How to Reach Financial Independence While Single

July 05, 2022
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There are a lot of perks to being single, such as making all of your own decisions without the need to consult anyone else, and having full control over your financial decisions. Sounds awesome right?

Here are a few tips to help you build wealth:

Live Beneath Your Income

Whether you are single or married, the path to financial independence looks the same; you must spend less than you make and invest the difference. Both steps are equally important. By living below your means, you are able to save more money because your expenses are lower. However, the money that you save must be invested. If not, you will either lose money due to inflation or, you will eventually spend your savings.

Setting up an efficient budget will also allow you to track and monitor expenses in order to reduce your monthly outflow of cash. If you are single, there is a chance you have lower income than a married couple, but you also are likely to have lower expenses. Expanding the gap between income and expenses will allow you to save more and invest in your future.

Avoid Lifestyle Inflation

A crucial way to stay financially independent as a single person is to avoid lifestyle inflation, which is the tendency to spend more as you earn more.

As your income increases, it is normal and justified to ask yourself, "Why shouldn’t I take advantage of all that my salary can buy as it rises? I deserve it." The temptation to: buy a nicer car, larger home, more expensive clothes, eating out and traveling more is understandable. However, in order to achieve financial independence, you must reject the temptation to increase your standard of living. 

Invest

Wise spending and budgeting are important first steps to financial independence, but they’re not enough alone. You will need to combine these strategies with investing if you want to achieve financial independence early.

Finding a platform where you can automatically deposit weekly or monthly savings into a low-cost portfolio of safe and diversified assets like market index funds is a good start. You can begin by automating a monthly transfer of a few dollars and any spare cash into a high-interest account. It will add up quickly.

Living alone means paying 100% of all of your expenses. Whether you are renting or owning, having a roommate when you are single is one of the easiest ways to supercharge your financial independence. The cost of living in hot job markets is skyrocketing, so controlling living expenses is essential for individual financial success.

Set Financial Goals

A financial plan begins with the creation of “clearly defined, quantifiable, attainable, realistic and time-bound financial goals. Setting financial goals is the most important step in achieving financial freedom.

Financial independence might be difficult if you don’t pay off all of your obligations. Credit card debt, auto loans, mortgage loans, and personal loans are examples of this type of debt. The less debt you have, the more money you have to invest.

Educate Yourself About Money

Financial literacy is key to financial success. Read books and articles about money and finance. Be aware of where your money is going. You don’t have to set a strict budget and say no to every opportunity that may cost money, but pay attention to what you’re spending money on and prioritize the expenses that bring the most value to your life.

Maximize Your Employee Benefits

Be sure to understand and take advantage of your employee benefits. Your 401(k) will probably be the first investment account you have, so you should understand how it works. Know your company’s matching policy and try to contribute at least enough to get the full match–it’s free money! Ask questions and research where your money is being invested. Make sure those investments match your comfort for risk. Know the vesting schedule so you don’t leave money on the table… Everything in your benefits package is meant to benefit you, so not reading it thoroughly and understanding what it offers will be doing yourself a disservice.

Debt can really set you back financially, especially as a single person. When possible, you should only take out debts that directly help you to reach your financial goals. A mortgage should be your goal for financial success as a single person. This is the kind of debt that can really pay off in the long run in a number of ways. You’ll be able to tap the equity in your house or sell it and hopefully, realize a profit, that can be used to help fund your retirement. Also, the value of your home adds to your net worth.

Consider a Side Hustle

As a single person, you have the disadvantage of only one income. By considering a side hustle, you have the opportunity to increase your cash flow. A side hustle can be anything from freelance work to a part-time job to starting your own business. The extra income can help you to accelerate your debt repayment or savings which will get you to your financial goals quicker.

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