Single people's budgets are stretched more than ever thanks to the singles tax — here's how to save more money (2024)

The Mint app has shut down as of Jan. 1, 2024. For alternatives, check out CNBC Select's ranking of the best budgeting apps.

No matter how you look at it, being single right now in the U.S. is expensive. From facing fewer tax advantages to not being able to split everyday costs like rent or groceries, living solo can come at a much higher price than with a partner.

That said, more and more Americans are continuing to opt for a single lifestyle. According to the U.S. Census, 37 million adults at or above the age of 18 lived alone in early 2021, up from the 33 million who did so in 2011.

At the same time, stagnant wages and record-high inflation rates mean being single is now more expensive than ever — and in the U.S., those trends are also leading to a widening wealth gap between those who are married and those who are not.

So, why is this happening? Select takes a closer look at how the so-called "singles tax" works and what single Americans can do to fight back against rising costs.

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One thing to note before we get started: For the purposes of this article, we are defining single people as those who live alone and are not splitting any expenses with either a romantic partner or a roommate, while 'the singles tax' refers to the higher cost of living single people face compared to their partnered or married counterparts.

With that in mind, consider the following analogy: Imagine you are trying to fight a fire all by yourself. If you're trying to contain it, having another firefighter at your side would certainly give you a better chance of dousing the flames.

This same idea can be applied when it comes to covering everyday expenses. Whether you're dealing with larger monthly payments such as rent or a mortgage or smaller bills such as gas or groceries, having two incomes in one household, or someone to split the cost with, can be a huge help.

Of course, inflation hasn't helped matters and, according to The Wall Street Journal, has been a major contributing factor of the widening wealth gap between single people and their married counterparts. Single Americans are also falling behind in every facet of personal finance, including spending and saving habits, income levels, taxes and net worth. Here's a look at how that's happening in each category.

The gap between married and single people starts when you look at how much money people are spending —and how much they're putting into savings —each month. According to a recent study by the personal finance company SoFi, the gap is stark between the two groups.

Median spending amount per month

• Married or living with a partner: $1,000
• Single, widowed, or divorced: $800

According to these figures, two people living together would end up spending an average of $500 per month each, but when you don't have anyone to split costs with, that number skyrockets by 60%.

Median saving amount per month

• Married or living with a partner: $300
• Single, widowed, or divorced: $100

The study also showed that those who lived with a partner were able to save three times as much as those who were single.

While it may be easier to spend less and save more as a couple, single people can still take steps to cut their expenses and put away more money. To help track your own spending habits and save on monthly expenses, consider using a budgeting app such as Mint or YNAB (You Need A Budget).

Mint

You Need a Budget (YNAB)

According to a 2021 report by the Pew Research Center, in 2019, single men earned a median amount of $35,600, while partnered men earned $57,000.Women's median earnings showed the same trend, with single women bringing in $32,000 and their partnered counterparts earning $40,000.

Why is there such a big difference? A 2021 American Economic Journal study theorizes that the marital wage premium — the notion that married people make more money — comes from two core principles:

• Income pooling, or having two incomes per household. This allows individuals to be more particular with their job selection since they can rely on their partner's income while the search for the highest paying job.
• Climbing the job ladder faster, as married individuals tend to advance their careers faster than those who are single.

And with higher income comes a higher tax responsibility —though married couples typically receive significant tax breaks and benefits to help counter it.

The U.S. tax system is a progressive tax system, so the more money you make, the more it will be taxed. As a result, single tax filers end up facing higher tax burdens than married couples.

Let's say, for example, a single person and a married couple each make $225,000. The single person will reach a higher marginal income tax bracket, which is 35%, while the married couple will reach just over the 24% tax bracket. In this scenario, without any other adjustments or deductions taken into consideration, the single person will have to pay at least $12,000 more in taxes than the married couple.

Charles D. Lindsey, associate marketing professor at the University at Buffalo's School of Management, says this is a direct reflection of the economic system, institutions and tax code not keeping up with modern times. And it's affecting the long-term wealth that single people can build.

According to data provided to Select by the Federal Reserve Bank of St. Louis, in 2019, the median net worth of married couples between the ages of 25 and 34 years old was nearly nine times higher than that of single households. In 2010, by comparison, married households' median net worth was just four times higher.

One reason why married couples came out so far ahead is due to the benefits of homeownership, which historically has been a key component of growing wealth in the United States. According to the Home Buyers and Sellers Generational Trends Report by the National Association of Realtors Research Group, in 2022, 60% of home purchases were made by married couples (another 9% were made by unmarried couples), while only 18% of home purchases were made by single people.

The Survey of Consumer Finances, released in Sept. 2020, also showed that in 2019, the median net worth of homeowners —the majority of which are married or partnered — was $255,000, while renters had a net worth of just $6,300. That's a big difference between the two groups, with homeowners being over 40 times as wealthy, and it's likely the spread has widened since then.

Regardless of marital status, homeowners can reap the benefits of growing their net worth by owning property, but since the majority of homeowners tend to be married or partnered, single people are left behind once again, this time for not making a major purchase that could advance their net worth.

Being single has become more financially stressful than ever, so much so that Lindsey recommends those living alone to "think out of the box and look at some hacks," such as staying with a family member or living with roommates to help save money. In the meantime, here are some other ideas to consider that can help singles save up.

Develop a budget and a plan

Lindsey tells Select that creating a budget is crucial during times of financial stress, as is coming up with a plan to deal with that added financial pressure. This can include setting up a high-yield savings account such as the American Express® High Yield Savings Account to earn a higher interest rate on your savings or saving for retirement with a Roth IRA.

American Express® High Yield Savings Account

You could also begin your investing journey with a reputable company such as Fidelity Investments, which offers everything from financial advice and retirement plans to wealth management, trading and brokerage services.

Fidelity Investments

The earlier you start to save and invest, the more time you'll have for compound interest to grow your money.

Start a side hustle

Having a side hustle is considered to be anything that helps you bring in extra money that occurs outside your regular job, such as babysitting or bartending gigs or doing freelance projects before or after your 9-to-5.

Find a new job

It's well documented that switching jobs can lead to a significant pay increase. If you haven't been given a raise or promotion in a while, you may benefit from asking for one or even switching companies.

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