Most of the financial articles I read are aimed at families.
Doing my job means I can often pick out relevant messages and hints/tips from those financial articles that could benefit me as a single person.
But if I didn’t do this job, I would skim past it, as it’s not aimed at me.
Recently, there was a notable push towards financial matters specific to women. Still, even that seems to have tapered off now and been replaced by ethical and sustainable investment opportunities – possibly a bigger target market or currently a more popular story.
However, according to the data used to produce the island’s living wage, single householders make up 35% of our population. And the thing is, planning for a single person differs from for a couple or family as their planning needs tend to vary.
Arguably, everyone’s needs differ as their dreams and aspirations differ, but there are challenges for single people that are not often discussed – what happens if you take ill? Who will you appoint as executor of your Will?
Another big one, when making Enduring Powers of Attorney, in case you become incapacitated, who do you trust to act for you?
Whether you’re single, divorced, widowed or keep your finances separate, there’s no need to be left behind. Hopefully, you will find the 6 points below helpful:
1 – Identify your aims and objectives
What do you want out of life? What does the future or retirement look like to you?
This vision is a very personal thing, and it’s also likely to be changeable.
The further you are from retirement, the less likely you will have a nailed-down idea of what you might fancy doing.
In addition, our priorities change. You might think it easier to plan just for yourself, but it’s not! You have so many choices!
We don’t always like to think about the future. It can be fun to enjoy the moment, but it’s much less fun to get too far down the line and find a severe lack of time to get on track.
A starting point could be focusing on what you don’t want.
Maybe you don’t want to work full-time until you’re 70. Perhaps you don’t know where you want to go on holiday, but you know you want to go somewhere lovely more than once a year.
Plan’ A’ may not be the finished article, but it’s a start.
2 – Create a financial plan
The next step is to create a financial plan to get you on track to achieve those goals. Creating a plan means pricing up what the rest of your life might cost.
It’s sensible to start with the necessities, your basic living costs. Then add in the nice to haves.
Then we need to make an allowance for the unexpected one-offs, you know, the boiler packing in or the car, or a hole appearing in the roof.
Single life is relatively expensive. A house for one is not necessarily half the price for two. Lighting and heating bills aren’t halved either.
The cost of living research suggests that a single woman’s life costs 73% of that of a couple. Holidays often involve single supplement charges too.
Down the line, care fees might be more of a priority, as you may have to buy in help at home.
Once the outgoings are established, you can determine whether your current and future assets and income are sufficient. If not, what can you do about it?
Basic planning is something that you could look to do yourself, but working with a Financial Planner has many benefits:
-We have the knowledge and expertise to include certain assumptions around inflation, for example, making the results more realistic.
-We can run numerous ‘what if’ scenarios, so you are not limited to one version of your possible future.
-We can stress test these plans to see how robust they are. Would an additional unexpected expense be a non-event, or would it derail your plan?
3 – Build a cash reserve. Protect what you have.
For those living alone/responsible for their finances, it is imperative to have a sufficient cash reserve.
There is no second income to make a stretch if needs be. You cannot dip into someone else’s savings.
A common rule of thumb is to keep at least six months’ core expenditure as an immediate cash reserve. Depending on your other assets and your employer’s sick pay policy, it may be advisable to keep more.
There is a need for balance in this area, not to keep back too much and risk inflation eroding the value of your capital whilst not finding yourself short of cash if things don’t go as planned.
In addition, it makes good planning sense to protect what you have. Where your income is the only money coming in, how would you get by without it? Do you need to insure it?
Do you have any liabilities that would be better paid off in case you become ill?
4 – Educate yourself
You may be new to managing your finances. Maybe you’ve never had an interest in the past. Perhaps you are currently part of a couple and don’t think money matters are your concern.
Maybe right now, they’re not, but they could be at some point.
You don’t need to know your finances’ technical ins and outs. That’s my job. It does help to get a good grasp of what you currently have.
What options are available to you at retirement if you have a pension through your work? What is the pension invested in, and how has it performed?
What options are out there that might help you achieve your goals?
It may come down to knowing how to complete your tax return.
5 – Consider investing, or at least appreciate the impact of not
Everything we do in life involves risk. Risk gets bad press, but opportunities arise from taking risks when we control them sensibly.
For investments, we take a measured risk with our capital in a bid to achieve a financial return as a reward.
The key is balancing and managing risk by using a diverse range of investments across various asset types.
Many people are scared of the potential outcome of ‘speculating’, and rightly so. These are usually the horror stories that you end up reading about in the newspapers.
Putting all your eggs in one basket, effectively gambling on one company’s success, is way beyond most people’s risk appetite – including most men, who are statistically less risk averse than women.
With education, professional support/advice and time, investing could give you a better future.
The alternative is to keep your cash in the bank. Even those with no interest in the financial world will know that inflation is currently high relative to the last ten years or so.
Although we don’t expect inflation to stay in the double digits, we expect an average of 2-4% in the long term.
As the prices of goods and services go up over time, the buying power of your cash decreases. By not taking on investment risk, are you simply accepting long-term inflation risk on your cash?
6 – Look at your state pension
A full Manx State Pension under the new calculation method is just over £10,000 per year. This pension income typically rises yearly, so it benefits from an element of inflation-proofing. It will be paid from the state pension age (soon to be 67, with the date this increases to 68 expected to be brought forward).
Your state pension is a good foundation from which to work.
Suppose you have worked part-time, taken a career break at any point, or lived off the island. In that case, I recommend you obtain a state pension forecast and look at any opportunity to maximise your entitlement if you are not currently on track. You can access the form here.
If you have worked in the UK, you may have even more opportunities to boost your state pension income.
How can we help?
Everyone’s dream life looks different. We can help you visualise what that might look like and determine if it’s possible, now or in the future.
The most valuable thing is our ability to provide you with a sounding board. Someone to bounce ideas off, someone with the knowledge and objectiveness to tell you what you maybe need to hear and not necessarily what you want to hear.