There’s no denying women have made great strides in the workplace and beyond over the last several decades. Today, many women handle finances for their family, run their own small business, or serve as the top executive in a large corporation. But despite these advancements, women average only 73 cents for every $1 a man earns, and women receive about 50 percent less in pension income than men.
Whether a woman works full time or part time, is a stay-at-home mom or a student, she faces a variety of financial situations that can cause anxiety. One survey found women tend to be more anxious about their financial future and more uninformed about the ways to secure it—and they typically face more financial challenges—than men. Life events such as child rearing, caring for elderly parents, divorce, and single parenthood financially affect women more significantly than their male counterparts.
With all of these financial pressures, it’s easy for women to avoid devoting the necessary time and attention to their finances. But it’s vital that she understand basic financial information and have a clear grasp on her personal finances.
• Be aware of your finances. Even if your spouse handles your household’s finances, you still need to know your financial situation. This includes knowing how to access checking, savings, retirement, and insurance accounts.
• Set financial goals. Whether you’re single or married, it’s important to have a road map for the future. Setting forth your goals is the first step in plotting a route from where you are now to where you want to be in the future.
• Know and protect your credit history. Investigate and understand your credit score. It’s important to establish yourself as credit-worthy in your own right, as well as attending to your credit rating as a couple. It’s important to have at least one credit card or line of credit solely in your name for which you pay the balance off each month.
• Take control of spending and develop a budget. First, review your spending for the last few months so you can determine where your money goes. Identify areas where you can cut back, and develop a realistic monthly budget with an allocation for savings. Then put it on paper.
• Eliminate credit card debt. Take a good look at your credit card spending and the interest that accumulates on unpaid balances, and make a plan to reduce those balances. Strive to pay off balances in full each month.
• Make savings a priority. Pay yourself first. Ideally, you should strive to save 10 percent of gross pay, but the important thing is just to save regularly over the long haul. Investigate setting up automatic deposits into savings accounts. What you don’t see, you don’t spend.
• Build an emergency fund. Establish an emergency fund to tap into in case you have an unexpected and immediate need, such as essential home repairs, medical expenses, or job loss. Aim to set aside an amount equal to three to six months of basic living expenses.
• Prepare for retirement. Saving early and often is the key to a secure future. If you’re employed and your company has a 401k retirement plan, contribute as much as you can, and certainly up to the maximum your employer matches. Even if you don’t work, you can explore the possibility of contributing to a traditional IRA or the newer Roth IRA.
• Review your insurance coverage. Conduct a realistic review of your insurance coverage—is your home and other property adequately covered? Is your income protected if you become disabled? For most of us, the value of our future earnings is our largest asset. Is your life insurance sufficient? Finally, what are your plans for dealing with the costs of long-term care if you or your spouse should require it?
Since we know that approximately 90 percent of women will be solely responsible for financial decision-making at some point in their lives, the Illinois CPA Society is working to provide woman with the basic financial knowledge they need to be successful. That’s why the Society was at Northwoods Mall in Peoria in September to provide women with an opportunity to ask a CPA financial questions and receive handouts containing financial tips and resources.
It’s never too late or too early to plan your financial future. If you’d like a copy of the “Financial Makeover Tips for Women,” visit www.icpas.org/icpas/outreach/financial-makeover-day.asp. TPW