As of 2022, women made up over 56% of the U.S. workforce. Of that number, 29% are their family’s primary breadwinner. This means that millions of women are in charge of bringing home enough money each month for their family to live on.
Women have unique challenges when it comes to personal finances. That’s why it is crucial to stay financially aware and confident in each stage of life so you can navigate any challenge successfully. We are here to help you recognize potential hurdles and to help overcome them.
We’ve put together the following list of our top tips that will help you plan for your financial future:
Protect Your Credit Score
What comes to mind when you think about your credit score? There are several things that can harm or improve your score. However, there's one thing we can be sure won't improve it: your current salary. For example, you can be making over a million dollars a year, but if you have bad credit, you are virtually throwing away money to higher interest rates every month.
There are a lot of things you can do to help protect your credit score, like paying your bills on time, only opening credit when needed, making sure that you only check your credit score once a year to ensure that everything on their looks accurate, etc. We all know that mistakes can happen, and we want to make sure that if there is a mistake, we get it corrected. But it's hard to maintain a healthy credit score if you don't know where your money is going. This is why it is important to budget.
Establish a Budget
There are many staggering statistics when it comes to budgeting. For instance, over 63% of Americans don't operate on a budget. One-third of Americans only have $500 or less in their savings account for an emergency.
Another example comes from a recent survey that asked people, “what are some of the things that you would rather do than talk about money?” Some people responded and said they would rather spend time in jail than talk about their finances. But communication is crucial—especially when it comes to budgeting.
One of our favorite budget rules to follow is the 50/30/20 rule. Meaning 50% goes to necessities, 30% goes to wants and 20% goes to financial goals.
Start Investing Early
Investing early can provide positive benefits to your future planning but could also be overwhelming if you do not know where to begin. We recommend starting out with a small investment, and then continue to put money away. As time goes by, it’s wise to roll those gains over so that your investments get bigger and bigger over time. Continue to monitor your investments and stay up to date with what’s happening in the stock market. It’s also important to modify your portfolio as your needs or objectives change.
Understand Your Employee Benefits
Since the pandemic, lots of people have shifted jobs or started new positions. One thing that’s important to do at the start of any new role, is to not only understand your company benefits, but also understand your spouse's benefits, because they can contribute to your bottom line.
Important things to be aware of are extra days off, 401(k) contributions, tuition reimbursement, gym memberships, company discounts, pet insurance, etc. All these things add up and help contribute to your income. You never know when an emergency will strike, and it’s always better to be prepared and aware of what’s changing with these benefits.
Discuss Finances with Your Spouse
A study was conducted where 1,000 people were asked two questions: 1) “How well do you and your spouse communicate about finances?” And 2) “How satisfied are you with that communication?” Surprisingly, 73% of the surveyed individuals said they were “extremely satisfied” with how they communicate about their finances. Then, they were asked a follow-up question, “how much money does your spouse make?” Half of these respondents were incorrect in their answers. And sometimes they were off by over $50,000. These were the people who checked the boxes said they were extremely satisfied with how they communicate.
This is why we highly recommend finding out if you and your partner are either “spenders” or “savers” before you get married. Learning which category you and your future spouse fall into can help you avoid some potentially uncomfortable discussions and situations later down the road.
Understand Your Financial Future
Over 90% of women are going to be solely responsible for their finances at some point in their life. So, when life throws curveballs your way, it’s important to know what to do next. Take your retirement for example. If something happens and you’re forced into early retirement, do you have a plan? A 401(k) is the most popular vehicle to fund a retirement and, depending on how much you have been contributing to that account over time, you may or may not have a nest egg tucked away for those rainy days.
Another scenario that often takes women out of the workforce is the need to be a caregiver, whether that's caring for a child, a spouse, or an aging loved one. We believe there are four types of people in this world: those who have been caregivers, those who are caregivers, those who will be caregivers, and those who will need care themselves. Therefore, everybody is eventually going to be impacted by this, and caregiving can be extremely expensive.
The Importance of Social Security
Did you know 60% of women rely on Social Security for at least half of their retirement income? Women typically cost more from a health care standpoint, but not because they’re consuming more than men in health care costs each year. It’s because, on average, women live longer – sometimes up to seven years longer. If you were to look at people in their 80s, for every man, there are two women. And for people in their 90s, for every man, there are three women.
Therefore, when you are thinking about planning, one of the best things you can do is talk to your family and loved ones about your wishes. We recommend purchasing the book, The Family Love Letter. This is a 35-page workbook that allows you to write everything down, such as contact information for your accountant, your wealth advisor, your attorney, etc. It also asks more thought-provoking questions such as, “is there a lien against me that might be an issue with a sibling in the future?” The section that we recommend the most is the “Document Locator.” This lists the 30 most important documents that we all have, and it encourages you to list where they can be found. This book allows you to capture crucial information and collect your important paperwork in one location. Most importantly, it allows you to start having key conversations with your loved ones ahead of time.
Again, we realize that no one knows what the future will hold for you and your family, but we at Thielen & Associates, Inc. want to help set you up for success. Planning for your financial future is not something you have to do alone. We are here to help you plan for major life events, as well as retirement. Give us a call today, or visit our website to learn more about how we can help you.
- “Savvy Women, Smart Investors” client seminar by MFS for use by Thielen & Associates, Inc.