Young, single, and broke

A few simple steps to get your financial life on track

Young singles face some unique financial challenges in the post-pandemic world. First and foremost, the nature of the labour market has changed considerably, with remote work, the contract, or gig, economy, and self-starting entrepreneurship among the choices facing the younger demographic. The traditional employee-employer structure is still the most common employment situation, and one in which most young singles find themselves. After all, a regular paycheque with benefits is nothing to be sneezed at.

And sooner or later, that brings up the question of what, precisely, you are doing with that paycheque. Many young singles are perpetually broke and unable to pay for anything without going into (more) debt. Eventually, you’ll come to the realization that blowing it all on beer and pizza with your friends every week is counterproductive financially. So here are some tips on how to think about your personal finances as a young single. And maybe get out of the hole.

Track income and spending

Face it, you need to get a grip on your income and your expenses – so you’re not blowing that nest-egg, be it ever so humble, on Mexican singles resort, for example. There are many good budgeting apps and software packages available to help you analyze your needs and structure your cash flow so it’s not always flowing away from you.

As a single person, you should be saving about10% to 15% of your income each year for retirement. Set up your own Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP). Arrange for automatic contributions directly from your bank account. Check with your employer to see if they offer a company pension plan or group RRSP. And join up. It’s like just another withholding from you paycheque.

Next, take the next rung on the ladder. Look for employment opportunities that pay more than you are currently making. Upgrade with continuing education courses, list with job sites, or hire a headhunter to find a position where you can make more money. Don’t be afraid to move – go where the money is!

Do you have back-up?

For successful singles, where and how you live are cornerstones of the life you lead. Do you own or rent? Do you live in a condominium? Or a townhouse?

Living the trendy urban lifestyle is exciting, but it’s expensive. To help defray some of the cost, consider taking on a roommate. It might cramp your style, but it will allow you to cut costs and free up some money for investing and savings. This is a short-term arrangement that can help you save thousands.

Do you have a mortgage? A car loan? And if so, do you have a plan to pay it off quickly? If you become ill or disabled, will you be able to continue living where you are, in the style you’re used to?

You definitely need to create an emergency fund worth three months of monthly expenses. Set up an automatic transfer, and start putting money into a Tax-Free Savings Account to cover you against the unexpected. Purchase some disability insurance. As a single person, you rely solely on yourself for income, and if you were to be injured or in an accident, you could be faced with expenses you cannot afford.

Maximize any employee benefits you may be entitled to (major medical, dental, and prescription drugs, for example), and integrate those with carefully selected insurance products to ensure you’re fully protected in the most-cost-effective manner possible. Check with your employer to see if they have disability coverage for you, and if not, get some.

Make a financial plan

This is one of those obvious bits of “advice” that hardly anyone follows. That’s because some of the advice you see online makes personal financial planning seem like an exercise in a Level III CFA program. But not all of us care that deeply about income statements, balance sheets, and debt-equity ratios. So, put off by alll the financial bafflegab, many singles never consider financial housekeeping at all. Then they find themselves with maxed out credit cards, collection agencies calling, and credit rating at risk.

It doesn’t have to be this way. A financial planner can help you with budgeting and cash flow, saving and investing, and risk management, including a professional analysis of your insurance and healthcare needs. Ask friends for recommendations or referrals. Often, you’ll find fully certified planners at your local bank. Sometimes your employer will offer financial planning services as a benefit. Always take advantage of these!

A few simple steps like these won’t cramp your lifestyle. But they will set a solid foundation for your financial future.

Robyn Thompson, CFP, CIM, FCSI, is the founder of Castlemark Wealth Management and an independent financial planning consultant.

Notes and Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned are illustrative only and carry risk of loss. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.