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5 Fixes for Female Money Problems

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Advances benefiting the fairer sex are many. (Foundation garment technology, unwanted-hair-removal options, and the great strides made in the area of mid-priced comfort shoe design all come to mind.) But in matters of money, we've got a long way to go, ladies.

It's almost as though we're stuck in a Mad Men episode: We've worked our way into the boy's club -- with access to interesting work, a decent paycheck, and a standing invitation to happy hours. But while the guys march sure-footedly forward, women still teeter precariously on the precipice of financial stability.

There's good reason for our insecurities. Even if we leave out the issue of Jack versus Jill wage discrepancy (that's fodder for another day), women work in a financial house of cards:

  • We spend more time out of the workforce caring for children, grandkids, and elderly parents. This time off for humanitarian endeavors takes its toll in other areas. When you're not in the office, you don't have access to raises, promotions, and certain saving and investment opportunities (in employer-sponsored retirement plans, for example).
  • A sporadic career can cost a woman more than half a million bucks in earnings over a lifetime. According to WISER.org, over the course of her lifetime a typical 25-year-old woman with a college degree earns about $500,000 less than a man in the same position. That financial hit reverberates well into old age when benefits based on earnings comes into play. Which leads us to ...
  • In our sassy 60s (or, more specifically, after the age of 65) the average woman's income is about half that of gray-haired guys' -- $12,080 compared with $21,102, according to WISER.org.
  • And there's the issue of those self-inflicted financial wounds. Even when we have access to wealth-building tools, fewer than half of wage-earning women in the U.S. contribute to a retirement plan, according to the Department of Labor.

It's that last one that really gets to me. C'mon ladies, with so many obstacles between us and financial security already, we cannot afford to blow off any moneymaking/money-saving opportunity. No, not even for a killer shoe sale at Nordstrom (yes, I feel your pain).

5 fixes for female money problems
I know you've already got a double-sided to-do list -- kids, career, love life, that leaky faucet in the laundry room. But I'm afraid it'll all be for naught if you keep de-prioritizing the most essential item that's probably not even on your list: "Secure my future financial stability."

To help make up for the inherent financial shortfalls women face, here are five relatively easy-to-implement financial fixes for female money problems.

1. Put your needs first. (Sorry, kiddos!)
It's natural to want to put the well-being of your offspring first. That's a sweet instinct. Now banish it from your mind unless you're sure your kids will be thrilled to support you in your dotage.

The reality is that when dollars are limited and you're facing two big savings goals -- the kids' college education and your retirement -- your needs come first. (Sorry, Junior.)

Don't feel bad about stepping to the head of the line, either. After all, Biff and Buffy can get scholarships and loans for college. But there's no such thing as an "oopsy, the car needs a new transmission" grant or an "I didn't save money for retirement" loan. And when you do have to raid your kid's college investment account to cover an emergency, you'll have to face taxes, early withdrawal penalties and a pouting teenager all at once.

To do: Having cash on hand is an investment in your sanity, safety, and peace of mind. The right amount in emergency savings depends on several factors -- your needs, your expenses, your dependents, and your willingness to take risk. Here's how to amass a cash cushion that's right for you and your family's situation.

2. Mooch shamelessly at the office
As mentioned earlier, the lost income, retirement investing returns, career promotions during those years when women aren't working (or are working part-time) really add up. To avoid losing too much ground over the long haul, make the most of the times you are employed by maxing out every single dollar-saving strategy at your disposal. In other words, the moment you get to the office, empty your handbag and cram it full of every benefit within reach.

To do: To milk your benefits for every last cent:

  • Make the most of your flexible-spending plan. These plans let you pay for medical, elder-care, and child care costs with pre-tax dollars. (Here's more on how these at-work benefits you should not skip work.)
  • Sign up for retirement savings now. Seriously. Right now. Employer-sponsored retirement plans (like 401(k)s and 403(b)s) often offer to match the funds you invest. And, yes, even if you're not going to work there forever, you should still invest because you can take the money with you. Here's how to do a 401(k) rollover.
  • Become your office MVP. Get noticed in the right way and get compensated for a job well-done by following a few simple -- seemingly obvious but of-overlooked -- career advancement tips.

3. Save like a working girl, even if you're not one
The best thing you can do for your long-term financial health is to get into the habit of saving -- even if it's just a few five-spots when money's tight. If you're not currently eligible to participate in a traditional retirement plan, set up your own auto-pilot savings plan, whether it's to fund an emergency account or contribute to your retirement savings.

To do: You don't need thousands of dollars to begin investing. Direct investing plans or dividend reinvestment plans (Drips) let you sock away sums as little as $10 in major companies. (Here's advice on the best way to invest various sums of money -- $20, $100, $1,000, and more.)

4. Maintain your credit reputation
The biggest mistake you can make when getting married (or merging finances) is to let your credit reputation get out of shape. Your credit score is the central nervous system of your finances. It's what bankers, landlords, utility companies, employers, and insurers use to size you up.

Though you may have merged mind, body, and spirit with your beloved, it's important to keep some accounts in your name only -- and to use (not abuse) them to keep the reporting active. Too many women have discovered that their ex is wrecking their credit long after the divorce has been finalized, or, even worse, when a spouse dies they suddenly get cut off from those joint lines of credit and unable to qualify for loans or credit cards on their own.

For your to-do list: Give your lenders good news to report about your credit use. If your credit card company hasn't already dumped you for inactivity (a common problem these days), dust off those credit cards that you got when you were single (or ones that are in your name only) and use them to make small purchases you'll pay off every month. Get regular credit checkups by logging on to www.annualcreditreport.com for the full-credit MRI.

5. Act more like a man (in your retirement account)
Women don't just need more closet space than men do -- we need more retirement savings, too. Women live longer (yay!), but that means that we have to stretch our savings longer, too. But, here again, those instincts to play it safe with your investments will not serve you well over the long haul, sisters.

Studies show that women tend to invest more conservatively than men, sacrificing long-term returns for a feeling of safety. Bad idea. Playing it too safe is the most dangerous financial move a woman can make. If you over commit your retirement money to CDs or money market funds, over the long term your money will lose to inflation and rob your future spending power. This is one area when it makes sense to be a bit more aggressive than your ladylike demeanor might allow.

To do: Find the right risk-reward mix for your money. In general, any money you need in the next year should be in cash (a money market or savings account). Funds you plan to access in the next five years (or even 10, if you really want to play it safe) should be safe income-producing investments such as Treasuries, certificates of deposit, or bonds. The majority of your long-term savings is a candidate for the stock market (mutual funds, individual stocks, or ETFs). (To determine the right mix of stocks and bonds for your retirement savings, see the table at the end of this asset allocation overview.)

Dayana Yochim is the author of Couples & Cash: How to Handle Money With Your Honey. The Motley Fool is girl and boy investors writing for other girl and boy investors.


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