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David Pitt

4 biggest money mistakes single people make

By David Pitt
Associated Press / October 12, 2011

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The single life isn’t always the simple life. Being on your own doesn’t mean managing your money is a cakewalk.

Just try sorting through the rainbow of credit cards: gold, silver, black, and green. Workers must also choose the best way to maximize their retirement savings from an increasingly complex mix of choices.

Consider these four common mistakes:

Failure to build a nest egg.

The stock market has taken a toll on retirement accounts, and that has left many workers feeling as if they will never be able to stop working. Yet contributing too little to a 401(k) or cashing out when switching jobs will put many workers at risk.

Just half of the workers between 18 and 30 participate in a 401(k) plan. Research also shows that nearly 60 percent of young workers cash out their 401(k)s when changing jobs.

For older singles, it’s important to have the right mix of investments. As they get closer to retirement, their portfolios should be more heavily invested in bonds or fixed-income assets to lower their risk of losses from a stock market downturn.

Failure to live on a budget.

When was the last time you heard someone speak of a dating budget? Controlling this spending can be an important first step. Older singles may be dealing with debt incurred from a divorce, a job change, or overspending.

Solution: Budgeting, like reading, is fundamental. Learning the discipline of tracking your spending can help you pay down debt more efficiently and assist in planning for the future. Any budget also should include an emergency fund.

Tools at bundle.com help track spending by synchronizing credit cards and other accounts. Users can also compare their spending on certain things like food, for instance, with other people in their area or age group. One of the most popular budgeting sites is mint.com, which helps track spending on a computer or mobile device.

Failure to have an estate plan.

Single people frequently don’t think about what would happen to their assets if something happened to them.

Solution: Everyone should have a will. But it’s also important to recognize the importance of the beneficiary forms that accompany life insurance policies, annuities, and retirement plans - including 401(k), IRA, and Roth IRA plans. Courts have ruled that beneficiary forms attached to life insurance policies and retirement accounts may supersede other documents. A blank beneficiary form could mean the money goes to your estate and a court will decide who gets it.

Failure to learn about investing.

Making investment decision for a retirement account can be a daunting challenge.

Solution: If you have a 401(k), check to see if your plan offers online tools, telephone help lines, or one-on-one counseling.

David Pitt writes for the Associated Press.