There are a lot of perks to being single, such as making all your own decisions without the need to consult anyone else and having full control over your financial choices.
However, when it comes to achieving financial independence, going solo can require more creative planning and strategic choices to reach your financial goals, whether they be owning a home, working fewer hours, or building your savings. Here, experts suggest numerous tips on how to reach financial independence as a single person.
Spend less than you make.
Whether you are single or married, the path to financial independence looks the same, according to Zachary A. Bachner, a certified financial planner. “Spend less than you make and invest the difference,” he advises.
Setting up an efficient budget will also allow you to track and monitor expenses in order to reduce your monthly outflow of cash, Bachner says. “If you are single, then there is a chance you have a lower income than a married couple, but you are also likely to have lower expenses. Expanding the gap between income and expenses will allow you to save more and invest in your future.”
Avoid lifestyle inflation.
A crucial way to stay financially independent as a single person is to avoid lifestyle inflation, which is the tendency to spend more as you earn more, according to Nick Hodge, founder of the Daily Profit Cycle.
“Inflationary lifestyles can be easily justified. Why shouldn’t you take advantage of all that your salary can buy as it rises? In order to achieve financial independence, you must reject the temptation to increase your standard of living.”
Frugal spending and budgeting are important first steps to financial independence, but they’re not enough alone, says Matthew Dailly, managing director at Tiger Financial. “You will need to combine these strategies with investment if you want to achieve financial independence early.
Finding a platform where you can automatically deposit weekly or monthly savings into a low-cost portfolio of safe and diversified assets like market index funds is a good start.” He advises that you can begin by automating a monthly transfer of a few dollars and any spare cash into a high-interest account.
Get a roommate.
Living alone means paying more for your expenses. Ryan Graves, CFA and president of Bemiston Asset Management, advises, “Whether you are renting or owning, having a roommate when you are single is one of the easiest ways to supercharge your financial independence. The cost of living in hot job markets is skyrocketing, so controlling living expenses is essential for individual financial success.”
Set financial goals.
A financial plan begins with the creation of “defined, quantifiable, attainable, realistic, and time-bound financial goals,” says Sarah Ross, financial adviser and co-founder of CoCoLoans. Setting financial goals is the most important step in achieving financial freedom.
“A person’s path to financial independence might be impeded if they don’t pay off all of their obligations,” she says. “Credit card debt, auto loans, mortage loans, and personal loans are examples of this type of debt.”
Become financially literate.
Financial literacy is key to financial success, says Sarah Lohse, director of marketing for BFG Financial Advisors and VP of Brotman Media Group, a financial literacy media company.
“When I started working in personal finance, I learned very quickly how much I didn’t know and became overwhelmed by all the information coming at me at once. But learning about compound interest and employee benefits and savings techniques has been so helpful,” she says.
Additionally, she encourages single people to “be aware of where their money is going. You don’t have to set a strict budget and say no to every opportunity that may cost money, but pay attention to what you’re spending money on and prioritise the expenses that bring the most value to your life.”
Understand your employee’s benefits.
Be sure to understand and take advantage of your employee benefits as well, Lohse urges. “Your 401(k) will probably be the first investment account you have, so you should understand how it works.
Know your company’s matching policy and try to contribute at least enough to get the full match—it’s free money! Know the vesting schedule so you don’t leave money on the table. Everything in your benefits package is meant to benefit you, so not reading it thoroughly and understanding what it offers will be doing you a disservice.”
Be strategic about debt.
Debt can really set you back financially, especially as a single person, says Carter Seuthe, CEO of Credit Summit Consolidation. “You should only ever take out debts that directly help you reach your financial goals. At the top of this list are car loans and mortgages.
A mortgage should be your goal for financial success as a single person. This is the kind of debt that can really pay off in the long run in a number of ways. You’ll be able to tap the equity in your house or sell it to cover the rest of your mortgage and even come out ahead.”
Consider a side hustle.
As a single person, you have the disadvantage of only having one income. Becky Neubauer, a millennial money expert, finance writer, and founder of Lifepothesis, recommends a side hustle to bring in extra income.
“This can be anything from freelance work to a part-time job to starting your own business. The extra income can help you accelerate your debt repayment or savings, which will get you to your financial goals more quickly.”