Why Being Single Is Bad For Your Finances
There is a lot to love about being single. You save money on expensive dates, have full power over the remote control and revel in the hubbub of the dating-and-mating scene.
But it’s not all rainbows and butterflies down the singles’ aisle. There are some aspects of single life that might be less than desirable for your wallet. These are five facts that will make you wish that you got hitched in college…
1. You make less money than your married colleagues
Beyond love, commitment and endless promises of the moon, being married can actually play a role in how much you are making.
Statistics from the 2013 Current Population Survey (CPS) in the United States show that a strong marriage premium persists for both young and middle-aged men. The figures indicate that married men aged 28 to 30 years old earn almost US$16,000 (RM53,252) more than their single peers in a year.
Meanwhile, middle-aged married men aged 44 to 46 years old reportedly earn almost US$19,000 (RM63,241) more in a year than their unmarried peers.
Some attribute this to the common perception that employers take a man’s marital status as an indicator of his character, such as being more stable and responsible and is paid accordingly.
Employers might also consciously or unconsciously give preference to married men when considering promotions, on grounds that the married employee has more financial dependents or a family to support.
On the other end, it might just be that married men are more likely to tough it out at work, because the other option is to “let your wife and kids starve to death.” Meanwhile, single guys are more likely to take a sick day off or sleep off a bad hangover.
Interestingly, the same survey did not show any statistical difference in personal income between married and single women. It does, however, show that married women who clock in fewer hours than their single peers do not earn less.
2. You have higher expenses and financial risks
For many couples, tying the knot will turn out to be a financial windfall. The most obvious reason is because when you combine your incomes, you are able to get a lot more done and increase your buying power very quickly.
It is also cheaper for two people to live together than live apart. Rent for a one-bedroom apartment in the city centre can go as high as RM2,500 per month. Meanwhile, rent for a three-bedroom apartment in the city centre generally starts at RM4,000. Given the costs, it definitely makes more financial sense to live together.
Couples are also more likely to pay substantially less for basic living costs than a single person. One explanation for this is because they are more likely to share expenditures, including for food, groceries, utility bills and fuel. Couples are also more likely to buy in bulk and enjoy better discounts.
Having two income streams also mean you are able to put more into your financial investments than you would if you were single. When a person’s income is put solely toward paying utility bills and daily expenditures, a portion of the spouse’s income can be put towards saving for retirement and other investments.
Getting married also allows you to mitigate risk. For instance, if you lose your job but your spouse still has a job, it will likely be easier to cope financially than if you were single.
3. It’s harder to get a home loan
With soaring property prices, the only way that many people can own a home is to opt for a joint loan.
The reason for this is because home loans tend to be so large, that a person’s income may not be enough to fulfil a lender’s desired debt-to-income ratios. As a rule of thumb, your monthly loan repayment should not exceed 1/3 of your gross monthly income.
Financial institutions will take this into account when assessing your repayment capability, as well as your other debt repayments such as car loan, personal loan and credit cards.
If you’re planning to buy a property in the city centre, be prepared to pay about RM600,000 for the most basic condominium unit. With 4.45% interest over a 35-year loan tenure and a 90% margin of finance, buyers will need to fork out at least RM2,802 instalment every month (not forgetting the 10% down payment).
The 2012 findings by the Household Income Survey (HIS) showed that the mean monthly income in Malaysia is about RM5,000, which means that many will find it difficult to secure a home loan in this point of time.
A joint loan makes it easier for applicants to qualify for loans by combining incomes and credit scores.
However, getting a joint loan is by no means an easy decision as it will mean that your credit rating will be tied to the other person who you signed the documents with. So not only do you have to pay your share, you are now responsible for insuring that the other person pays their share too. Furthermore, now both of you are only eligible for another 90% housing loan each.
4. You save less on taxes
In some instances, filing for joint assessment can help married couples save on their taxes.
According to Section 45 of Malaysia’s Income Tax Act 1976, all married couples have the right to choose whether to file individual or joint taxes.
Previously, only a woman can elect to be assessed separately from her husband if she derived income from employment, a pension or a qualifying profession. However, since 2001, a husband can choose to do this too. The election has to be made every year.
Joint assessment is beneficial to the couple if either the husband or wife is a salaried employee and their spouse has no income or earns less than RM35,000 in a year. Electing for joint assessment will make you eligible to claim spouse relief of RM3,000 under the husband/wife or alimony payment.
Joint assessment can also help mitigate financial losses incurred if you are running a business. For example, if a husband is making some small losses in his business while his wife is a salaried employee, electing for joint assessment under his wife’s name would help to maximise the business loss deductions and relief available.
Studies also show that financial success is tied to sex (which is closely related to higher confidence levels and self-esteem according to a study), which comes with being in a relationship. This in turn makes employees more productive, happy and creative.
Given the financial perks and benefits you’re missing out while canoodling with your cats, singletons may just have to work harder to fill the gaps in their love lives and money pool. To speed dating websites out there, you’re welcome.