Single-person households are very common — one in seven Canadians lives alone. Whether you are single temporarily or permanently, it’s wise to have a financial plan in place that meets your needs. This means having clear short-term and long-term goals, and a strategy to help achieve them.
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The number of solo households in Canada more than doubled over the last 35 years, according to Statistics Canada, in 2019.
1. Plan for emergencies
Having an emergency fund is one of the most valuable savings goals you can have. It’s particularly important if your household relies on a single salary.
For many people an emergency fund would equal at least three months of living expenses, but even having one month’s worth set aside can help. Any savings buffer that can help you meet emergency needs and avoid taking on debt, will help you navigate a rough patch and offer peace of mind.
2. Make sure your essential needs are covered
It’s crucial to stay on top of your monthly expenses whether you are single or not. This means having enough to cover your rent or mortgage, groceries, medications and any debt repayments. Keeping on top of bill payments also means you won’t owe additional interest or late fees, which can add up.
When you’re the only one paying the bills, your expenses are likely to be higher, including rent or mortgage, utilities, or car payments. The same goes for many discretionary expenses like travel accommodations.
Tracking where your money goes each month can also help you find places to reduce or make trade-offs. After the essentials are taken care of, you’ll know how much that leaves for personal spending, saving and investing.
Budgeting can sometimes come down to knowing your own needs and wants.
3. Check your credit report
If you can’t remember the last time you checked your credit report, you might consider adding that to your to-do list. Your credit report (and credit score) contains information that can be used by lenders to determine your credit worthiness.
This is especially valuable for solo households, and even more so if you are looking to make a major purchase that involves borrowing, such as a car or home.
4. Save for the goals that are important to you
Your money should ultimately help you live the life you want. Make room for savings that will help your dreams become reality. For example, you may want to improve your professional skills by taking a new course or degree, save for a home, or plan the vacation of a lifetime.
The earlier you start putting aside money for any goal, the better.
5. Have a retirement plan
Retirement planning can feel daunting for anyone. It’s is a long-term investing goal that depends on your situation. These are the key questions to ask yourself:
- How much do I need to have saved in order to retire?
- How much can I expect to rely on CPP, other pensions, or government benefits?
- How much do I need to contribute each month to meet that goal?
These answers can also change if your living situation changes.
Knowing the difference between Saving vs. Investing can help you reach your goals.
6. Look for sources of advice and support
Living solo doesn’t need to mean making every decision by yourself. Working with a financial advisor can valuable when it comes to planning for the future. If you are struggling with debt, then speaking to a credit counsellor or other debt professional could help.
Consider who else could be part of your support network when it comes to finances. Friends or family could help with problem-solving or new ways to balance the budget.
7. Know your emergency contacts
You should name an emergency contact when registering for new financial accounts, pensions or insurance. If you do not have an immediate family member who could act in this role, make time for conversations with close friends to decide who would be best suited.
You can also provide your financial advisor with the name of a Trusted Contact Person who can add layer of protection to your investment account. They’re someone your financial advisor could contact if there are concerns you are being financial exploited or not acting like yourself. It is part of new regulatory measures to support advisors in their efforts to help investors, particularly older investors and vulnerable, protect themselves and their financial interests. However, investors of all ages can benefit from sharing the name of a Trusted Contact Person with their financial advisor.
Wills and estate planning are another crucial part of future planning. Our article Why you need a will is a good place to start with the basics.
Getting on top of your finances can be challenging whatever your living situation. If you are single, it can feel even more daunting when you don’t have a partner to share the planning or the bills. However, living the solo life also means you may have more freedom to set your own priorities for your money.
