt
Paying down high-interest debt should also be a top priority at this life stage. When you don’t have to spend a lot of money on interest each month, you’ll have more available for the rest of your expenses. And paying down debt can also improve your credit score and help you qualify for a better mortgage if you want to buy a house in the next few years.
Build an Emergency Fund
Building up an emergency fund becomes particularly important when you’re single and don’t have any other income to fall back on if unexpected expenses arise. Try to set aside enough to cover at least three months of essential expenses in an emergency fund that is safe and accessible, such as in a money-market account.
Budgeting Tips for Single Mothers
Budgeting becomes a lot more complicated if you’re a single parent. You may have reduced your work hours to care for your child, and you may have additional child care expenses, too. And the rest of your household expenses are also higher with kids at home.
Take Advantage of Any Eligible Tax Breaks
This is a good time to take advantage of tax breaks to help stretch your income and cover your child care costs. If you work for an employer that offers a dependent-care flexible-spending account, you may be able to contribute up to $5,000 pre-tax in 2022, which you can use for child care costs for children under 13 while you work or look for work.
If you don’t have an FSA at work, see if you qualify for the child care tax credits. For more information, see IRS Publication 503 Child and Dependent Care Tax Credits.
Look for Ways To Save on Child Care
Find out about other ways to save on child care costs, which may be some of your largest — but also most flexible — expenses before your child starts school.
“Look for opportunities to save money [such as] nanny share, co-op and sibling discounts,” Burns said.
Review Insurance Policies and Your Will
With someone else depending on you financially, it’s also important to have good insurance — health insurance to cover you and your kids (if you don’t have health insurance through an employer, visit Healthcare.gov and find out if you qualify for a subsidy to help reduce the premiums), disability insurance to provide income if you become sick or injured and aren’t able to work, and life insurance to help cover your kids’ expenses after you die.
Make sure you have an updated will naming a guardian for your children, and that the beneficiary designations on your life insurance and retirement savings plans are up to date.
Prioritize Saving for Retirement
Continue to save some money for retirement, too. While you’re juggling so many different expenses, you may not be able to afford to contribute as much as you had in the past, but set aside as much as possible — try to at least benefit from the full employer match. If you don’t work in a job that offers a 401(k) or other retirement savings plan, you can still contribute to a traditional or Roth IRA if you earned any income from working. And if you have an eligible health insurance policy with a deductible of at least $1,400 for individual coverage or $2,800 for family coverage — whether you get coverage through an employer or on your own — you can make pre-tax or tax-deductible contributions to a health savings account, which you can use tax-free for eligible medical expenses in any year.
Start Saving for College
It can also help to start saving for your children’s college when they’re young, but don’t sacrifice your own retirement savings.
“If you want to contribute to college costs, start now,” Burns said. “You can start small. Set up a college savings account and start a monthly deposit of a manageable amount. You’d be shocked by how much this money can grow by the time your kids start college.”
You can use money from a 529 tax-free for tuition and fees, room and board, and other eligible expenses, and you may get a state income-tax deduction for your contributions, depending on your state. See SavingForCollege.com for more information about 529s.
Budgeting Tips for Divorced or Widowed Women
Some women become single later in life, often unexpectedly, if their spouse dies or they get divorced. Here are some tips for them.
Reassess Your Budget
If you are widowed or divorced, you’ll need to reassess your budget to reflect your new income and expenses.
“Your income and expenses have likely changed, and the goals you have for your financial future probably look different,” Burns said. “Take some time to think about what you want to accomplish with your finances in the long run. Then, work backward to build a budget that allows you to make progress towards those goals.”
Review your current income and expenses, and also where you stand with retirement savings. After the assets have been split up in a divorce, or you inherited life insurance or retirement savings from a spouse who dies, review where you stand towards your future financial goals.
Prepare for Future Expenses
If you get divorced and still have children living at home, prepare for future expenses after alimony or child support ends.
“If you will be receiving alimony/child support for a limited number of years, you need to have a plan for when that income ends,” Burns said. “If you’re expecting to have a shortfall, you may need to set aside some extra savings now.”
It’s also a good time to review your debts and your credit score.
Create or Update Your Estate Plan
Estate planning becomes important, too, because you’re not just leaving everything to a spouse. Make sure your beneficiary designations on your life insurance and retirement plans are up-to-date because they have likely changed after the divorce or death of a spouse.
“For all women, but especially divorced women — even if they’ve been divorced for a long time — check your beneficiary designations,” said Michelle Morris, a certified financial planner and enrolled agent with BRIO Financial Planning in Quincy, Massachusetts. “Actually check them — don’t just assume what they say. These are the designations on your IRAs, employer plans such as 401(k)s and 403(b)s, and life insurance, including your group term life through an employer. The money goes to the person or people listed, and generally, they override your will.”
Update the designations if you no longer want to leave money to a former spouse or if one of your beneficiaries has since passed away.
“Check to make sure that an ex-spouse is no longer listed, unless you actually do want to leave an ex-spouse money when you die,” Morris said. “I had a client whose mother was her life insurance beneficiary and her mother passed away over 20 years ago.”
Update your will and guardianship for your children. And it’s a good idea to have a healthcare proxy. Choose a trusted person to make medical decisions on your behalf if you’re unable to do so yourself. Also, think about who will care for you if you need more help as you get older.
“As a single person, you do need to devote more thought to estate planning and protecting yourself and your family,” Adam said. “That means drafting estate planning documents, looking into long-term care insurance and buying disability insurance. There may be no one else to fall back on.”
Budgeting Tips for Single Women Nearing Retirement
When you’re in the home stretch before retirement, it’s important to start to assess how your income and expenses will change after you retire. You still have time to make some changes if you fall short of your goals, such as by working a few extra years, picking up some additional or freelance income, and making decisions about when to receive your Social Security benefits. Women tend to live longer than men, so you may need even more money to cover your expenses after you retire.
Get Clear About the Benefits You Are Eligible For
If you’re widowed or divorced, figure out how much you may be eligible to receive from a deceased spouse’s pension and how your Social Security benefits will be affected — whether you would qualify for survivor benefits on a deceased spouse’s record or spousal benefits based on your ex-spouse’s record, or if you will be relying on your own benefits. You can find out more about your benefits by setting up a MySocialSecurity account.
Think carefully about when to claim your Social Security benefits.
“You may be tempted to start your Social Security benefits as early as possible (age 62), but consider the advantages of waiting,” Burns said.
Your benefits will be reduced if you take them before your full retirement age, which is age 66 for people born in 1943 to 1954, and gradually increases by two months for each birth year before reaching age 67 for people born in 1960 and later. If you can delay receiving benefits until age 70, you’ll receive larger monthly benefits. For each year that you postpone benefits beyond your full retirement age, you get an 8% increase in the monthly payment amount.
“Do some budget planning to see if you can hold out for a couple of years to get a higher monthly benefit,” Burns said.
Since life expectancy is longer for women than it is for men, this lifetime income can make a big difference.
Streamline your finances, which will make it easier when you start to take withdrawals in retirement.
“Is your financial life (and tax time) too complicated? Make a list of your accounts. Every bank account, every investment account, every IRA/employer plan. Can and should some of these be consolidated?” Morris said.
Some people have several accounts from former employers, and maybe an IRA and self-employed retirement account, too — and are drowning in paperwork.
“It is next to impossible to evaluate a portfolio for asset allocation and tax efficiency when it is disjointed,” Morris said.
Consolidating some of your accounts can also make it easier when you start taking withdrawals in retirement, and can also simplify the process for your heirs after you die.
“Simplify now, and your heirs will appreciate this gift after you are gone,” said Morris.
Pay Down Remaining Debts
Assess what debts you may still have after retirement and look for ways to cut them back.
“For those nearing retirement who have a mortgage, consider whether a refinance makes sense,” Morris said. “Rates are up from their recent lows, but still low by historical standards. Refinancing while you still have employment income is often easier than in retirement. A refinance might reduce your fixed expenses dramatically.”
Plan for Long-Term Care
Make a plan for any future long-term care needs, whether through insurance or extra savings, especially since you aren’t living with a spouse who could become a caregiver if you need extra help.
“I find that as a single mom, even though my kids are now in their 20s, I have to be more responsible and think about how I can help them financially if something happens to me,” Adam said. “At the bare minimum, I don’t want them to have to quit their jobs to take care of me. The best gift you can give your kids as a single person is to plan for your own financial future so they don’t have to.”
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