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The Financially Challenging Single Life

By Cynthia Lee

Whether living alone or with a partner, single people face their own set of financial challenges. But, don't worry, you are not alone. The U.S. Census Bureau says that almost half of the adult American population (86 million) siphon into this category.

Do you fall into one of these three categories?

1) Living without dependents
2) Single parents with dependent children
3) Cohabitating, but unmarried

If you are single you probably do. Each of these groups of singles have their own financial needs.

But they SHOULD have certain things in order such as:

  • Critical financial documents - Documents that will direct their loved ones in case of death or disability, such as a will, a power of attorney, a health care proxy, and documenting the beneficiary to the assets of your IRA or 401K.
  • An emergency savings account. A crisis can occur at any point whether it is an accident, illness, or getting laid off from a job. The recommended amount to set aside is typically 3-6 months of income in a low risk investment vehicle.
  • Standard Medical and Disability Insurance for both the short and long term. This is critical as single people do not have a spouse' income to fall back on.
  • Life Insurance - To a great extent Single people do not typically need life insurance unless they have young children. This should exist for a loved one if you should pass away.

Buying a Home

Renting an apartment requires less commitment than buying a home, but buying a home is the first step toward true financial security. It allows the singles to build equity, take advantage of tax deductions for real estate and income taxes and interest payments on their mortgage and have something to borrow against should the need come up.

According to the National Association of realtors, more homes are being purchased by single parents.

Mixing Money
Today there are over 10 million unmarried Americans living with partners. These adults typically have two salaries and can share living expenses. These couples face fewer financial obstacles than those single people living alone. But the statistics reveal more, While the majority of cohabitating couples eventually marry, 40% go their separate ways within 5 years. This is substantial and a single person in this situation should realize that precautions and legal agreements may be necessary.

Unmarried couples typically choose to keep their financial accounts and assets separate. For those who do choose to mix money/accounts, splitting assets can get complicated and difficult when one partner either dies or leaves.

One solution is to hold assets in an account that is registered as joint tenants in common. This allows the partners to stipulate that each owns 50% of the assets, and at death, half of the account belongs to the survivor or is distributed according to the terms of his/her will.

Accounts with a Transfer on Death ( registration are becoming an increasingly popular estate planning tool for unmarried couples. TOD accounts allow individuals to avoid probate.

Single Parent Households

Single parents, either through divorce or having never married the spouse, or by choice, face unique challenges. Even if the single parent gets child support he/she may find themselves always in need of money and time.

The first issue to address is the expense of setting up a separate household or sometimes two separate households. There are two households to furnish, two sets of accounts for phone bills, and other items like that. Often credit card debt is incurred and then this turns into a huge problem later, especially with getting a better credit rating later.

There is also health insurance to replace or sign up for. Life insurance is also a critical element for singles with children.

On the whole, singles must work harder to overcome life's financial obstacles. They need to be smart in financial planning, because there is much more at stake in their situation.


Cynthia Lee is a Freelance Writer for online magazines.


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