With all the demands on your career, spouse, and kids, it can be daunting to also budget, manage and track the finances for the family. The great news is that money can be engaging and empowering.
When it comes to personal finance, women face different financial challenges that can impact their lifestyles and lead to financial insecurity. Knowing these roadblocks can help you pay off debt faster and build wealth.
Gender Pay Gap
Women, on average, make only $0.82 for every dollar a man makes. Based on this estimate, a woman would have to work an extra 3.5 days per month to earn what her male counterparts earn.
A budgeting system can help close the gap. A budget is not just about keeping your spending in check – it forms the groundwork to help you achieve your financial goals and ensures you keep your eyes on the prize. A reasonable budget provides clarity on your spending and saving habits.
Step 1: Pick a budgeting method
We recommend the popular 50/30/20 rule. You spend roughly 50% of your after-tax dollars on necessities, 30% on wants, and 20% on savings and debt repayment. The 50/30/20 rule is the best for those wanting to keep things effortless.
You ask have to yourself two simple questions:
- Is this item a need or a want?
- How much can I afford to invest/put towards debt?
Step 2: Review and Understand the Spending Categories
Write down your monthly after-tax income, then calculate how much you should spend in each category.
Step 3: Review Your Spending Pattern
Look at the past three months of transactions to see how much you actually spent in each category.
Step 4: Track Your Income and Expenses Monthly
Set a spending limit and focus on meeting your spending goal for the next 30 days.
If you spend too much on any category, consider cutting back or adjusting your lifestyle.
The Pink Tax
Did you know that consumer goods aimed at women cost between 6% and 48% more than the equivalent product for men? It is a poorly kept secret based on the idea that women like to spend money.
The Pink Tax may sometimes be unavoidable, but being flexible and purchasing more neutral items can help alleviate the extra cost. Compare details between the gendered products, so you feel confident about choosing a cheaper option.
Health Care Expenses
Women are more likely to develop chronic conditions that require health care throughout their lives. As a result, women seek preventative healthcare and have more doctor visits than men. In 2019, the average annual health spending for women ages 19 to 34 was $4,709, more than double men's spending in the same age range, at $2,261.
Take control of your financial situation now by saving for medical expenses that may come up in the future, such as doctor visits, dental, vision, pregnancy, and delivery. Many employers offer HSA plans that can make it easy to save. This savings account allows you to save money on a pre-tax basis to pay for qualified medical expenses.
Not Saving Enough for Retirement
Women live an average five years longer than men. If their spouse becomes disabled or dies before them, expenses can deplete the household's assets.
If your employer offers a retirement plan, sign up immediately. Most employers match your 401k contributions up to 6%. Unsure of what funds to select? Some programs will automatically pick your asset allocation based on your age or risk tolerance.
Investing is the best way to overcome inflation and win at retirement. If you have already started saving, save more. Learn about Social Security and start planning for your retirement now.
Financial literacy is key to building and maintaining wealth. Saving more and investing more aggressively can put women one step closer to having the cushion they need as they enter the different stages of their life.
Use the tips above to help you create an effective strategy so you can play equally in the financial world and follow us on IG @_dearmoney_ for more tips on personal finance for women.
