We’ve all been there: Single on Valentine’s Day. And while finding yourself in such a situation can range from mildly irritating to downright heartbreaking, there is at least one type of singleness on Valentine’s Day where financial advice can help: being “financially single.”
This can include all kinds of situations, from single parents to those in a relationship but keeping finances separate, or simply those living and maintaining your finances all on your own. Whatever the case, being financially single can often feel like a weighty responsibility, but the good news is that there are some simple strategies that can help you plan for the unique opportunities and challenges that come with independence.
As a financial single, you will have different tax options than married couples. You’ll also have sole responsibility over covering your expenses, earning an income, and planning for your future in terms of retirement, eldercare, and estate planning. On the other hand, you’ll likely also have fewer financial obligations to others, which may translate into being able to save and invest more in what interests you.
The main thing to remember is that you are in the driver’s seat. You can pursue your financial goals on your terms. So, what are your goals? And how do you want to get there?
Build a financial foundation
Whatever you prioritize, a sound budget is the first layer of your financial foundation. Many of us have a rough idea of how much money we have coming in and out each month but creating a more detailed and organized budget can help you better allocate your money.
Calculate your earnings from your job and any other sources, then track your current expenses—everything from rent and utilities, to food and personal care items, to clothes and entertainment. Separate the “needs” from the “wants.” Factor in predictable expenses like gifts, weddings, and taxes. From there, you can set a budget with a clearer idea of what you need to cover the essentials and what’s left over.
Many people find that the “50/30/20 Rule” gives them a solid framework, with 50% of your budget covering needs (like bills, food, housing), 30% going to wants (like vacations), and the last 20% for savings and investments (like retirement accounts, debt repayments, and an emergency fund).
Start where you are today, and over time, find ways to tweak those percentages to make room for your goals. Do your best to stick with your budget and check on your progress regularly to see if you need to make any changes to adjust as your life evolves.
Work the workplace
Being financially single can give you the freedom to focus on your own goals, including in your career. But your workplace may offer you more than income: more companies also offer financial benefits for employees beyond the basics of health insurance and retirement accounts. In today’s economic climate, we are seeing workplace benefits like financial coaching, financial wellness programs, and financial literacy education growing in popularity.
Find out if your employer offers any financial benefits in addition to your paycheck, then strategize how you can put it all together to work toward your goals. Don’t overlook discount programs or investing opportunities through your workplace either—for example, participating in an Employee Stock Purchase program can help you build capital over time.
Prioritize your future (retirement)
Retirement planning is a central pillar of a strong financial future, and many workplaces offer retirement plans with matching contributions. Think through all your choices in terms of which type retirement account to open and the asset allocation and funds you select. Importantly, different types of retirement accounts will have different tax implications once you withdraw funds. For example, a traditional 401(k) pulls contributions out of the employee’s pre-taxpay, with taxes due on the eventual withdrawals. With a Roth account, contributions are made with after-tax pay, but then withdrawals are tax-free. Note that making any withdrawals from your retirement accounts before you’ve held the account for five years or reached the age of 59-1/2 will incur additional penalties. And outside of work, you also have the option to contribute to an individual retirement account, or IRA.
The most important thing is to just get started with saving and investing for retirement. You may want to work with professionals like tax advisers, attorneys, and financial advisers to help you create a more comprehensive plan that accounts for all your needs. Beyond a retirement account, you’ll also want to plan to preserve your assets, protect your beneficiaries, and prepare for the unexpected so that both you and your loved ones are covered down the road. This includes planning for any children or relatives you help support as well as your own future healthcare and long-term care needs in old age.
For the financially single, thoughtful money moves can help set you up for success today and tomorrow. As you map out your financial life, consider which priorities are important to you and embrace the opportunity to do your thing, your way.
Remember to take care of yourself—both your personal well-being and your finances. Keep an eye on the future and assemble a team to support you, whether that means working with professionals like a financial adviser through the workplace or building up a personal network and community. You may be single in a financial sense, but you are certainly not alone.
Krystal Barker Buissereth is head of financial wellness and participant experience, Morgan Stanley at Work.
Not all products and services are available in all jurisdictions.
This material has been prepared for informational and educational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
When Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors (collectively, “Morgan Stanley”) provide “investment advice” regarding a retirement or welfare benefit plan account, an individual retirement account or a Coverdell education savings account (“Retirement Account”), Morgan Stanley is a “fiduciary” as those terms are defined under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and/or the Internal Revenue Code of 1986 (the “Code”), as applicable. When Morgan Stanley provides investment education, takes orders on an unsolicited basis or otherwise does not provide “investment advice”, Morgan Stanley will not be considered a “fiduciary” under ERISA and/or the Code. For more information regarding Morgan Stanley’s role with respect to a Retirement Account, please visit www.morganstanley.com/disclosures/dol. Tax laws are complex and subject to change. Morgan Stanley does not provide tax or legal advice. Individuals are encouraged to consult their tax and legal advisers (a) before establishing a Retirement Account, and (b) regarding any potential tax, ERISA and related consequences of any investments or other transactions made with respect to a Retirement Account.
Morgan Stanley at Work, Morgan Stanley Smith Barney LLC, and its affiliates and employees do not provide legal or tax advice. You should always consult with and rely on your own legal and/or tax advisers.
Morgan Stanley at Work services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries of Morgan Stanley.
© 2023 Morgan Stanley Smith Barney LLC. Member SIPC.