Difficulty in Financial Planning for Singles

It is not uncommon for people to assume that financial planning for singles is easier financially than married people. However, if you step into the shoes of a single person you will quickly find that it takes more than 50% of what a married couple needs to live on singlehandedly. In other words many people think that a single person’s cost of living is half of what it would be if they were married and that math is entirely wrong for a variety of reasons.

When it comes to filing taxes, there are tax breaks that are afforded to married couples filing jointly that single tax payers are unable to use. Financial planning for singles is different. A single person financial planning for singles cannot use a spouse for an exemption and cannot realize the benefits of filing jointly such as when selling a house that has a capital gain. The capital gain exemption is $250,000 for a single tax payer and $500,000 for a married couple filing jointly. Tax disadvantages can be compounded for a single person without child tax credits.

Singles don’t have the economies of scale to their advantage in sharing everyday expenses. This can put a hardship on monthly cash flow. For example, hotel rooms are based on double occupancy so a single person must pay the same price as if a couple were to occupy the room. The case is similar when it comes to buying groceries, particularly at big box stores like Costco. Since most items are sold in quantities bigger than a single serving a single person must buy more groceries than they need and this causes a dip into the monthly cash flow.

Singles have to plan for retirement on their own. They cannot count on a second stream of income from a spouse. Singles are unable to use strategies for maximizing Social Security like married couples can and get extra benefits however, some single people who were married previously and are single due to divorce or widowhood, may still be able to receive social security benefits.

Single people do not have a back-up salary in case of job loss, illness or emergency. This makes it even more important that a single person relying on their own income to live on set aside money in the event of any of these to cover their expenses for 6-months to a year.

As a financial planner, I tell clients that a single person may easily need 80 percent of a married couple’s budget. If the single client is used to living off two incomes they now must accumulate that income based on one salary.

While it is a great idea for anyone whether single or married to get professional planning advice it is important to understand that there are significant financial differences that should be considered between single and married people.
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Karen helps attorneys; mediators, individuals and couples, navigate through the financial morass of divorce and widowhood. Her expertise lies in understanding the special tax and financial issues that can plague divorce and she helps clients get their financial fair share and equitable settlements. She provides financial analysis, projections and solutions so clients can avoid long-term regret over decisions made early on in divorce and widowhood.  Karen offers a range of financial, investment and insurance services that address clients’ complete financial picture and long-term needs before, during and after marriage.  She is currently writing a book entitled, “To Have and To Hold Onto Your Financial Fair Share: Financial Decision Making When Marriage Ends in Divorce or Death.”