The unique circumstances of single adults are completely overlooked in many areas. This includes financial management for singles. As someone who married in my late 30s, I recognize how much of the information out there is directed towards couples.
Single People are Often Overlooked
Our society stigmatizes unmarried adults and leaves them out of conversations about financial planning. Often there is a message that if you do not have children to support or a partner to worry about then your situation has no complexity. Even worse, there can be a perception that a single person’s money is selfish and a luxury. This is not right or true.
Effective financial management is just as important for singles as it is it is for married people. Money is necessary of all of us to survive and thrive.
In last week’s blog I addressed managing your finances as a couple. This week I am going to dive into some of the dynamics that apply to those who are managing their money solo.
In many ways financial management for singles is less complicated. You do not need to worry about coordinating your spending or saving styles with someone else. You always know who is in change and who is responsible.
And in some ways, financial management for singles can be much more complicated.
Obviously, there is the single income element and paying for 100% of all the expenses. I won’t go into that here, as it is a whole blog topic on its own. But, if we look beyond cash flow matters, there are many other elements affecting single people that differ from those affecting couples.
Last week I discussed the importance of sharing all of the financial data with you partner. If you should pass away, or become incapacitated, it is vital that your spouse not be left unprepared.
Decisions May be Trickier
For single persons, the possibility of incapacitation still exists. It is trickier, however, because you don’t that that assumedperson who will manage your finances and your medical decisions. You may not have someone else who is relying upon you for support, but you also do not necessarily have someone else to rely upon.
If you do not currently have a domestic partner it is vital to consider who you would want to handle your affairs if you were unable to do so. Once you make this decision, spend the time and money to have legal documents written to put this into effect.
For married persons, the spouse is generally the individual you want to manage your financial and medical decisions. For singles, this aspect of financial management may not be as clear. If you do not have legal documents, the default person assigned by the court to manage your affairs may not be who you would choose. If you spell this out then your friends and relatives will have an easier time if you were to pass away or become incapacitated.
The Importance of Estate Planning Documents
The person with the legal authority to make decisions on your behalf is called a Power of Attorney. You can select different Power of Attorneys to handle financial matters and medical decisions. This is helpful to keep in mind because, for many of us, we have have friends or family that align with us more in one area that another. The person who would be able to anticipate your health care wishes may not be the same person who is good at managing money.
Additionally you should have a legal document called a healthcare directive so that your wishes regarding your own treatment are clearly spelled out. This is the document that outlines specifics such as whether you would want to be kept on life support. Having this document makes it easier for those responsible for your medical care and can save them from a making a lot of agonizing decisions at an emotionally fraught time.
Establishing a will and/or a trust will make clear what should be done with your possessions if you were to pass away. Wills are not only for wealthy people. Even if you do not have much money, there may be other specific bequests you wish to make for items with emotional significance. Someone will need to deal with all of your possessions, pay outstanding bills, and close your financial accounts. Lacking estate documents causes delays and makes this process much more labor intensive for your grieving loved ones.
The above mentioned documents are part of what is called an Estate Plan. For a more complete list of estate planning documents and their function, see this checklist of 6 Estate Planning Must-Haves. Estate planning documents should be prepared by a qualified and licensed attorney. Estate planning laws are state specific, so this is one area in which it is important to consult a professional licensed in your state of residency.
(Please Note: married persons should also have all of these legal/estate documents. This article focuses specifically upon unmarried persons, but the importance is just as great for married people)
Communication with Loved Ones is Also Important for Singles
After deciding upon a power of attorney, have a conversation with that individual. Share your vision for your life, your health, and your money. Tell them where they can access to all of your financial documents. Take a look at last weeks blog about couples managing their finances and you will see that many of the items I outlined for couples also applies to singles. Your financial Power of Attorney needs to know what bills to pay and where your money held.
When managing and sharing your personal information financial information as a single person there is the added element of the assets not being joint. It may not be wise and/or comfortable to share every detail regarding your finances with someone else. I am not advising anyone to go into the detail that they would when sharing information with a spouse. But, at the very least, you should make sure that your power of attorneys and executors know where to find your legal documents and what attorney to contact should something happen to you. Additionally, if you are working with a financial advisor make sure that the Power of Attorney has the planners contact information and that you have authorized an emergency contact person for the advisor.
These Decisions are Not Forever
Deciding upon a Power of Attorney can be challenging. Who is to say that you will still be close that that friend in ten years? What if you choose your parents and then they have their own health problems? I have seen many people get hung up on this aspect and delay getting estate planning documents.
Remember that these are not forever documents. You are not locked into your decision. I recommend that people have their estate documents updated whenever they they have a substantial life change (marriage, child, divorce, relocation to a new state, etc.) Even if you situation remains unchanged, you should still have your estate pan reviewed and (as necessary) revised every five years due to potential changes in estate planning law.
So, when creating your estate documents keep in mind the phrase “done is better than perfect” as it applies to choosing your power of attorney, executor, or beneficiaries. We are all only able to make these choices based upon our current situation and we cannot account for every possible eventuality. You can always make revisions if/when you change your mind.
** This information is intended for informational purposes only. I am not an attorney and any information provided above should not be construed as legal advice. Additionally, laws differ by state. Please contact a licensed estate planning attorney in your state for legal advice and/or to create an estate plan.
Maura Madden is a registered investment adviser in the State of Washington. The Adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. Individualized responses to persons that involve either the effecting of transaction in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.