Money & Career

5 ways to manage your money on a single income

5 ways to manage your money on a single income

© Photography Image by: © Photography Author: Canadian Living

Money & Career

5 ways to manage your money on a single income

A relationship breakdown is tough at the best of times. And when your finances are intertwined, things can get downright complicated. If you've recently gone from being in a two income household to flying solo, you may need to make some important adjustments to the way you manage your money. Here's how to make smart decisions about your single income. 

How to manage your money on a single income

1. Understand your relationship with money
Your relationship with money can be complicated, but it's important to be clear about how you feel about it from the outset. That's why Karin Mizgala, CEO and co-founder of Money Coaches Canada, says that's where she starts when she's working with a new client.

"Often, money is an issue that's been avoided in a relationship. It might have been something that the partner has taken care of, or maybe even something that you argued about that helped cause the split," she says. Be honest about the role money has played in your life so far because it will help you chart your course moving forward.

2. Know how much money is coming in and how much money is going out
Mizgala says that when she sees a new client immediately after a split, she works to help her understand exactly what money she's got coming in and going out. "It might seem mundane, but a lot of people really don't know what their financial picture is," explains Mizgala. "Do they understand what assets they have? Are they clear about their debts and liabilities?"

While she admits it's not always easy, Mizgala says it's also important to get a clear picture of your expenses as you make your transition. "You want to make sure that you will be able to meet your obligations and pay your bills." That's why she often helps her clients do an approximation of what their future will look like as a single person – and that means getting a clear read on sources of income, too.

If you're going to be living on less, you'll need to assess your standard of living and you may be forced to make some tough decisions, from cutting back on your spending to selling your home. "It's crucial to find a way to live within your means," says Mizgala.

Page 1 of 2 -- If you've recently split with your partner, find out why it's important to revisit your will and insurance on page 2. 3. Build a good credit rating

After a split, Mizgala advises her clients to check their credit ratings with a company like Equifax or TransUnion. "It's good to know where you stand," she says, "because you might need to borrow money, and in the past you may have qualified for borrowing on the basis of the family." She recommends not only getting a credit card in your own name, but also establishing a line of credit because it not only helps build credit, but it can provide a cushion in the event of an emergency. "Anxiety levels can be high during a period of transition and it can help provide an additional comfort."

4. Revisit your will and insurance
Though it doesn't need to be done right away, if you've recently split with your partner, it's important to reassess the documents that will take care of things in the event of disability or death.

"As a newly single person, you want to make sure that you have coverage in the event that you aren't able to work," says Mizgala. You'll also want to be clear about who will be the beneficiary in the event of your death and who can make decisions on your behalf in the event that you are incapacitated. "Death does not nullify a will," says Mizgala, "and if you pass away, your ex, who you don't like, could be the one to get your money!"

5. Take your time
If the idea of tackling your finances immediately after a split has you feeling overwhelmed, relax: you don't have to do everything at once. That's why Mizgala advises people to deal with the immediate priorities but to defer everything else. "When you're in an emotionally fragile state, it can be hard to know what you will want in the future," she explains. That's why she says for some people, it might make more sense to rent an apartment after a split, rather than jumping right into the real estate market.

"People can make rash decisions that are wrong because they want to feel settled," she says. "But they might end up buying something too expensive that will put them under huge constraints going forward." Instead, she says it's important to take small steps, learning how to manage a single income -- and clarifying your dreams for the future -- as you go.

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5 ways to manage your money on a single income