How to make a financial plan for one & avoid the 'single penalty'

You can still reach your financial goals without a spouse.

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Myles Ma, CPFCSenior ReporterMyles Ma, CPFC, is a senior reporter and certified personal finance counselor at Policygenius, where he covers insurance and personal finance. His expertise has been featured in The Washington Post, PBS, CNBC, CBS News, USA Today, HuffPost, Salon, Inc. Magazine, MarketWatch, and elsewhere.

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Americans are increasingly living single. New analysis from the Pew Research Center finds that in 2019, almost four in 10 adults ages 25 to 54 were neither married or living with a partner. This share is up from 29% in 1990. 

Living alone has its perks, but it does have financial consequences. Unpartnered adults have median annual earnings of $35,000 compared to $49,000 for partnered adults. This gap has grown since 1990.

“Single people certainly have less room when it comes to financial setbacks,” says Justin Pritchard, a certified financial planner and owner of Approach Financial Planning. “You can’t rely on a spouse’s income to carry you through hard times, and you don’t get to join your spouse’s health insurance plan while starting a business.”

But you can still reach your financial goals without a spouse. Here’s how people can overcome the “single penalty.”

The challenge of going it alone — and a silver lining

It’s important to lay out the financial challenge single people face: Two incomes are better than one. Chris Diodato, a certified financial planner and founder of Wellth Financial Planning, has been married and divorced.

“When I was married, it was much easier to stuff money away,” Diodato says. 

Expenses for a two-person household are not twice as high as expenses for a single-person household. For example, it can often be cheaper to split the expenses on a two-bedroom home than bearing all the costs on a one-bedroom home. 

On the other hand, planning your expenses and income is simpler. There’s no need to factor any changes to a partner’s income, and you don’t have to worry about a divorce upending your plan.

“You’re losing on the economies of scale, but you’re definitely getting a boost on the predictability part,” Diodato says.

Protecting your finances as a single person

Without that second income as a backup, you need a stronger safety net, Pritchard says. That means building a bigger emergency fund — perhaps enough to last a year instead of the customary three to six months. 

You may also want to take a closer look at products like disability and long-term care insurance. Disability insurance can provide income if you become too sick or injured to work, while long-term care insurance pays for a nursing home and other elder care. This financial protection may come in handy without a spouse to help cover financial and health care needs down the line.

You should still have a robust estate plan. You may not need life insurance if you have no dependents and haven’t co-signed any loans, but your estate plan should still include a power of attorney and medical power of attorney so someone has the ability to make financial and medical decisions on your behalf if you become incapacitated.

It can be tricky to find this person, says Kevin Lao, a certified financial planner and director of financial strategies for Imagine Financial Security. If you’re picking a sibling or a friend, they may be too close in age. 

“If you are going through the aging process, so are they,” Lao says. “This becomes a bit more complex as you get older and is very important to address.”

Whomever you choose, make sure you provide them documentation that says you’ve named them in your estate plan. You might also want to name a successor to that person, in case they can’t take on that role, Lao says.

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