How to Manage Your Money Wisely When You’re Single
Finances are difficult -
regardless of relationship status. However, money management when you’re single can feel overwhelming. Let’s be honest, the world feels set up for dual incomes, so learning how to manage money when you’re living solo is essential. You don’t always have someone to bounce financial decisions off, and in my case that can lead to spontaneous spending (which isn’t always practical or sensible).
Over the past few years I have really focused on my financial health, budgeting, tracking my spending (so many chai lattes?!) and figuring out my priorities and financial goals. Since living alone, it’s even more important for me to know how much is coming in and going out, how to spend wisely, how to budget and pay down any debts.
Why Financial Independence Matters When You’re Single
Having financial independence as a single person allows you to build stability. You only have yourself to fall back on if things go slightly pear-shaped, so being in a secure position financially can help you recover from any set backs. It is also empowering to know that you have the funds not only to take care of yourself and your lifestyle, but to make any big financial decisions with limited repercussions.
Create a Budget That Fits Your Solo Lifestyle
Okay, so this is where you need to get honest with yourself. Money in vs money out.
What is your exact income every month?
Do you have multiple sources of income?
What do you really spend your money on?
When my finances were in the bin, my friend made me this very handy budget tracker. Here’s an example of the things I have on mine. I have my bills on one side and my ‘non essentials but still must be paid’ on the other.
You need to spend some time tracking your spending and really paying attention to where your money is going. Are you spending £20 a month on chai lattes? Do you have subscriptions that you don’t really use? How much do you actually spend on bills or have you just been letting the money fall out of your account each month? Once you’ve worked this out, you can build a budget which works for you.
Start with all your essentials. For me, these are things like my mortgage payment and all my bills combined.
Then I have my non essentials my gym membership, my therapy sessions etc. Some of these are things that I can go without if I need to but I still count them in as a part of my monthly outgoings. Then I will split the remainder of my monthly income into savings, debt repayments and spending or ‘fun money’
Even if you have a financial goal in mind, it’s important to leave yourself enough money to do things which fill your cup each month, if you are able. Paying bills, saving money or repaying debts can feel relentless and resentment can grow very easily if there’s nothing left for you at the end of the month.
Pay off your debts
If, like me, you have a credit card/s that you need to pay down, and you really want to focus in on this goal, then there are two main ways you can do this. These are well spoken about online and both have pros and cons, so it’s about working out what is best for you.
First of all you need to work out your repayment budget. How much extra money do you have once you’re essentials and minimum payments are sorted? Once you’ve worked this out, you can use this to aggressively pay down your debts.
Avalanche method: This method is about tackling the debt with the highest interest rate first. This is usually a credit card. Continue to make your minimum monthly payments on any other debts you might have, but focus your repayment budget on this first. This is likely to be the largest debt and will probably take the longest to pay off, however, the benefit of this is that you’re getting rid of the higher interest rate which in the long term, is just adding to your debt and making it feel unmanageable. The con of this method is that it takes longer to see results, and sometimes feel as though you’re not making a dent in the amount, which can be discouraging.
Snowball method: This method tackles the lowest amount first. If you’re overwhelmed by your debts, having smaller wins can set you on the path to success. It’s about building a habit first, to show yourself that you are capable of paying off debts. Once you see that you can do this, it becomes easier to tackle the larger, more overwhelming debts and the motivation can propel you towards your larger goals.
Build your emergency fund
Once your budget is calculated, and you’ve paid off any debts, you can start building an emergency fund. I would say this is essential as a single person, especially if you’re living alone as you need a safety net should your circumstances change or you find yourself unemployed. If you live alone, this is even more important as you need to be able to run your house and if you own your property, then you need to be able to fix it too. It also can feel like a slog, getting together this much money which you’re not going to touch? Where’s the fun in that? Honestly, it’s not fun. It’s practical, and it might just save your behind if the shit hits the fan.
First of all you need to work out what is achiveable and realistic to you, and what works for your financial goals. I aim for emergency fund to be at least 3 months worth my my wages - some people suggest 3-6 months worth or more but I know this isn’t feasible for me when I have other goals I want to work towards.
Have a figure in mind for what you’d like to save and then work out realistically how long it’s going to take you to save this amount. For example, if I wanted to save £8000, I would divide this by 12 months to see how much I’d have to put aside each month to reach my goal. I’d then see if this worked in with my budget - have I got the money to allocate once my essentials are paid for? If not, then we stretch if over 24 months instead and see if this is more feasible.
The first book on finances I read - a friend leant it to me whilst I was crying into an excel spreadsheet.
Helpful extras-
Plan for the future with your pension: Even though retirement might seem like eons away, set up your workplace pension or consider opening a private one. Future, retired you will thank you.
Protect yourself: If you have no dependents you likely won’t need life insurance, however you could consider income protection or critical illness cover if there’s no income to fall back on should you become unwell.
Learn to say no: You have to prioritise yourself and your finances. This might mean making some tough decisions and saying no to things which ultimately don’t serve your goal. But this means saying ‘yes’ to your long term goals and financial freedom.
Managing money when you’re going solo isn’t about restriction, it’s about building the life you want whilst ensuring you have a safety net. With a budget which works for you, a plan to pay off those credit cards and an emergency fund to cover any surprises, you can feel independent, secure and empowered.