Being single may have some advantages, but when it comes to your money it could spell disaster if you aren’t careful. As a single guy or gal you have the freedom to spend your time and money on the things that are important to you. Unfortunately, this also means you only have one source of income and every decision you make will significantly impact your personal finances. So, if you take the right precautions you’ll be sure to save and spend wisely.
Cut Down on Entertainment
One of the biggest expenses of single life is entertainment. You probably don’t enjoy sitting at home by yourself every night, so that means you’re far more likely to meet up with friends for dinner, grab drinks or catch a movie on the weekend, and otherwise spend a lot of time being social. Unfortunately, most of these things don’t come cheap. Dining out frequently can quickly drain your budget and hitting the bar or club on the weekends can cost an arm and a leg. So, moderation in these areas will be key to saving money.
This doesn’t mean you need to cut out all of your fun social activities. Instead, you’ll just want to take stock and determine how much you’re spending and where that money goes. Once you see how much you’re spending on food, drink, and entertainment, you can probably identify some areas of potential savings.
For example, let’s say you’re going out to dinner five nights a week and each time you’re spending 25 dollars. That’s $125 a week, or $500 a month. Just on having dinner! If this is the case, consider cutting back one or two nights a week by eating at home, or by simply grabbing a cheap bite somewhere. Even if you make this small change it could result in an extra $100 in your wallet every month.
Start an Emergency Fund
After you’ve taken a look at your budget and have identified some areas to cut back, what should you do with the money you’re saving? The first thing you should do is take a look at your emergency fund, if you have one.
If you don’t have one, now is the time to start. Having money in the bank that’s set aside for a financial emergency is the first step in building a sound financial foundation. Without this cash cushion you’re bound to resort to credit cards or loans in the event of a financial crisis, which only makes the situation worse. So, if you’re able to save a few bucks by cutting back in other areas, start by making sure you’re putting some of that money into your emergency fund.
Pay Down Debt
You’ll also want to use any savings you’ve realized to tackle high-interest debt. If you’re carrying a balance on a credit card that’s charging something in the neighborhood of 12-29% interest, one of the best things you can do with that money is to pay it down. Even if it’s only an extra 25 dollars on each monthly payment, you’ll shave years off of the repayment term and save hundreds or even thousands in interest.
Don’t Neglect Retirement
Finally, don’t neglect retirement. This one is the most difficult for young singles because retirement is the last thing on your mind. Retirement might be forty years down the road and you haven’t even thought about what you want to do next week, let alone four decades from now. But not thinking about it now is a big mistake.
Time can either be your greatest asset or your biggest enemy. The earlier you begin saving, the less you actually have to save because compound interest over time does the work for you. If you wait just ten years before starting to save for retirement you could end up having a nest egg that’s only half as big as if you had started earlier. So just because you’re single and retirement may feel like it’s half a century away, make sure you’re putting at least something into your work’s 401k or into your own IRA. You’ll thank me later.