Financial planning does not have to be tough. It all begins with taking one step at a time.
It is said that variety is the spice of life. That may be why most of us have friends who are nothing like us.
While I study every nickel and dime of our budget, I once had a neighbor whose husband tightly controlled the family pursestrings and became prickly if she got too close. When she would complain to me about money or said something about finances that I know to be patently untrue, I wanted to scream, "Get in there and take some control!"
But I didn't say anything -- mostly because she seemed satisfied with the arrangement, but I would have liked to. If I could tell every woman on the planet to take these five money moves, I would.
1. Be prepared to take over
American men live, on average, a little over 76 years. American women live, on average, a little over 81 years. In short, women live longer.
If you're not already handling the family budget (or at least playing a supporting role), prepare to take over with the enthusiasm of a Broadway understudy. Assume that you're going to be around for a while, that you will one day need to take over financial planning, and use this time to learn how to do it right.
There are excellent resources available, including our website, books, and financial podcasts. Challenge yourself to learn one new aspect of personal finances each week.
Let's say this week you look into the role the Federal Reserve plays in setting the interest rate. Next week you might want to learn more about the differences between stocks and bonds. No matter how much foundational knowledge you possess, learning more can give you the confidence you need to make money work for you.
2. Know where the important stuff is
If your partner takes care of finances, insist on finding out where all important papers are kept, including:
- Bank statements
- Monthly bills
- Previous year tax returns
- Safe-deposit key
- Important papers (like the lease agreement or mortgage)
If you are one half of a couple, having easy access to financial papers can lower your stress levels when your partner is out of commission or passes away. If you're single, providing easy access to essential documents can reduce the stress levels of the people you love when it's time for them to step in.
3. Prioritize health
The Congressional Budget Office (CBO) reports that approximately 31 million American citizens were without health insurance in 2020, and they expect the number to grow significantly. When you consider that two-thirds of all personal bankruptcies can be traced back to medical bills, you begin to realize how precarious it is to live without coverage, even if you don't believe you can afford it.
Look for the cheapest health insurance with the most significant coverage -- enough to get you through an illness or injury and help you sleep better at night. An excellent place to start is healthcare.gov. There you will find insurance options available in your state, along with how much that coverage costs and whether you might receive federal subsidies to help cover premium costs.
4. Have your own money
Back to that neighbor who seemed so happy that her husband "took care of the money." If she wanted to purchase a plant for their yard, she had to run it by him. If she wanted a meal out, she asked permission.
I get that some relationships work that way, and as long as it's not a case of financial abuse, it's none of my business. Still, here are a few things having money of your own can do for you:
- Give you a greater sense of autonomy.
- Provide the opportunity to "practice" financial skills. For example, investing a small amount of money allows you to see firsthand how compound interest can work in your favor.
- Cut down on how often you need to use a credit card. When you have a small cash reserve put away, there is less chance that you'll have to pull out a credit card to cover an emergency.
- Allow you to pursue your interests without any drama. Let's say you collect salt shakers shaped like frogs, but your partner thinks they're ridiculous. Having a bit of your own money means each of you can pay for things the other finds silly without sparking an argument.
S&P Global conducted a study two years ago showing that only 26% of American women invest in the stock market, even though 41% thought it was a great time to do so. We could get into the 1,001 ways women and people of color have been boxed out of wealth-building practices through the generations. But, if a woman can cover her bills each month and has an emergency fund in place, it's time to take the bull by the horns by investing.
Let's say you can swing a $300 per month investment. Putting the money into savings may seem more secure, but today's low interest rates aren't keeping up with inflation. That means that you may have a nest egg of roughly $72,000 in 20 years, but in terms of real dollars, it won't be worth as much then as it is now (due to inflation).
If you invest that same $300 each month in a financial vehicle earning an average of 7%, the money could grow to more than $147,000 in 20 years. If you're particularly risk averse, a good stock broker for beginners can talk you through options for balancing your risks.
There are currently more than 3 billion women in the world, and we are a powerful bunch. It's up to each of us to take control of our financial futures.
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