Personal Finance with No Dependents

I’m in a situation where I’m married and have three children. For the next decade of my life – at least – I have several other lives to be concerned with when it comes to my financial decisions.

My closest friend, however, is single. He has no spouse. He has no children. He has no one depending on him but himself.

It would not make any sense for the two of us to be making the same financial decisions. We use many of the same strategies – frugality, spending less than you earn, setting up a bright future – but our method of implementing them is very different.

Since I usually focus on the financial choices that I make, I thought it might be interesting to walk through some of the different decisions he makes and why.

His only life insurance is a very small policy he’s had since birth. It will cover his funeral expenses and that’s about it.

Since he doesn’t have any dependents, he doesn’t have any children to worry about or a spouse to leave behind. Thus, there’s no need for an extensive life insurance policy – there’s no one left behind to protect if he were to suddenly pass away.

In our situation, Sarah and I need to have substantial life insurance coverage or else we’re risking leaving our children unprotected if the unthinkable were to happen.

He plans on working until he physically and mentally cannot do so, so he doesn’t save a large amount for retirement. He does save a bit for retirement, but not nearly as much by percentage as Sarah and I do.

He’s not a person who enjoys sitting around without things to work on, so he plans on working until he truly can’t. His retirement savings is mostly so that he can afford to live a nice lifestyle regardless of what he’s doing when he’s seventy.

At that point, he might not be able to do exactly what he chooses, so he may have to settle for work that earns a lower income level. For him, retirement savings is not for retiring, it’s for supplementing income.

Again, this is all about personal choice. If he wanted to, he could also focus heavily on retirement and extract himself from the work force at a very early age.

He has a smaller emergency fund than I do. Our emergency fund consists of several months of living expenses. His consists of about two months of living expenses.

Why the difference? He doesn’t have dependents to care for in times of emergency. When something disastrous goes down, he only has one mouth to feed and one head to find shelter for.

He also only has one person who can generate emergencies, while we have five, drastically increasing our chances for overlapping crises.

He can afford more investment risk. If my friend makes an investment choice that doesn’t return as well as he hoped, he’s the only one that has to deal with the life consequences of that choice. He might have to work longer or put aside a goal for the time being, but it’s only going to affect him.

If we invest in something with significant risk in order to try to bolster our returns and it falls short, the life consequences not only affect both of us, but it affects our children, too. We may be delaying goals and opportunities for them, not just for us.

Overall, being single gives you more financial flexibility because you have fewer people that need protecting. That simple truth has impact throughout your financial life. Having a family is deeply rewarding in other ways, but it does have a strong impact on your financial flexibility in a lot of ways.

I consider that fact to be a vital thing to consider when moving into a committed relationship or considering parenthood. Your choices are suddenly burdened with the need to protect other lives beyond your own, which restricts the risks you can take with your personal choices while still being a responsible adult. That choice comes with great reward – the close relationships – but for some, it’s a choice that deserves serious consideration before jumping on board.

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