The sin­gle-minded ap­proach to money

Fly­ing solo means you might need help to keep you grounded.

Waikato Times - - Business - Liz Koh

Be­ing sin­gle brings a dif­fer­ent set of fi­nan­cial chal­lenges to those faced by cou­ples, yet it is a state that is of­ten ig­nored in fi­nan­cial lit­er­a­ture. For older women, in par­tic­u­lar, fi­nan­cial strategies for liv­ing alone are im­por­tant, as women still out­live men by some years.

With young peo­ple now de­lay­ing mar­riage or long-term part­ner­ship and with high rates of sep­a­ra­tion and divorce, chances are that a big per­cent­age of the adult pop­u­la­tion will spend at least some time sin­gle.

The cost of liv­ing for some­one liv­ing alone is of­ten higher than the cost per per­son for a cou­ple.

That means it is much harder for sin­gle peo­ple to save. Stick­ing to a bud­get is im­por­tant for ev­ery­body, but is par­tic­u­larly im­por­tant for sin­gles. Be­ing sin­gle means you are free to spend your money on what­ever you want, but therein lies a prob­lem. Cou­ples can be a good foil for each other to keep spend­ing in check and hold each other ac­count­able. Be­ing a good money man­ager as a sin­gle re­quires dis­ci­pline. Hav­ing a money men­tor is one way to bring some ac­count­abil­ity into the pic­ture if you find it hard to stick to your bud­get.

On the other hand, be­ing sin­gle may be bet­ter than be­ing a part­ner of some­one who is reck­less with money.

Sin­gle-par­ent­hood adds an­other layer of is­sues. It’s stress­ful bring­ing up kids on your own. There’s al­ways the temp­ta­tion to spend money on things that make life eas­ier, such as take­away meals and babysit­ters, or to spend more money on the kids be­cause you feel guilty about them grow­ing up with sep­a­rated par­ents. Emo­tional and fi­nan­cial stress are in­ex­tri­ca­bly linked and can feed off each other. A good sup­port net­work can help keep stress at bay.

Be­ing sin­gle de­mands self­suf­fi­ciency. It means hav­ing enough money on hand to cover a cri­sis – whether it’s an un­ex­pected car re­pair bill or a pe­riod of time off work be­cause of ill­ness.

The big­gest fi­nan­cial risk for a sin­gle per­son is the loss of in­come through re­dun­dancy or ill­ness. This risk can be re­duced by build­ing up an emer­gency fund and by tak­ing out in­sur­ance to cover loss of earn­ings through crit­i­cal ill­ness. How­ever, get­ting these things in place iron­i­cally adds to fi­nan­cial pres­sures. It’s a catch-22.

For those who be­come sin­gle later in life af­ter a long-term re­la­tion­ship, the key is­sue is re­build­ing wealth quickly. A ma­jor re­view of fi­nan­cial goals and strategies is needed when as­sets are split in half and along with this goes a prob­a­ble change in liv­ing stan­dards and in­creased fi­nan­cial stress. Strategies for grow­ing wealth quickly usu­ally come with a high level of risk, yet a newly sin­gle per­son who has just lost half his or her as­sets is not in a good po­si­tion to take on more risk, es­pe­cially late in life.

Fail­ure to ad­just to a new way of life can lead to even fur­ther loss of wealth. This is a time when good per­son­alised fi­nan­cial ad­vice is a ne­ces­sity.

Wealth pro­tec­tion is just as im­por­tant as wealth cre­ation and for sin­gle peo­ple there is in­creased risk of loss through fu­ture re­la­tion­ships that don’t last. Set­ting up a fam­ily trust or a prop­erty agree­ment can help pro­tect ex­ist­ing wealth when go­ing into a new re­la­tion­ship. It is also im­por­tant to get a will done.

Later in life, sin­gles of­ten worry about who will look af­ter them when they need care in the fi­nal stages. Through en­dur­ing pow­ers of at­tor­ney, close friends or rel­a­tives can be ap­pointed to take care of your fi­nan­cial af­fairs and per­sonal wel­fare in the event you be­come men­tally in­ca­pac­i­tated. Long-term plan­ning is needed for liv­ing ar­range­ments. Re­tire­ment vil­lages are a pop­u­lar op­tion but of­ten have long wait­ing lists. Liv­ing close to ex­tended fam­ily mem­bers doesn’t al­ways work as a so­lu­tion be­cause peo­ple of­ten move. The last re­sort is to pay some­one to pro­vide care, and this means set­ting aside funds for the last stage in life. So, sin­gle peo­ple may need larger in­vest­ment port­fo­lios for re­tire­ment.

Manag­ing in­vest­ments as a sin­gle per­son re­quires a good level of knowl­edge and con­fi­dence.

It is much more dif­fi­cult to make ma­jor de­ci­sions about fi­nances when there is no-one else to talk to, and most peo­ple are re­luc­tant to dis­cuss their af­fairs with oth­ers. Find some­one who is knowl­edge­able and trust­wor­thy to act as a sound­ing board.

Be­ing sin­gle of­fers more free­dom and in­de­pen­dence, even if it not by choice, but has fi­nan­cial chal­lenges and higher costs.

It is much more dif­fi­cult to make ma­jor de­ci­sions about fi­nances when there is no-one else to talk to.

Liz Koh is an au­tho­rised fi­nan­cial ad­viser and au­thor of Your Money Per­son­al­ity; Un­lock the Se­cret to a Rich and Happy Life, Awa Press. The ad­vice given here is gen­eral and does not con­sti­tute spe­cific ad­vice to any per­son. A dis­clo­sure state­ment can be ob­tained free of charge by call­ing 0800 273 847.

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