1. Create an Emergency Fund. Just because you are single does not mean you won’t have unexpected bills or won’t retire one day or have future responsibilities. You will have to pay for things married people do like health care, everyday living costs, etc. Save enough in your savings account to cover at least 8 months worth of monthly expenses.
2. Set a Budget. Because you are single, you have an opportunity to save more than your friends who are married with children. Use that extra money to speed up the accomplishment of your short term and long term retirement goals. Instead of retiring at 65 or 70 you may be able to stop working at 50 or 55.
3. Stay Out of Debt. Accumulating even small amounts of credit card debt can derail your long-term financial plans and keep you working for many more years. If you carry a balance of $5,000 with 18% interest and pay the minimum of 2% of the outstanding balance, it will take you 46 years to pay off the credit card.
4. Invest in Passive Exchange Traded Funds (ETF’s). These are low cost (average Vanguard internal cost is 0.167%), tax efficient (Vanguard ETF’s had zero capital gains in 2008), and diversified investments.
5. Stay Away from Actively Managed Mutual Funds. The average internal cost of a managed mutual fund is 1.50%[1]. In any given year 75 to 80% of actively managed mutual funds under perform their benchmark[2].
6. Buy Disability Income Insurance. Often provided by your employer, it should provide you with 60% of your income if you become disabled and cannot work.
7. Buy Long Term Care Insurance. You will need this to pay for home caregivers or nursing home care. Because you are single, you do not need to buy life insurance.
8. Find an Estate Planning Attorney. They will help you draft a will, establish durable powers of attorney, and determine who will inherit your assets.
9. Don’t Pay Your Mortgage Off Early. By keeping your mortgage you get a tax deduction, a lower payment thereby allowing you to invest more and grow your wealth.
10. Stop Getting a Tax Refund. Basically, you are giving the government an interest free loan for money that is yours. Instead, talk to a tax expert on the number of exemptions to claim on your W-4 and try to make it so you neither owe the government money nor will get money back.