Today, we’re re-running an oldie but a goodie: women and finance. Find out how you can break the trend below.
I’m going to fess up: one of my feminist passions is about women and finance.
Sounds boring, right? Well, it might not be when I put it to you this way: more than half of older women are so poor that they have to decide between food and medication - they cannot have both.
Why is this? Women often do not save for retirement; many women can be financially destroyed after divorce; and like it or not, more women leave the workforce to take care of their children and/or parents than men do. Add to that the still-present wage gap between men and women and it adds up to record numbers of women living in poverty.
(Seriously, read some of those links: the statistics are horrifying.)
What can you do to make sure this doesn’t happen to you? What can you do to make sure this doesn’t happen to your mother? What can you do to make sure that this doesn’t happen to your daughter? Well, here’s a few tips that I’ve learned in my research on this topic (please note: I am not a financial advisor, but I am passionate about the topic; some financial jargon ahead, so if you don’t know a word, look it up here):
- Please, please, please – save for retirement.
We’re in no way wading into the politics of this topic, but by and large, pensions are gone: if you or your parents are lucky enough to have one, please realize how lucky you are! Most of us have 401(k)s or 403(b)s with our jobs; use them! Contribute as much as you can to your retirement plan, but if your company matches your contribution with some money of their own, take advantage of it. (For example: if they “match 3%,” you need to contribute at least 3% to receive it. Magically, your 3% contribution becomes 6%. It is nearly-free money.)
Some advisors recommend contributing 15% of your income to your retirement – I would say just contribute as much as you can, even if it’s 3%. Why? It’s the magic of compound growth – you (hopefully) gain 8% or so on your investments over the year. It doesn’t matter much in the early years, but boy, does it matter in the later ones. 8% growth on $5,000? Your account gains $400 just for existing. However, 8% growth on $225,000? Your account gains $18,000 – just for existing.
Do it. Do it today.
- Married? Awesome. Hope for the best; plan for the worst.
We all hope that we will get married and stay with our spouse forever, am I correct? I hope that too for everyone, but unfortunately, this doesn’t always happen. (By the way? It’s single women who are most at risk for falling into poverty.)
So, consider maintaining your own separate savings account during your marriage, if you’re comfortable with it. It’s also a good idea to always maintain a credit card in your own name only, as it can sometimes be difficult to obtain one during or even after a divorce. (Stay at home parents? This goes tenfold for you.) Also, it’s always a good idea to know what you and your spouse own jointly and what your spouse owns on their own.
However, if you’re actively considering divorce? Set up your own savings account now. There are a lot of expenses associated with divorce, least of which would be hiring a lawyer. (This article is a great resource to look at – just in case.)
A quick note: same-sex marriage and divorces are an area of law that is just now being created, so it’s very, very important that you consult a lawyer if you would be going through this.
- If you’re able, make sure you’re adequately insured.
The ones you have to have? Health insurance. (We’ll be talking about this in depth all year on the Feronia Project – look out for the posts!) Disability insurance. (Have enough income to live on if you could never work again? No? Get disability insurance.) Renter’s/homeowner’s insurance. (Could you afford to buy everything in your house again if it burned down? No? Get insurance.)
Three other ones to consider, if you’re in the situation:
- Life insurance – term life insurance is usually your best bet. Do you have kids? A spouse that depends on your income? Time to buy life insurance. No, it’s not fun to think about your own death, but it can help to know that the ones you care about will be OK.
- Long-term care insurance. Can you afford to put your parents in a nursing home for the rest of their lives and still be able to do everything you want? No? Think about buying this - with an inflation rider, as this type of care will only become more expensive. (If your parents are under 70, ask them if they’ll consider purchasing the policy. If the monthly payment is too high for them, consider paying for half of it.)
- Auto insurance. If you drive, get this one. I’ll share a personal story: last January, I got into what I thought was a small fender bender (not my fault, thankfully). Unfortunately, this small fender bender destroyed my suspension and was more expensive to fix than the value of the car. It was a total write-off; I was shocked. However, with the payment from the insurance company and a payment from my emergency fund, I was able to upgrade to a much newer and more affordable car. Happy, happy day.
- A controversial one: your savings come first; your child’s come second.
I know, this is a tough one, but it’s a better idea to save for your retirement than for your child’s college education. Think about it this way: your child can get scholarships. There are no scholarships for retirement.
- Lastly, educate yourself.*
There’s this horrible stereotype that women don’t know anything about finances. Well, I think it’s time to change that. I’ve done my fair share of reading on the topic; here’s the ones I liked the most:
- Your Money and Your Man: How You and Prince Charming Can Spend Well and Live Rich
- Get a Financial Life: Personal Finance In Your Twenties and Thirties
- Protecting Your Parents’ Money: The Essential Guide to Helping Mom and Dad Navigate the Finances of Retirement
- and I also unabashedly love Learnvest, a finance site aimed at women.
What do you think? Is it time women took control of their finances – and their futures?
(Some of the above content includes affiliate links.)