By Josh Ariyo
Navigating finances as a single person offers unique freedom but also responsibility. Without a partner to share expenses, it’s essential to have a clear plan for saving, investing, and managing finances independently. Whether you’re a young professional, single by choice, or newly independent, here’s a guide to building a solid financial foundation for the future.
1. Setting Financial Goals
Why Set Financial Goals?
Setting financial goals is the backbone of any successful financial plan. As a single person, you have the flexibility to prioritize goals that suit your lifestyle, be it traveling the world, advancing your education, or preparing for a future family.
- Short-Term Goals: These might include creating an emergency fund, paying off small debts, or saving for a short-term experience like a vacation or a major purchase.
- Long-Term Goals: These are bigger aspirations that require ongoing saving or investment, such as buying a home, building retirement savings, or starting a business.
Real-World Example:
Emma, a 27-year-old graphic designer, set a short-term goal to save $3,000 over the next 12 months to fund a solo backpacking trip in Southeast Asia. She also set a long-term goal to save for a down payment on a condo by age 35. By prioritizing these goals, Emma has a clear direction for her finances.
Action Step:
Write down three financial goals: one short-term, one mid-term, and one long-term. Set realistic timelines for each, and break them down into monthly savings targets.
2. The Importance of Building Good Credit
Why a Good Credit Score Matters
A strong credit score is crucial for anyone, but it’s especially important for singles who may be relying solely on their own financial standing for major purchases. A high credit score can help you secure favorable interest rates on loans and make it easier to qualify for mortgages or car loans.
- Credit-Building Tips: Pay bills on time, keep credit card balances low, and avoid opening multiple credit accounts in a short period.
- Monitor Your Credit: Use free credit monitoring services to stay on top of your credit score and ensure there are no errors on your report.
Real-World Example:
Jake, a single 32-year-old, wanted to buy his first car but struggled with a low credit score due to late payments in college. He focused on paying all bills on time, reduced his credit utilization below 30%, and saw his credit score rise by over 100 points within a year. When he reapplied for a car loan, he qualified for a much better interest rate, saving him thousands in interest.
Action Step:
If you don’t know your credit score, check it using a free tool like Credit Karma or AnnualCreditReport.com. Set a goal to improve your score by paying off debt and making timely payments.
3. Saving for Future Goals
Setting Up Separate Savings Accounts
Saving for multiple goals at once can be challenging, but creating dedicated savings accounts for each can help you stay organized. Many banks offer the option to open sub-accounts or “buckets,” allowing you to visually separate your money for specific goals like travel, education, or homeownership.
- High-Yield Savings Accounts: Consider using a high-yield savings account to make your money grow faster, especially for longer-term goals.
- Automate Savings: Set up automatic transfers into each savings account. This way, you won’t have to remember to set money aside each month.
Real-World Example:
Sarah, a 29-year-old social worker, has three savings accounts: one for emergencies, one for a future home, and one for travel. By setting up automatic transfers from her paycheck, she has been able to save consistently without worrying about remembering to move money each month.
Action Step:
List your main savings goals and set up a dedicated savings account for each. Automate a monthly transfer to each account based on your income and priorities.
4. Building a Side Income
Why Consider a Side Income?
Side incomes can add financial security and flexibility, helping singles reach their financial goals faster. The options are diverse and don’t require major lifestyle changes. From freelancing to selling items online, a side hustle can be an excellent way to increase your savings or pay down debt.
- Freelancing and Consulting: Utilize your professional skills on platforms like Upwork or Fiverr to earn extra money without long-term commitments.
- Selling Handmade or Vintage Items: Websites like Etsy, eBay, or Depop make it easy to sell handmade goods, vintage items, or even clothing you no longer wear.
- Teaching or Tutoring: If you have a skill others want to learn, consider tutoring, teaching online, or creating a course. Sites like Teachable or Skillshare let you share knowledge and earn income.
Real-World Example:
Daniel, a 25-year-old software developer, started freelancing part-time as a web designer. By dedicating just a few hours a week, he earned an extra $500 a month, which he used to pay off student loans faster. This extra income enabled him to stay financially stable while achieving his financial goals.
Action Step:
Identify one side income opportunity that fits your schedule and skills. Set aside a few hours each week to work on it, and create a budget to allocate the additional income toward your savings or debt.
Conclusion
Managing money independently requires careful planning, a solid understanding of your goals, and a commitment to maintaining good financial habits. Setting financial goals, building a strong credit score, saving for future aspirations, and creating a side income are essential components of a financially secure lifestyle for singles. By taking these practical steps, you can confidently navigate your finances and build a future that aligns with your aspirations.