Money Management Strategies for Women
By Lynnette Khalfani-Cox, The Money Coach
As women, we tackle an incredible amount of responsibilities every day. After juggling our demanding professional and personal roles – as employees or bosses, wives and partners, mothers, sisters, friends or volunteers – we often feel like there’s no time for ourselves. Unfortunately, this can be a big mistake when it comes to your personal finances. Instead of letting a never-ending stream of “things to do” cloud your day-to-day life, take time instead to position yourself and those you love for financial success. Here are some ideas to get started.
GOAL-SETTING FOR SUCCESS
Much of your financial well-being depends on making a plan to succeed – as opposed to merely “hoping for the best” or thinking “I’ll worry about my finances down the road.” To create a winning financial plan, you must consider what personal, professional and financial goals you’d like to achieve, and then put a price tag as well as a deadline on those goals.
Here are some common goals that many women share:
- Paying Off Excessive Debt
- Earning a B.A. or Graduate Degree
- Buying Your First (or Second) Home
- Sending Your Kids to College
- Starting a Business
- Planning for Retirement
All of these goals cost money. Each also requires an investment of your time and energy. Start by thinking about what is truly important to you, then write down your own goals. Place them somewhere visible – like on your bathroom mirror or on top of your dresser to serve as a constant reminder and to reinforce your motivation. When you draw up your list, don’t state vague, hazy goals such as “I want to be rich” or “I want a comfortable retirement.” Instead, create “SMART” goals. SMART is an acronym that stands for goals that are Specific, Measurable, Action-Oriented, Realistic and Time-bound.
FINANCES AND YOUR JOB
Whether you earn $20,000 a year or have a six-figure salary, you can improve your personal finances with some savvy money-management moves on the job. A few ideas:
- Max Out Your 401(k) or 403(b)
According to the U.S. Department of Labor, out of the country’s 60 million wage and salaried women, only 47% of them participate in a company-sponsored retirement plan. By not contributing to a 401(k) or 403(b) plan you could be losing valuable retirement dollars. Not only could you get a tax break for participating in a 401(k) plan, but many companies also offer a matching contribution, usually 50 cents for every dollar you contribute, typically up to 6% of your salary. Under federal guidelines, the 2008 maximum contribution amount you can make to a 401(k) plan, including your employer’s contribution, is $15,500. If you haven’t joined your company’s 401(k) or 403(b) plan, do so immediately. Even if you are married, you need to have your own retirement assets. Don’t count solely on your husband to take care of you during your Golden Years. After all, you could face divorce or the unexpected death of your spouse, especially since a woman retiring at age 65 can expect to live another 20 years, three years longer than the average man. By steadily building a savings nest egg now, you can assure yourself that you won’t run out of money in retirement.
- Take Advantage of Cafeteria Plans
Cafeteria Plans – sometimes referred to as 125 Plans because they’re based on Section 125 of the IRS tax code – allow you to use pre-tax dollars to pay a variety of out-of-pocket expenses. As a result, your company’s cafeteria plan may help you save money on medical costs, dental and vision bills, health screenings, hearing checkups, child care, along with life and disability insurance. To find out what benefits are offered by your employer’s Cafeteria Plan – also known as a Flexible Spending Plan – check with your human resources office.
- Don’t Be Afraid to Negotiate
We all know that women earn an average of 75 cents for every dollar that men make. And since many women tend to be out of the workforce – at least temporarily – during their childbearing years, it’s especially important to make the money you earn on the job count. Yet, many women dread the prospect of boosting their income by asking for a raise. Don’t be afraid to ask for more money when you’ve demonstrated that you’ve earned it and you are making a valuable contribution to your overall company or your specific department. For best results, get the raise you want by keeping a “praise file” about your on-the-job performance. Document your track record over a period of six months to a year, taking care to maintain records of every positive note, email or “pat on the back” you receive about your work from your bosses, colleagues, customers, or vendors. Then when you’re ready to make your case to your boss about why you deserve a raise, take your “praise file” in as back-up.
RELATIONSHIPS AND MONEY
The relationships we have with various people in our lives can serve to bolster our finances, or deteriorate them if we’re not careful. As women, we must first learn to have a healthy relationship with money by ourselves, learning how to manage money properly, avoiding excessive debt, and by shattering the myth that money issues are either “too complicated” or “too boring” for us to handle. Once we start to properly handle our own financial affairs, then we can extend that healthy perspective about finances to how we deal with money when it comes to friends, family and loved ones.
Be Selfish – For the Greater Good
It may sound like an oxymoron, but being “selfish” about your personal finances actually can help you enhance the lives of others. How so? When you are financially secure, you’re less stressed, so you can be more patient with the kids, more generous in your economic giving to religious groups or charity, and more productive at work. On the contrary money problems can dampen all these things. To strengthen your financial standing, try implementing the following tips.
- Establish a Personal Cash Cushion
Set aside three months worth of expenses to protect yourself and your family in the event of an emergency or some major unexpected expense.
- Avoid Over-Spending On Others
Many of us are guilty over indulging our children and other family members with luxuries ranging from expensive clothing to electronic gadgets to a house full of toys. Over-spending sets you back financially and sends the wrong money messages to those you love most.
- Build Your Own Credit Rating
It’s not enough to have joint credit accounts with a spouse. All women need to have credit in their own name, in order to establish a solid credit history and to learn how to manage credit wisely.
- Maintain a Separate Account
Many couples share joint accounts to pay household bills – and that’s fine. But having a separate savings or checking account gives you a heightened degree of financial autonomy and helps you become better at saving and budgeting too.
By adopting these strategies, women of all ages, incomes and backgrounds can create an outstanding, stress-free financial future.
