The Solo Project: The Finances of Living Alone

solo living

Can two really live as cheaply as one? It turns out, yes, nearly. While many things have changed about managing finances, this is still true to a surprising extent.

By most measures, it only takes about another 20% of cash to add a second person to a household of one. That’s the incremental cost of what a second person would need to live with you: their food, their clothing, anything else they would need, including insurance and other services. This is true regardless of whether a second income joins the household or not.

The 35 million+ (and growing) solo householders are at the center of a cascading set of changes to the way our financial eco-system – defined as the way we earn, spend, and save – is organized.

Here are three financial trends of solo living we’re capturing early on:

1. New Patterns.

The money of those who live alone moves different, and not just in the stereotypical ways you might see on TV. A few new patterns we’re seeing is the gifting of substantial funds from these Solos to other adults, especially and increasingly to subsidize health care shortfalls as people age. They also gift money to other people’s children for education. They plan charitable giving, both during and after their lifetimes. All these patterns hold true regardless of income.

Solos are also opting to remain living alone regardless of relationship status, so we are seeing new household structures emerge:

  • Married couples who live apart, sometimes across town, sometimes across oceans.
  • Monogamous, unmarried partners who maintain separate residences and finances.
  • Most common of all, adults who have decided to remain living alone regardless of what happens in their romantic lives: These include never marrieds as well as once-married (now widowed or divorced) who decide that they want to or will remain Solos. 


These are all new household formations, and all of these patterns invite products and services that we haven’t imagined yet. But here’s what we do know: If it takes 80% of a dual-income household to maintain a one-person household, why do so many people live alone?

2. New opportunities

Solo householders need different kinds of financial advice, support, and products. Let’s take one very simple, basic financial marker: 

The conventional wisdom of keeping 3-6 months’ expenses in emergency savings is usually expanded to 12-18 months for Solos, because there isn’t a second earner to subsidize expenses in an emergency, like in the event of a job loss.

But Solos don’t earn more, and they have to spend more, so they save at a slower rate.

It costs the same to rent or buy a one-bedroom apartment for one as for two; insurance is the most expensive for the first person; everyone after that is an incremental cost; a hotel room is the same for one person as for two, and so on. If it takes longer to save the same amount of money as a couple, that means Solos have less access to mortgages, financial advice, and lines of credit (yes, except at the very highest income levels, but that’s true for everyone, not just Solos).    

What else do Solos need? They need better ways to save, invest, and retire on a single income, better unemployment insurance, better emergency savings mechanisms. They need different financial rights, like the right to bequeath money outside the nuclear family that doesn’t carry a tax penalty, and ways to designate executors and powers of attorney where options for family and friends are limited.

And they need smart, sensitive, financial advisors who understand the challenges and opportunities that come from living alone. What does that look like? I’ll tell you what it doesn’t look like: It doesn’t look like the (wildly successful) financial advisor who blithely told me the other day that “the only kinds of women clients I have are wealthy widows.”

“What about wealthy women who aren’t widows?” we asked him. 

“Nope,” he said. “Just widows.”

3. New Decision Drivers 

A few years ago, a really good friend of mine told me a story that haunts me. She happens to be an Ethiopian refugee who grew up in Minnesota, got herself through medical school, and became an emergency room doctor in Washington, DC. She said, “Nobody cared when I passed my [Medical] Boards the first time. Do you know how hard that is to do? And nobody cared. And then I had a baby, and everybody went crazy and started congratulating me like I did something.”

One of the many ways financial service providers identify opportunities is to focus on the money that moves leading up to and after a very finite series of major life events: typically, these are marriage, birth of children, adoption of children, separation, divorce, widowhood, send kids to college, retirement, and death. The “industry” sees these as catalysts for moving money, and that’s where the opportunity is: when money moves. You get married; you need a mortgage. You have a kid, you need a 529 plan. You have two kids, you need more life insurance.

So what about the skyrocketing number of people who never engage in most, or indeed any, of these activities? Does this mean that nothing ever happens to them? That they don’t matter or matter less than traditional families?

Well, yes. It used to. Slowly (very, very slowly), that’s changing.

What it means is that we have to expand our idea of what constitutes a major life event. 

Businesses like to plan around events you can see: weddings, births, deaths. They’re leading indicators of moving money. But for Solos, the major money movers are different.

First, major life decisions are likely to be internal monologues (“I’m never gonna marry that clown, but I am going to buy a house”), rather than observable phenomena or expressed decisions. Second, different events trigger the movement of money: Instead of a marriage, a baby, or a funeral, it’s going to be passing your medical boards, starting your own business, or landing your first big client.

The decision to earn, save, invest, and retire on a single income per se requires updating the currently available financial services, which were developed in the 1950s for what I call the Mad Men family – one white collar, (white) male decision-maker, a wife and a couple of kids, one thirty-year career, a pension, and deceased within two years of retirement. 

You can see how this model is increasingly irrelevant for most of the population. (And yes, race matters in earning, access to financial services, and longevity.)

Until now, living alone has been regarded as a kind of infantilism: “Oh, you’re single, so you spend all your money on shoes and booze. When you get married and start a family, then you’ll be a serious person and we can talk about investments and planning.”

So actually, the biggest change that the financial services industry needs to truly innovate is to expand their idea of a decision-maker. And it’s not just Don Draper.

Coming Soon

Want to learn more about our research on solo living?

Previously we focused on The Rise of the Solo Householder and have new articles coming soon that look at the practical life and the emotional life of those living alone.

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