When I was a very young girl, I’d heard about a marital method of allocating money to both present and future goals that made a lot of sense to me at the time. Essentially, in a situation where both spouses worked, the household’s present needs would be paid for from one paycheque while the other paycheque was devoted to saving for the future. To my naive mind, this division would be split evenly since obviously both parties would earn the same amount and there would be no reason to fight about money… Ah, the innocence of youth!
Now that I’m an adult, I realize that many, many, many factors go into the process used by couples to decide how their money is allocated. Many of my friends are married. As far as I know, not a single one of them uses the “ideal allocation” that I’d envisioned as a child. They’ve worked out money rules that work for their relationships and they all seem very happy with their decisions. Still though, I remain convinced that spending one income while saving the other is a great idea.
If you’ve read enough personal finance blogs, you’ll have noted that the common minimum savings target in the online world of personal finance is 50% of your income. There’s often the admonition to save as much as you can, as soon as you can but 50% should be considered the baseline if you want to reach financial independence sooner than 65!
The challenge for singletons is obvious! We don’t always have that second income coming into our households, which means it’s not always as easy for us to live on 50% today while saving 50% for tomorrow. Economies of scale are missing since there’s only one paycheque to pay for the entire cost of housing, all of the food, all of our entertainment/travel/debt payments, etc… There are ways around some of these costs. For example, those singletons living with roommates have found a way to decrease their housing costs but not everyone wants to live with roommates. Also, it’s highly unlikely that roommates are willing to fund one another’s retirement accounts from the disposable income that results from lower housing costs! A couple’s desire to share their financial goals and to pursue them over a lifetime together is something that is very definitely missing from the roommate relationship.
If you’re a singleton with a side hustle, then maybe you’re one of the fortunate ones whose side hustle income is equivalent to what you earn from your regular job and saving that income already amounts to saving 50% of your income. Or maybe you’re a singleton with a nice, fat paycheque that allows you to live well below your means. If so, then hooray for you! You’re well on your way to funding the very desirable status of being a financially independent person where working for a living is an option rather than a requirement.
Singletons without lucrative side hustles or incredible incomes have to find ways to increase the savings target so that they can also reach financial independence and have the option of whether to continue working. Even singletons who love, love, love their current jobs should be saving big chunks of cash from their paycheques. The things that we love about our jobs can change over time. When they do, it’s best to be in a position to leave when those changes become intolerable and it’s even better to be able to leave without financial fears for the future.
What’s a singleton to do? As one singleton to another, I would urge you to save money towards your future. Personally, I automatically transfer money from my paycheque to my investment and retirement accounts every single time I get paid. The convenience of automatic transfers cannot be overemphasized because automation is beautiful!
If you need a daily reminder to commit to your future, consider the savings method employed by Grant Sabatier of www.millennialmoney.com where he decided to save a fixed amount every single day in order to reach his goal of financial independence and early retirement. Not everyone is able to save as much as Grant does. If you can, great! If not, then pick an amount that you can save and go from there. The point is to start saving money for your future as soon as you can. Once you’re in the habit of saving money, you’ll more likely than not increase the amount that you’re saving so that you can reach your financial goals sooner rather than later.
And the reality is that saving something is far better than saving nothing, even if your financial situation doesn’t allow you to hit the target of saving 50% of your income every year.
In a perfect world, I would be living on 50% of my income. I would pretend that my Illusory Partner was bringing in the other 50% of the household income and that his income would be going into the bank towards our goals of financial independence and early retirement while continuing to enjoy a standard of living that’s as good as the one I have now. Unfortunately for me, saving 50% of my income would mean that I wouldn’t enjoy my day-to-day life as much as I already do because I’d be living on a very tight budget that wouldn’t allow for the little luxuries that make life sweet. That’s just a fancy way of saying that I’m not yet prepared to cut out any of today’s expenditures in order to save even more for the future.
Am I still working towards the goal of saving 50% of my income? Of course I am! Yet, I will freely admit that my choices about how I want to live my life from one day to the next have prevented me from reaching this goal.
This particular singleton has made the decision to live below her means and to save as much as possible while still incorporating travel, entertainment, and spontaneous fun into her life. It’s a constant battle, but I’ve managed to create a budget where I save 40% of my net income and I set it aside for my aforementioned goals of financial independence and early retirement. I’m not terribly hard on myself for not being able to save the full 50%. As far as I’m concerned, 40% is still a respectable chunk of money so I think I’m doing okay.
The extra 10% that stays in my chequing account is for the small extravagances and short-term goals that are most important to me. It has paid for my recent international trips to Italy (2016) and to Spain (2017). It paid for a last-minute invite to a production of Comedy of Errors at Shakespeare in the Park. It has paid for my annual theatre subscription. It has paid for the costs associated with flying all over North America to attend family reunions. That extra 10% allows me to enjoy life now without having to wait to do all of my enjoyment later. I’ve been able to find a balance that works very well for me.
Could I have lived without those little extras in order to save the money? Of course I could have! And had I made that choice, there is no doubt in my mind that I would be closer to my financial goals. However, the other reality of choosing to save more money would be that I wouldn’t have seen as much of the world as I already have. I wouldn’t be as close to my extended family as I am now because I would have missed time with them nurturing the familial bonds. Similarly, I wouldn’t have had as much time with my friends building great memories around time spent doing things that we’ve enjoyed.
It’s very important to me to be free of the obligation to work as soon as possible – that’s why I save 40% of my net income and invest it for my future. Hopefully, I will continue to earn raises and receive larger dividend cheques from my army of Little Money Soldiers. One day, I will be in a position to meet my target of saving 50% of my net income.
Until then, it’s vitally important to me to live my best life each and every day on the other 60% of my paycheque. I don’t want to reach early retirement and realize that I haven’t nurtured important relationships or that I don’t have enough good memories of my life-before-retirement.
It’s taken me the better part of nearly 5 decades to figure out the best balance between my today money and my tomorrow money. Life is so short and the time flies so fast! There is a balance and I’ve been lucky enough to find it.