Money is something that we think and talk about every day. And when it comes to women and money, thinking about our finances can be stressful. Very stressful. There are monthly bills to pay, there is debt to pay off, there are savings accounts to build, children to take care of, life to live.
Not only that, a lot of times, as women, we are doing this on our own. We are managing our finances as single women, single mothers, breadwinners women or a combination of these.
In addition, the following stats add to the financial strain many women experience with their finances and building wealth:
More women are becoming the financial heads of their households
This includes single mothers and married women who are bearing the financial burden of earning the income to support not only themselves but their families in addition to also maintaining a household. It's not uncommon for a woman to make significantly more than her partner or to be the sole breadwinner.
This means, in addition to earning the bulk of the money in our households, we also need to be well equipped to manage and grow our finances.
Then there's the gender wage gap. On average, women get paid 20% less than men for the same job functions
For every dollar, a Caucasian/white man makes, a woman makes about 20% less (source). But that's just the average. Broken down by demographics, the numbers are even more discouraging; For every dollar a while makes -
- Asian women make 81 cents
- Caucasian/White women make 77 cents
- Black/African American women make 61 cents
- Native American women make 58 cents
- Hispanic/Latina women make 53 cents
In addition, over their lifetimes, women lose more working income than men via unpaid or minimally paid maternity leaves, by taking time off to raise children which in turn halts or pauses their career progression and in turn impacts their earning potential.
Women generally live longer than men
This means that women need more money to support themselves in retirement especially, single women as they don't have the benefit of a dual retirement income, social security or pension benefits.
Women give more of themselves emotionally AND financially by nature
Women are more emotional beings by design. It's in our DNA. This makes us as women more giving and less likely to say no even at our own expense. For these reasons (and many others), it is of utmost importance that women make their financial success a priority and this means creating a plan.
6 steps for successful women to create solid financial plans:
1. Build up an emergency fund
Having an emergency fund can help protect your financial plans. This is basically your backup plan in the event that an emergency or unplanned life event happens, this way you don't have to leverage debt to get through the situation. Start with $1,000 and then 3 months, and plan to grow it to 6 months and then 12 months.
The successful way to build an emergency fund is to make your contributions to it part of your budget. It's also a good idea to make the money easily accessible but not entirely convenient so you aren't tempted to spend it for non-emergencies.
2. Pay off your debt
Debt is expensive. The longer you stay in debt the more interest you'll pay. The longer you continue to accumulate debt the less you can save. Start by aggressively attacking your high-interest credit card debt and then student loans. Once you can get rid of your debt you can free up money that can go towards your savings goals.
3. Save for your short and long term goals
As women, we definitely have other goals outside of retirement planning be it short or long term goals. But in order to successfully achieve these goals, we need to plan for them. This means putting money aside for things like a down payment to purchase a home, taking a family vacation, buying a car or starting a business.
To get started, lay out all your financial goals, prioritize them, add timelines to them and then build savings for them into your budget.
4. Plan for your children's college education
It's a good idea to start saving for your children's college education as early as you can to minimize the cost of sending them to college and to help them avoid being straddled with student loan debt. This in conjunction with teaching your children good money habits will set them up for their own financial success too.
5. Contribute to your retirement savings
This is your nest egg aka the funds that will support your lifestyle in retirement. It's a good idea to determine how much you will need to retire and then start saving accordingly. You can do this via employer-sponsored retirement accounts or IRAs to take advantage of tax benefits.
6. Get the right type of insurance
Not having the right type of insurance coverage can pretty much derail any financial goals you might have. While auto, health and home insurance are most common you definitely want to consider other types of insurance like disability, life, renter's, personal property and pet insurance depending on your current life situation.
This way if life does happen, you can tap into your insurance policy to cover things instead of derailing your financial goals.
If you don't have a plan or if your plan is lacking, it's time to create a solid plan for your financial future and put in the work to turn those plans into reality.