Single? Plan your finances differently

Money is both a macro as well as a micro concept when it comes to personal finance. Which means while the general personal finance adages apply to all, in certain situations, it's better to go by the specific ones that apply to a particular situation. Take for instance when you are happily single. 

Until a few years ago, being single was considered a taboo in the society, especially if you were a single woman in her 30s or above. If you are single, financially independent, don't have kids, here are a few things to keep in mind regarding your money matters.

Medical insurance

The first place to begin is medical insurance. Ideally, one should have an emergency fund handy. Shilpa Wagh, chief financial coach, Wagh Financials, says, "This is an important step, more so for singles. You cannot just depend upon your employer to give medical cover. In the future, the employer's policy may change. Hence, you cannot just depend on their medical cover." The amount you need will fairly depend on your individual needs.

But do keep in mind that you have at least Rs 3-5 lakh as medical insurance and also have adequate critical illness cover.

Another thing to remember is the personal accident cover. Buy a personal accident insurance policy, read the terms and see that it not only provides benefits of hospitalisation but also covers the loss of pay arising out of temporary disability.

Emergency funds

Swapnil Kendhe, a Sebi-registered investment advisor at vivektaru.com, says it's important to keep a minimum of six months to twelve months' expenses aside as emergency funds. "Make sure you choose the instrument which offers good liquidity." Remember, while you will always have extended friends and family for support, as a single who has slightly less financial obligations, it's your responsibility to avoid being a financial burden on others during emergency situations. While relying on the credit card is alright once in a while, start with baby steps and build an emergency fund asap.

Buy a home or two?

Wagh says, "There is no right answer to if you should buy a house or not as a single person." In case you buy, go for something you can afford with EMI. You can always buy a second home later on in life but it's important that the first one is affordable and EMIs are not too big a burden. A second home is a good way to get passive income via rent.

Avoid debt trap: The biggest mistake a single can do is rack up debt in the early years. Without many financial obligations, it's much easier to live a little beyond your means, especially vis credit cards. But this will put you in a debt trap and by the time you recover from it, you might have spent the better part of your 30s paying for it. If you are someone who has a student loan, make sure you pay that off before getting on another loan, especially a car or a travel loan.

Investing

It is an activity which is based on your risk profile. Ensure that you don't go stock picking as a single person. Have a healthy mix of equity and debt instruments in your portfolio. Unless you are a financial pro, don't rely on your skills while investing. Seek help from a fee-only certified financial planner. Remember, such professionals will be able to offer you unbiased advice without worrying about getting a commission off the financial instrument they recommend to you. A healthy mix of debt, equity and gold, as per your asset allocation, financial goals and risk profile is the key. Kendhe says, "If you want to keep it simple, then go for a no regret 50:50 asset allocation in equity and debt as a strategy." 

Life insurance

Kendhe says, "Unless you have a dependent, you don't need a life insurance policy at all."

Retirement planning

This is the most important part of financial planning for single women. Public provident fund (PPF) is a very good tool. If you max out Rs 1.5 lakh every year for 20 years at an average of 8% tax-free rate interest, you would be able to accumulate a good corpus. Three financial products PPF, employee provident fund and National Pension Scheme are a good strategy.

Nominations and wills

This part should not be ignored. Ensure that you have nominations and a will in place. Wagh says, "If you have created wealth, or have assets, it doesn't matter if you 25 or 50, getting a will in place is a must."

Psychologists have said that by the time most singles hit their mid-40s, the thought of marriage does cross their mind. In case your status changes, you will have to revisit your financial plan. 

Finally, remember that being single gives you immense opportunity for wealth creation. So make the most of it, before you decide to get married.

SECURE LIFE

• Medical insurance of at least Rs 3-5 lakh and adequate critical illness cover is must
   
• The biggest mistake a single can do is rack up debt in early years