Dear Michael D. Gatson,
I enjoyed reading your blog on Love & Finances, but I am a single professional and I need some advice on getting my finances in order. How do I save when I only have one source of income? Can’t I just save after I pay my bills and have some fun?
Too many professionals find themselves with sparkling new big ticket items, living paycheck to paycheck, with no money for groceries, and worse no emergency fund in case they become the latest victim of the revolving recession door. Today it is imperative to save for a rainy day, because you never know when that day will come. It is important to live below your means, working with what you have, not accumulating credit card debt, and always putting aside 10% of your income.
It is important to set financial goals, make a monthly budget, and stick to it. Examine your current living expenses and decide what you can live on comfortably. For example, if you are single, you are probably paying over $400 for cable, Internet, cell phone, and a gym membership.
Even though watching the Have’s and The Have Not’s on OWN is nice, or True Blood on HBO, is it necessary? Especially when cable runs on average $80 for the monthly bill. While having internet might a necessity, the extended cable is not, and that is money that can be saved.
In 2005, I experienced some financial issues and from that experience I learned the true value of saving and investing. While in graduate school my mentor/friend educated me on the importance of having a savings and a 6-month emergency fund. When I graduated, I made sure that I paid my savings, emergency fund and investment accounts like a monthly bill. In 2010 only my close family and friends knew I lost my full-time job. For almost 6 months I was without health insurance or a salary. I did not ask anyone for any financial assistance because I had a few contract jobs and a 6-month emergency savings.
Saving is Sexy: Being Broke or begging for money is not hot! But saving is! Make sure you set aside at least 10% of your income and put into a savings account. Having a savings ensures financial security. Build the habit and literally become stronger and more disciplined. You build the emergency fund itself and you have money set aside for emergencies and for opportunities. We are not talking about the ability to go out for dinner on short notice, but perhaps you could take advantage of a vacation. Or maybe your fund enables you to fly home for an emergency, or fly to your best friend’s destination wedding without maxing out your credit cards.
Credit Cards: Less is more when it comes to credit and retail store cards. If you have multiple cards crowding your wallet, now is the time to streamline in order to get organized. The best way to start is to cut out the store cards and consolidate down to 2-3 major credit cards at most – preferably those with the lowest interest rates.
Monthly Budget: Keeping a monthly budget is an excellent and easy step to ensure healthy saving habits. This reminder will also help with remembering to schedule bills to be paid.
Online Bill Pay: This is seriously the easiest way to ensure good financial habits and a great credit score. Almost all banks and credit unions offer online bill pay – use it. Always pay bills on time to avoid unnecessary late fees. Organizing your financial life shouldn’t be a chore – but it will take some time commitment. Paying your bills on time ensures a great credit score. But staying organized will help you sleep at night!
Planning is key to reaching your financial goal. There is more mental comfort to living off your savings versus credit cards during unfortunate transitional periods. Years of savings will also pay off when you do want to make large purchases such as a house, or even starting a family of your own.
Michael D. Gatson
What tips do you have for single professionals to manage their finances? Share your comments below!