Financial Planning for Single Independent Adults
As young adults and Milennials join the workforce or engage in entrepreneurial pursuits, they become financially independent. Some remain single as they prepare financially for marriage and family life. They may enter into business partnerships and purchase homes, interests that need to be financially protected. And these independent adults need strategic financial plans that will allow them to pay their expenses, plan for future needs, protect assets, and accumulate wealth.
If you are a single independent adult with financial responsibilities, dreams, and goals, most likely you’re asking these questions: “What do I need to do now to protect my assets? How do I assure that I have what I need for living expenses, paying school loans, and money for future needs? How do I set myself up now to build wealth and prepare for a secure and comfortable retirement?”
At this stage of your life, your responsibilities are building as you acquire property, a car payment, a business, debts from school loans, and make plans to get married and have a family. It is a time when the opportunities for financial growth and wealth building are enormous with a financial plan that sets a course and keeps you on track. But do you know what you need to do to properly plan for and secure your financial future?
A strong financial foundation for single adults...
As a single adult with a good job or in your own business, you’re at a great time in your life to achieve financial security and accumulate wealth. Imagine being able to travel, pay off loans, buy a home, get married in style, raise kids without debt, meet all your financial needs, and plan for a happy, comfortable retirement. With the right financial plan, you and your future family can live your dreams without financial stress and worry.
Provided your health needs are met, you have an adequate income, do not have excessive debt, and you’re willing to make a few changes to reduce unnecessary spending, you can benefit from financial strategies that will protect your assets, cover expenses, and when the time comes, enjoy your retirement without any financial worries.
A financial plan always begins with a detailed analysis of your financial situation and needs. This includes any special needs you have, income and expenses, mortgage info, projected future expenses, existing insurance, savings, existing retirement accounts, spending habits, knowledge and beliefs about money, and your tolerance for risk. Based on your analysis and input, we prepare a customized plan designed to meet your needs for financial security, covering existing and future expenses, and accumulating wealth.
Customary considerations for single adult financial planning...
Most people go through their life spending money erratically without a budget. They may go for coffee everyday, eat out regularly, or use unnecessary gas by making several trips to the store. Some make regular purchases in expensive convenience stores instead of clipping coupons or shopping where grocery and personal care products are much less costly.
A big part of helping you to generate enough income for life is to reduce unnecessary spending. You will learn how small changes can produce big money growth. Your commitment to using a budget that eliminates impulsive unnecessary costly purchases will change your life. In the process, you will be empowered to take control of your money so that you can get what you most need and want in your life.
Are you taking advantage of opportunities for a tax-deferred retirement account through your employer? Your contributions will be deducted from your paycheck before taxes and invested by a fund manager according to your risk tolerance. Sometimes your employer will match your contributions up to a certain percentage of your annual salary. This is money that can grow substantially over a period of years and produce a comfortable retirement. All the money earned through your retirement account belongs to you with options to do a tax-free rollover investment when you leave your job.
Your employer may also provide you with life insurance. This might be one to two times your annual salary. You might have the opportunity to purchase additional life insurance or long-term care insurance through your employment. These extra policies belong to you as long as you continue to pay the premiums. And if you are young, healthy and a non-smoker, the cost of these policies is a real bargain – one that you will not want to miss out on.
Policies for short term disability and long term disability can be purchased to safeguard your salary when you are unable to work for an extended period of time. Disability insurance pays you a portion of your salary after you have been disabled due to injury or illness. This is different from workers compensation (paid by employers when required) that pays you when you are injured on the job.
If you are a single adult living independently, there are many ways a life insurance policy can help you. It could be for the support of parents or siblings. It might be used to pay off debt from a mortgage or other loan. You may want to purchase insurance at a very low cost while you are young and healthy. The insurance may be to protect your business interests or to take advantage of a policy that provides tax benefits and savings.
There are a number of different types of life insurance. No one product is right for everyone. Whether you choose a term or permanent life insurance, your choice should be based on your calculated insurance needs, your age and health status, budget, financial obligations, and other options you have to build up cash that fits with your savings and investment goals.
Long-term care is a type of insurance that provides you with limited assistance in your home or in an assisted living facility when and if you meet certain criteria. You don’t have to be a senior to take advantage of this assistance. It is available to you throughout your life due to a health problem or injury. Most people do not think about long-term care insurance until later in life when it is very expensive. The best time to buy long-term care insurance is when you are young and healthy and the costs are very low.
When you have many years ahead for investing, this is a time where you can generally afford more risk. There are numerous investment opportunities that can accumulate large amounts of cash over a period of years. These can be managed funds within an IRA or a 401k through employment. Even if there is a retirement account through your job, you are not limited to a single account. If you are in a relatively low tax situation and can afford it, you might consider investing within a Roth IRA in which after tax dollars are used to fund the account. This provides an opportunity to grow cash in an account that is completely tax free after 5 years.
If you and your partner have good paying jobs or are self-employed, it is quite possible that you have a substantial income with a high tax obligation. Fortunately there are a number of opportunities to offset your taxes, lower your taxable income and accumulate cash – strategies that can make you wealthy over time. Tax-deferred investment strategies allow you to invest, deduct your investment amount from your taxable income, and defer the tax until you take distributions later in life. Another method of reducing your taxable income is by having your own business where business expenses offset your taxable income.
When we are young and healthy, we tend to believe that we will remain healthy for a very long time. Although most people will have a long, healthy life, a life threatening illness or injury can happen at any age. Part of financial security are legal protections that safeguard you and your family should serious illness or death occur. Trusts or wills, Durable Power of Attorney, and Living Wills are important protections for you, your family, and your assets. Our team includes estate and asset protection attorneys who can help you by creating these essential legal documents.