|
Whether
you're single because you've never married, or are suddenly single due to
divorce or death of a spouse, money management and financial planning are
critical. You have only yourself to depend on for income, goal-setting,
decision-making, and retirement planning. Here are the issues that most need
your attention:
Debt:
Know exactly who you owe, how much you owe each creditor, and the interest rate
on each account. Develop a plan to pay down your debt.
Budget:
You've heard the expression: "You can't get there from here," right? Well,
whoever coined the phrase might very well have been talking about budgets. When
it comes to meeting your financial goals, without a budget "you can't get there
from here." A budget doesn't have to be financial handcuffs or a money diet.
Health insurance:
It's common to feel invincible when you're young. Many young singles take a huge
financial risk by going without health insurance because they believe their
youth and good health makes insurance unnecessary. This is one of the biggest
mistakes you can make as a single. You CAN become ill, regardless of your age.
You could be in a car accident, hurt yourself skiing, tear a muscle lifting
weights, fall on the ice, get mono or pneumonia, or incur any number of
illnesses or injuries that would land you in the hospital and rack up large
medical bills that may take you decades to pay off.
Don't be short-sighted. If
you can't afford a good plan with a low deductible, at least protect yourself
from catastrophic financial losses by purchasing a less expensive plan with a
high deductible. You'll pay the small expenses yourself, but the large ones that
could ruin your financial future will be covered by insurance.
COBRA:
If you're covered under your employer's group health insurance plan and you're
about to change jobs, check into COBRA coverage, which allows you to continue
your coverage under the plan until you're covered under your new employer's
plan, for up to 18 months after termination of employment. The cost to you is
whatever your employer pays, plus a small administrative fee.
Disability insurance:
Because you don't have a second family income, it's very important that you
protect your income-generating power by buying long-term disability insurance,
and if possible, short-term disability insurance. Disability insurance will pay
a percentage of your income (usually 60%) if you're unable to work due to
illness or accident. Again, don't let your feelings of invincibility prevent you
from protecting yourself. These coverages are much more important to you than
life insurance unless you have dependents. Many employers offer short- and
long-term disability insurance free or at a substantial savings. Check with your
Human Resources department.
Retirement Planning:
If you're young, don't let your age fool you into thinking it's too early to
save for retirement. The sooner you start saving, the less you'll need to save
overall, due to the power of compounding, deferred taxes, and your employer's
401(k) match if you're lucky enough to have such a plan. Don't walk away from
the free gift your employer offers via the 401(k) match. If you're not eligible
for an employer's plan, set up an IRA. Avoid a big mistake many singles make:
don't cash out your 401(k) account when you change jobs. Roll it over into an
IRA or another employer plan instead. The cash is tempting, but spending your
retirement money is short-sighted.
Medi-gap and Long-term
Care Insurance:
Singles over 65 should purchase a Medi-gap policy to cover medical expenses not
covered by Medicare. Singles over 50 may want to consider a long-term care
insurance policy, which covers the expenses of a nursing home or home health
care if needed.
Your Home:
If you're suddenly single due to divorce or death of a spouse, it may be
necessary or prudent for you to move to a smaller home so you have a smaller
mortgage. This will make it easier to make ends meet and may be the only way
you'll be able to save towards retirement.
Wills:
Wills are another item that many singles think are unnecessary. They're wrong.
If you own anything of value (car, jewelry, house or condo, computer, savings
account, etc.), you should have a will specifying who will get your belongings
if you die. If you have children, a will is an absolute must, because it's the
method for designating a guardian for them.
Living Will and Health
Care Power of Attorney: If you become unable to make medical decisions for yourself, a living
will and power of attorney will designate someone you trust to make those
decisions for you or carry out the wishes you've indicated. See a lawyer or
financial planner to draft these documents.
One should consult
with a qualified financial planning professional prior to implementing financial
planning strategies.
If you are a tax,
insurance, financial or real estate planning professional receiving this
newsletter, please call our office and introduce yourself to us. We are always
seeking to grow our referral network and expose more service professionals to
our client base.
|
