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Money Tips for Women

Women are sometimes more disadvantaged than men when it comes to finances, and there’s proof in data.

A 2018 study conducted by the Pew Research Center found that in the United States, women earn, on average, just 85% of what their male counterparts earn.1 Women not only earn less than men, they also save less, live longer, and have more long-term and overall health care expenses—on top of the same living expenses as men.2 

While these challenges can yield negative consequences financially such as an increased debt load or minimal retirement savings, there are many strategies women can implement in their daily lives to enhance their financial well-being, ultimately building a financially stable future. 

Educate Yourself

Before diving into strategies to build a solid financial foundation, carve out some time to learn about money management and investing. According to a 2018 Federal Reserve survey, women, on average, are less comfortable making retirement investment decisions, and they exhibit lower levels of financial literacy compared to men. Just 32% of women with a bachelor’s degree are comfortable managing their own investments.3 

If you’re among those who don’t, you can begin to overcome some of your discomfort by educating yourself. Read books and articles, and contact your financial institution or local nonprofits to ask about free educational resources that may be available to you. You may also want to search on social media for relevant groups to join or people to follow to up your knowledge about personal finance.

If you get overwhelmed or confused while studying, you may want to ask a professional for help. It could be the difference between improving your financial health and continuing to struggle with building an emergency fund, managing your debts, saving for retirement, or reaching goals you have. 

Set Financial Goals

When you set goals for every area of your finances, you give yourself concrete targets to work toward. This exercise also provides you with a starting point, and you can flesh out the necessary steps to make your goals a reality.

When setting financial goals, think about what excites you, and then set realistic targets that will motivate you to keep going if the road gets a bit rocky.  

It’s essential to have both short-term and long-term goals. Short-term goals are objectives you can achieve within one year and that give you those small wins that propel you to move forward, like a new piece of furniture or a weekend getaway. Long-term goals, like saving for retirement or building your child’s college fund, require more effort, and could take several years to achieve. 

Be mindful that goals sometimes change over time. So, be sure to revisit your list of goals at least once per quarter and make adjustments based on where you are in your life with your finances. 

Create a Budget

Make a budget and stick to it. The first step is to gather all your bills and pay stubs, then write down your monthly income and your expenses. Break your expenses down into “needs” like housing and food, and “wants” like streaming services and eating out. Next, subtract your expenses from how much you make. If you don’t have anything left, or you don’t have enough for savings goals, see if you can cut back on some expenses or find ways to increase your income. 

The thought of following a spending plan may seem restrictive, but doing so can help ensure you meet your financial goals in a timely manner. Budgets also prioritize your monthly expenses by placing your needs before your wants so you won’t run out of money each month and incur unnecessary debt. Just like your list of financial goals, you want to visit your budget from time to time to make adjustments.

Budgets don't have to be scary. A realistic plan that covers your needs (and also includes some of your wants!) can help you become financially independent faster.

Build an Emergency Fund

An emergency fund or a rainy day fund is an integral part of a healthy financial plan. It’s a useful tool to protect your finances against unexpected events, like a job loss or medical emergency. 

But many Americans still don’t have an emergency fund, especially women. A 2020 MetLife survey found that more women than men say they live paycheck to paycheck (55% of women vs. 44% of men).4 And women are more likely to report that they could not pay an emergency expense of $400, or would have to use some form of borrowing, according to the Federal Reserve.5 

If you don’t have enough stashed away for a rainy day, you should start taking steps toward building or growing an emergency fund. A good rule of thumb is to save three to six months’ worth of living expenses. Every time you get a paycheck, make it a priority to save some money for yourself. To make it easier, you may be able to have your employer directly deposit part of your paycheck into a savings account. 

If you need to, cut spending on unnecessary perks. This way, you’ll be ready for that quite possible rainy day when it comes. 

Save for Retirement

According to data from a 2012 U.S. Government Accountability Office report, women's annual contributions to retirement accounts were around 30% lower than men’s contributions.6 

Women, on average, face a larger retirement savings gap than men and experience higher poverty rates later in life. In 2019, the national poverty rate for women ages 65 and older was 10.3%, compared to 7.2% for men in the same age group, and the gap continues as men and women grow old.7

Throughout their lives, women are more likely than men to work in part-time jobs that don’t qualify for a retirement plan, and also interrupt their careers to take care of family responsibilities. Ultimately, fewer years of work lead to less retirement savings.8 

All of this means there’s even more reason for women to prioritize retirement saving early in their professional lives. The earlier you start, the longer you’ll have to multiply your money through compound interest. Starting young also saves you the hassle of having to play catch-up and make hefty contributions that stretch your budget thin later in life. 

Take advantage of the retirement plans offered by your employer if you haven’t already. If you have a 401(k) and your employer offers a match, contribute at least this amount so you won’t miss out on the extra help. 

Consider an Individual Retirement Account (IRA) if your employer doesn’t offer a retirement plan or if you’re self-employed. You can also use an IRA if you seek more flexible investing options than what’s available through your 401(k) plan administrator—just be sure to contribute up to the employer match first before funding your IRA. 

Avoid Consumer Debt

Some debt like mortgages and student loans are OK to take on if they fit in with your overall budget. Those kinds of debts are considered “good” debts because they’re investments. “Bad debts” include high interest credit card debt. While the overall level of credit card debt in the U.S. fell during 2020, Americans still owe hundreds of billions of dollars to credit card companies.9 

Credit cards are a convenient and safe way to pay for things (and possibly earn rewards for doing so), but to make them work for you, you have to pay off your balance every month in full. It’s key to keep from using credit cards to finance your lifestyle, as the double-digit interest that accompanies these little pieces of plastic can make it hard for you to get ahead financially. 

The best way to avoid debt is to create a financial plan and stick to it. 

Excessive debt can have serious implications for your financial, mental, and physical health. If you’re suffering these kinds of effects, seek the help of a licensed professional. 

Use Missteps to Help You Learn and Grow

As the famous saying goes, experience is the best teacher. Instead of being ashamed of past financial missteps, learn from them. 

Everyone can grow from the financial mistakes they make. Create a list of the errors you’ve made thus far. Next, note how you acted, what went wrong, and what actions you can take to prevent history from repeating itself. 

This may be a painful exercise in the short term. However, it can be crucial to identifying money moves to avoid in the future and give yourself the best chance at long-term financial success.

BY ALLISON MARTIN Updated March 18, 2021