It is Saturday morning, at 6:30 am, and as I am trying to figure out what to write for my first official blog, Beyonce’s “Single Ladies” started to play- and I thought- “Hell yes!” I will write my first article for all the single ladies out there: single, single moms, widows, and divorcees.
We definitely have unique challenges and concerns when it comes to our financial planning needs; as well as the resources to fund them!
Not only is there less income coming in to pay bills and save for a rainy day, but there is only one person to make the decisions and take action. What a great topic for my first blog: a special thanks to Queen Bey and the Universe for giving me inspiration.
So, what can we do as single ladies to empower ourselves and our money???
Nugget #1: First thing first, start talking about money!
A huge hindrance for us is that we, as single women, avoid talking about money. Why though? I know it is not because we are shy… you have no idea how many sex stories my girlfriends (and clients!) have shared with me; and I mean intimate details (over drinks of course), yet when I bring up money friends and clients alike clam up and look very uncomfortable.
I hear all the time that women feel guilty about making too little or feel greedy for making too much. They do not want their friend’s pity or to make them feel bad. Nonsense! We have all made mistakes, and we can learn from each other. If you do make more than your girlfriend, telling her does not have to make her feel bad- contrarily you can help her increase her self-worth and give her the confidence to go ask for a raise! Do not think of it as braggy, think of it as empowering! If you feel like you do not make enough, be open and honest- 1) your friends love you and 2) they may not be doing that great either. Just because they make more or have dual income does not mean they are spending/saving/investing it wisely. You could be a wealth of knowledge for them! If everyone brings their truth to the table, at the end, all friends will walk away with a sense of increased power. Plus, you can always share the nuggets you will be getting from my blog 😊
Nugget #2: Definitely have a 6 Month Emergency Fund amount
I’m sure you’ve heard the financial gurus/professionals/authors tout “You should have 3 to 6 months of your expenses saved in your emergency fund.” And it is true! But have you ever wondered why there was that 3-month spread?
Well, first, I should explain the reason for an Emergency Fund. It is a separate account you maintain to protect you financially in case of an emergency: such as becoming laid off or unable to work due to a medical emergency. It is not a sinking fund, where you put money to save up for a big expense you KNOW IS COMING. This is for things that catch you off guard.
So, like in the case of being laid off. If you are single, and you are laid off- the household income decreases to zero (for my example there are no side hustles, rental properties, etc.) It may take you a while to get another job. Maybe even 5 months. If you are alone, and only had 3 months expenses saved in your emergency fund you would be in trouble if it took you 5 months to get another job.
Now say that same instance happened, but you were in a dual income household. Well, although you had 3 months expenses put away; you would not need to use the whole month’s expense because the other individual is still bringing in their income. They are still paying for things too.
Now, both could lose their jobs, or one could have to quit to take care of the other, so even dual incomes should have the six months, but it is not as imperative as it is for my single ladies.
Nugget #3 Estate and Wealth Transfer Prep
For divorced and single individuals, there is no unlimited marital deduction. So, in the case of large estates, careful consideration is needed for planning for liquidity of assets at death. It is so important to also design (or update if you are a widow or divorcee) your durable power of attorney, health-care directives, and guardianship plans for minor children.
Another large consideration is if you are (possibly) remarrying- speak with a professional about a QTIP (Qualified Terminable Interest Property trust). It provides for children from an earlier marriage. To elaborate, imagine you remarry, and you have children, and your new spouse has children. You live together for a time, and then you get ill. You pass, but your spouse is still young. Does all your estate go to your new spouse? What about your children?
And if your new spouse lives another 20 years, when they pass, will your children still have any relationship with that family? Will all your estate then be passed down to your new spouse’s children? Or, gasp, their newer spouse?
Under a QTIP income is paid to your new spouse, while the balance of the funds is held in trust until their death, at which point it is then paid out to the beneficiaries specified by the grantor (you).
#bossmoves, keeping it in the family 😊
Nugget #4 Income Taxes
I had a client come in recently concerned about her money because she is filing for divorce. She is trying to wrap her head around all the changes occurring in her life. She was a stay-at-home mom for over 20 years, and now she has gone back to work. She is terrified of not having enough money and has been working herself to the bone. As we looked over her financials and started putting a plan in place that made her feel confident and safe with her spending, she asked me about taxes.
Specifically, whether her alimony would be taxed.
With the passage of the Tax Cuts and Jobs Act (TCJA), alimony is no longer taxable to the recipient (and not deductible to the payor!) That made her smile. But we did talk about how large transactions, like if she were to decide to sell the house, may create a tax issue for her. Single filers cannot shelter as high a portion of the capital gains from taxation upon the sale of the primary residence. Also, we discussed how her new filing status could potentially have a decrease in deductions.
Overall, a trip to your CPA is invaluable! They can go over with you the best moves to make for your specific situation 😊
Nugget #5: Life Insurance
If you are single with no children, most would say that you do not need life insurance. I mostly agree but have a few instances where it would be wise.
1. You have a co-signor for loans. If someone else signed a loan with you (think private student loans, auto loans, home loans); they could still be financially responsible to pay it back if you were to pass away. Do not leave that financial burden behind, cover yourself enough to cover the cost of your burial plus these loans. You do not want to ruin their credit if you owe more than the asset is worth and they cannot pay.
2. You want children in the future and have a family history of health issues. If you have young children, you should most definitely have life insurance. Most people think the logical chronological order is to have kids, then get life insurance. The problem? Life insurance is something that you apply for, and it can be incredibly expensive or even denied if you have health issues. If you know you will have children in the future but want to lock in the lower rate of being young and healthy you may want to purchase a policy sooner rather than later. Also, imagine you wait and then suffered a heart attack. Your future self that has kids, may not even be able to acquire the insurance. Food for thought.
If you have young children: Please get a life insurance policy of sufficient amount and decide who will be responsible to raise your child(ren). The responsibility is great, and you must talk with them about it. I have a client whose brother and sister-in-law passed in a car accident, and now she is the “mom” of a preteen. Out of nowhere. Quite a shock. She loves her niece, but it is a huge life change that she was not expecting. Her brother did not even tell her that he chose her. Furthermore, they did not have life insurance. Now my client has no financial help to raise this beautiful girl. Please take the time to ensure you provide the financial help to the person who will raise your child(ren).
Okay, nugget number 6 is saving for retirement, but I feel that there is so much information that it should be an article of its own. Stay tuned for a discussion on retirement planning for one on my next blog!
Stay financially empowHERed my friends!