Finances are not confusing. As professional women, you’re educated, world-traveled, and very likely have a high level of common sense. Finances, while seemingly complicated, are simple. They just require a little bit of your time so that you can develop an understanding and make smart decisions for your lifestyle.
I know how busy everyone is, but time spent understanding money, is time well spent. It’s YOUR money that you’ve earned through blood sweat and tears and it should be protected. This guest post goes over some basic financial tips for women to help you build your financial house, or get it in order.
Once you’re secure financially, life becomes a bit easier and you can sleep better knowing that the future you has something.
Hopefully these tips help you!
I want to be the rich person nobody knows about – to me, this means having just enough wealth for money to not be a concern anymore, to have enough funds to be able to give freely to charity and enough assets to support a modest lifestyle.
As a woman, I realize I must hustle, hustle and hustle away to meet these goals. Women tend to spend more time out of the workforce on account of taking care of family – that I personally enjoy, but what is deplorably unfair is the gender pay gap. In addition to this, women live longer than men and women generally lag in the area of financial literacy compared to men.
Facing this reality, women need to take a keen interest in financial planning to ensure a stable and secure future. Let’s look at a few financial tips for women that fall in this realm.
7 Financial Tips For Women
1 – Create A Financial Plan
The first step to this is to create a budget. A budget can help you determine your total income, spending habits and calculate your current net worth as well (resources like SoFi and the Mint app can help you consolidate information and keep track of everything). Understanding your current cash flow will allow you to set financial goals and create a financial plan as you go forward.
Use a simple financial calculator (you will find plenty of them online for free) to figure out how much money you need by the time you retire. Use this number to create a target net worth that you can achieve using the following steps.
Remember to update your budget regularly as your expenses or lifestyle changes and to revisit your plan so you can make necessary adjustments.
Want an easy way to keep track of your finances? Try SoFi. Through SoFi you can invest, track expenses and calculate your networth!
2 – Start Retirement Planning Sooner Than Later
The earlier your retirement planning starts, the better. As an American citizen, you have access to various types of retirement accounts such as 401(k) and IRAs which are long-term savings accounts with tax implications designed to help you add extra money to the accounts.
401(k) accounts, in particular, can turn out to be golden eggs if your employer matches your contributions. An employer match is free money you definitely want to receive. Read your contract in detail to see if employer matching is part of your package. If so, be sure to contribute the maximum on your end so that you get the maximum contribution from them.
In addition to the above, there is the 403b and 457b pre-tax accounts. These are important for tax savings and to reduce your taxable burden. While you will have to pay taxes when you withdraw, the idea is that you likely will be living on a lower salary during retirement, so then your taxes will also be lower.
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3 – Make Your Money Work For You
The stock market conjures up ideas of windfall gains and losses – surely, it’s so risky to invest in shares these days. How do you decide which stocks to put your hard-earned money in?
What if I told you there is a way to make consistently good returns through the stock market? They’re called low-cost Index Funds and financial mogul Warren Buffet recommends them for wealth building too. These funds mimic the performance of the S&P 500 Index and the returns are pretty impressive when you look at long-term results.
For instance, between January 1980 and 2021, for those that reinvested their dividends, the index yielded an annual return of 11.81%. If you adjust this for inflation, you still get 8.54% per year, despite the stock market crashes in 1987 (Black Monday), 1999-2000 (The Dot Com Bubble Bust) and 2008 (The Great Recession). Let’s not forget that prices also dipped last year after the pandemic spread and then rebounded a few months later.
The best way to invest, especially if you don’t have an interest in watching the market or reading too much about it, is to get your money into these index funds. Set a regular investment schedule and then forget about it. Let the market do its thing, don’t react to changes and over time your returns will be equivocal.
If you’re interested in diversifying outside of the stock market, consider companies like Fundrise or Diversyfund.Make your money work for you. You can watch your wealth grow from wherever life takes you. Invest in multifamily real estate today!
4 – Be Intentional About Your Salary
Research shows that women earn less, are less likely to ask for a raise, and even when they do, they are less likely to be compensated at par with their male colleagues. Unfortunately, you don’t always get what you don’t ask for.
There is an art to negotiating a salary, and the first thing you need to realize is that you need to be intentional about it. Understand where you are, what leverage you have to negotiate with, and where you’d like to end up.
Feeling confident about your skills and contributions to your company’s performance is the first step to negotiating a pay raise. To successfully negotiate a better deal, you can follow these steps:
- Determine the fair market rate for a job similar to yours
- List down all your achievements throughout the year to highlight your value as an employee
- Aim a little over your target salary to allow room for bargaining by your employer.
Earning more money is a key part of attaining financial freedom. Sometimes, however, higher pay doesn’t come from the same job, but from changing jobs. So, if your request for a raise is met with deaf ears, you can always consider making a switch.
5 – Consider Additional Income Streams
Whether you are employed or not, you can consider adding to your income through side businesses. In an age when job security is almost unheard of, relying on one source of income can be risky. You can turn your hobbies into income-generation machines or explore freelancing to see what suits you best.
You don’t necessarily need another degree or high level skill set to start a side gig. What you need are skills that are in demand and that can be monetized. Often, what you do on the side can be an offshoot of what you do at your primary job. For instance, if you’re a teacher, you may consider tutoring, or creating online lesson plans.
For more ideas, check out 38 Business Ideas for Women
6 – Make Debt Payoff A Priority
Most Americans have debt in some form or the other with the average personal debt in 2020 estimated at a whopping $92,727. While some of it can help you own assets, like mortgages, others do not, like credit card debt.
The interest rate on all types of loans is a parasite towards your savings so being completely debt-free should be at the top of your mind. Whenever possible, make more than just the minimum payments and attack high-interest debt first to preserve your assets in the long run.
Again, you will find lots of free online debt repayment calculators to help figure out a schedule that saves you the most money.
7 – Look At Your Healthcare Options
Healthcare is expensive in America – it’s so expensive that it is sometimes cheaper to travel to another country to get the specialized treatment you need. However, there are ways to take care of your basic medical needs without booking an international flight.
Sign up for an employer-sponsored health plan if available. Your insurance plan may offer dental and life insurance as well as additional perks such as counseling and coaching services, which can save you a lot of money.
Check if you have access to specialized saving plans such as Flexible Spending Account (FSA) and Health Savings Account (HSA) to cover different medical expenses. These accounts are pre-tax accounts that provide you with a tax haven, and then you can utilize them to pay your bills first without dipping into savings – a win-win.
Personal Finance for Women
In essence, the route to financial freedom involves making the same choices as men do. The only difference is that since women are primary caretakers at home, financial planning is sometimes pushed to the sidelines. It can seem overwhelming to handle everything at once but if you take the 7 financial tips for women mentioned above, you can more or less ensure financial independence in a passive manner.
Do you have any concerns related to your financial situation? Do you feel something else should be added to the list? Share your thoughts below!
As you can see each step mentioned addresses a different part of your financial life. From salary to addressing debt, to making sense of retirement and investing, these topics are essential to building a solid financial foundation.
When people say “pay yourself first”, consider the above. Get a higher salary if possible, pay down debt (save in interest), invest and make your money work for you. Yes, your money is leaving your bank account with each of these, however, the money is still YOURS. So while you’re spending, you’re spending on your future. You’re paying yourself in the future.
Do these first, and then plan for fun and recreation. In doing so, you’re securing yourself, and ensuring that you don’t overspend in ways that may hurt you.
I’ll add another tip:
Do What Makes Sense For You & Your Family
Everyone lives a different life, with different problems and stressors. Lifestyle and financial choices that work for one may not work for others. It’s important to understand that so you don’t waste time comparing yourself to anyone else. When and what you prioritize can vary, but I think so long as you understand the basics mentioned and keep those in site, you’ll be well on your way.
Featured image courtesy of unsplash.