How to ensure financial security as a single woman – GOBankingRates | Team Cansler

InspirationGP / iStock.com

The wealth gap between married and single people has widened in recent years. As of 2019, married couples were worth nine times as much than single-family households, the Wall Street Journal reported.

Wealthy Millennials Don’t Invest in Stocks: Here’s What They Invest Instead
Find Out: How Long $1 Million Retirement Will Take in Each State

Given these wealth disparities, it’s clear that achieving financial security on a single income is harder — but with the right planning, it’s possible. In this Financially Savvy Female column, we chat with Jordan Sowhangar, CFP, Vice President and Wealth Advisor at Girard, a Univest Wealth Division, about what single women should be doing to maximize and protect their finances in the short and long term.

What should single women focus their money on to maintain their financial security in the short term?

While having an adequate emergency fund is important for everyone, it is even more important for single women. Her paycheck is the only income that will cover all her needs in her household, making it all the more important to “secure” yourself in an emergency situation. Whether it is a total job loss or an inability to work due to health reasons, single women need to ensure they have enough savings to cover themselves if they are unemployed for six or even 12 months.

The dollar amount to aim for would be at least six months’ spending, but this should be the bare minimum. Twelve months of spending would be the ideal amount that single women should work towards to have on hand at all times. This money should be held in insured, liquid accounts such as traditional or online bank accounts that offer FDIC insurance coverage, liquidity in case they need money right away, and if possible, a reasonable interest rate to make some money on their balances as well .

Take our poll: Concerned about cutting Social Security benefits over your lifetime?

What should you do for your long-term financial security?

In the long term, it is crucial for single women to plan for retirement as early as possible. Again, their income is the only income that goes into their household, meaning it’s also the only income they can use to start saving for future retirement. As soon as they can contribute to their company’s retirement plan, they should.

Even if they aren’t immediately eligible for match opportunities, they should still use a portion of their paycheck toward the retirement account being offered. Once they are eligible for a match benefit, they should ensure they deposit at least the amount required to take advantage of the maximum “free money” available to them.

The more they can contribute sooner, the more that money earns interest and grows tax-deferred or tax-free until they need it. That money should also now be growing at a higher average rate of return than their emergency funds, as it’s likely to be invested in vehicles like mutual funds, exchange-traded funds, etc., which typically earn more over the long term than banking solutions.

What other steps should single women take to ensure they are doing well financially?

Keep debt to a minimum. One way single women can derail their financial plan and disrupt their financial security is by taking on too much debt. Smart debt, like taking out a mortgage on your own home, is a good thing, but maxing yourself out on that mortgage isn’t. It is particularly important for single women not to put themselves in a situation where they are “house poor”.

Credit card debt should be avoided whenever possible. Use credit cards solely to take advantage of points opportunities to buy more for what you buy, but then work to make sure you have enough to pay that monthly bill in full, if possible. It’s difficult to get out of credit card debt in a two-income home, let alone as a single, one-income woman.

Check out disability insurance. Emergency funds are great insurance, but paying for disability insurance, especially with the right policy, can help a single woman significantly when she is in a position where she cannot work, or at least at the level she once was , for health/disability reasons. These policies can help generate additional income and allow you to focus on your health/other expenses you may incur without additional worries.

GOBankingRates aims to empower women to take control of their finances. According to recent statistics, women have $72 billion in personal wealth – but fewer women than men consider themselves “good” or “excellent”. Women invest less and are more likely to be in debt, and women still receive less overall than men. Our Financially Savvy Women column will examine the causes of these injustices and provide solutions to change them. We believe financial equality starts with financial literacy, so we provide tools and tips for women, by women, to take control of their money and help them live richer lives.

More from GOBankingRates

Leave a Comment