March is Women’s History Month, and it’s dedicated to celebrating the significant contributions women have made throughout history. But despite the progress made, women still face countless financial challenges.
Women still face a gender pay gap and will spend more time out of the workforce than men. Women also tend to live longer than men, so they need more money saved for retirement. So women need to utilize different financial planning strategies — this blog post will outline seven places to start.
7 financial planning tips for women
Women face numerous financial challenges, both in the workplace and at home. Here are seven financial planning tips for women:
1. Create a monthly budget
The best way to get your bills paid each month, stay out of debt, and reach your financial goals is to create a budget. A budget is a guide for how you spend your money each month. It ensures that you have money to spend on the things that matter to you.
But there’s another important reason you should budget — budgeting forces you to check in on your money regularly. When you budget, you know how much money is coming in and leaving your account. It also helps you understand your spending habits and identify areas where you may be leaving money on the table.
If you manage your money jointly with a partner or spouse, don’t give up total control over the finances. Even if your partner is in charge of paying the bills, you can still schedule a daily or weekly reminder to check your bank accounts and review your money.
2. Don’t be afraid to negotiate for a higher salary
According to the Bureau of Labor Statistics, women earn 82.3% as much as their male counterparts earn annually. And though women are 84% more effective in core leadership competencies than men, women only account for 5.8% of Fortune 500 CEOs.
The bottom line is the gender pay gap still exists, so women need to be intentional about knowing their worth and negotiating for a higher salary. Before you accept a new position, take some time to research comparable salaries. This research will help you see what other people in similar positions earn.
If you receive a job offer on the low end of the pay scale, don’t be afraid to ask for better pay. Studies show that people who fail to negotiate their salary will lose between $600,000 and $1 million over the course of a 45-year career.
3. Save an emergency fund
Building up an emergency fund is a crucial aspect of any financial plan. It’s only a matter of time before a financial emergency arises, and if you have the savings to cover it, you won’t need to rely on high-interest credit card debt.
If you don’t have any savings, start by setting a goal to save a $1,000 emergency fund. From there, you can work on building up a three to six-month emergency fund.
If you’re not in the habit of saving, this can feel challenging in the beginning, so the best way to get started is by automating your savings. Decide how much you’re going to save each month, and have that money automatically transferred to an account where you won’t see it every day.
4. Focus on building good credit
Your financial life is going to be more challenging if you don’t have good credit. Your credit score affects your daily life in more ways than you may realize. For instance, if you plan to buy a home, a good credit score will help you qualify for a mortgage and land low-interest rates.
But your credit score can also affect your ability to get a job, rent an apartment, or refinance a loan. In some states, insurance companies even consider your credit score when determining how much you’ll pay in premiums.
If your credit score isn’t as high as you would like, there are things you can begin doing today to improve it. Here are the two most important places to start:
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Pay your bills on time: Your payment history is one of the biggest factors used to determine your credit score. So if you regularly miss payments and pay your bills late, your score will take a hit. Start scheduling your bills ahead of time so you can start improving your payment history.
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Improve your credit utilization rate: Your credit utilization rate is the sum of all your credit card balances divided by your total available credit. For instance, if you have $10,000 in available credit and have spent $5,000, your credit utilization rate is 50%. You should aim to keep your credit utilization rate below 30%, but the lower, the better.
5. Start saving for retirement early
According to the CDC, women live an average of five years longer than men. That means you’ll need more money in savings to cover your retirement needs, so you should start saving as early as possible.
If your employer offers a 401(k) match, you should take advantage of it. This is essentially free money, so you should contribute enough to earn the full match. But even if your employer doesn’t match your contributions, you should aim to max out your contributions anyway.
If an employer-sponsored 401(k) isn’t an option, you can set up your own IRA through a brokerage account. You can also begin exploring non-retirement investing options.
6. Consider working with a financial advisor
The truth is, financial planning will be different for everyone depending on their personal situation. For instance, the calculus changes if you’re self-employed, have children, and are married or divorced. And you’ll utilize different strategies if you’re early in your career as opposed to nearing retirement.
That’s why it can be helpful to work with a financial advisor. A financial advisor will learn about your situation and develop a customized plan for you. Knowing you have all your bases covered can help you feel more confident about your financial future.
7. Make sure you have proper insurance coverage
Life is uncertain, and there are many things you simply can’t plan for. That’s why it’s crucial to have adequate insurance coverage. Insurance can’t prevent bad things from happening, but it can ensure that you don’t go bankrupt in the process.
Here are three types of insurance every woman should have:
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Health insurance: Hopefully, you can take advantage of an employer-sponsored plan through yourself or your spouse. But if not, you can purchase health insurance through the marketplace. Before signing up, you should evaluate the type of plan, network provider, premiums, and total coverage.
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Life insurance: You should review your insurance needs before buying life insurance. Start by determining how much coverage you need and whether you want to purchase term or whole life insurance. And once you have life insurance, it’s a good idea to review your coverage every few years.
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Disability insurance: Finally, you should make sure you have adequate disability insurance. Disability insurance will protect you if you become ill or are injured in an accident. This coverage is especially important for women since they have a 54% chance of becoming seriously ill or injured during their working years. And you’re actually 3.5 times more likely to need disability insurance than you are life insurance.
The bottom line
Women still face numerous financial challenges, which is why it’s important to have a financial plan in place. You can focus on creating a budget, improving your credit, and saving money for emergencies to get started.
From there, you can begin working with a financial advisor to develop more advanced retirement planning strategies. And to learn more about disability insurance and how it can help you, contact Asteya today.
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