It’s a fact of life that women in the U.S. are more vulnerable than men when it comes to financial insecurity. You’ve likely heard statistics that demonstrate how women are paid less for the same work, promoted less often in the same positions and ultimately retire with less in savings.
What you don’t hear often enough is how financial literacy—knowing how to manage your own money and understanding larger financial systems—is instrumental in determining if and when women will change this reality.
Just as physical fitness builds your strength and confidence, financial fitness gives you the smarts to make the most of your earnings and the self-reliance to avoid bad relationships and detrimental money habits. Your monetary needs and circumstances, not unlike your physical needs, also change as you age. Below is a roadmap for women to navigate a lifespan of financial health.
CASH & CONTROL:
Yes, the wage gap has significantly narrowed since the 1970s. But make no mistake about it: Women still earn an average of 20 percent less than men in the same positions. When young women enter the workforce aware of the factors that contribute to this disparity, they can head them off from the start.
1) Know what you’re worth and ask for it
When starting out, be acutely aware that younger women earn closer to 90 percent of the salaries of their male counterparts. It’s only after women turn 35 that their comparative earnings begin to fall, in part because men are more likely to find themselves in leadership roles. When starting out, seek out early promotions and other opportunities to keep you climbing at a swift pace. Salary negotiation workshops can help women gain the essential skills to advocate for themselves that they may conventionally lack. And career-specific leadership and professional organizations will provide you with a lifetime of support and resources. Participating in work-related workshops and conferences can be an investment in your long-term earning potential.
2) Beware the “pink tax”
Recent research by The New York City Department of Consumer Affairs revealed what many of us have sensed all along; products marketed specifically to women are oftentimes more expensive than similar products for men. Known as the “pink tax,” the 8 to 13 percent mark-up on things such as toiletries and clothing would strain anyone’s salary. Take responsibility for yourself when it comes to spending wisely and choose products that are priced fairly.
3) Budget from the beginning
Budgeting is essential to financial health. Young professionals learn quickly that any salary—no matter what its size—can feel like not enough. Just like any habit, however, living paycheck-to-paycheck is a behavior you can change. Now is the time to learn how to avoid debt and start a savings plan. SafetyNet™ offers a free Budgeting 101 ebook that provides simple explanations and a free budgeting Excel spreadsheet to ensure you will enjoy the benefits of your salary today and tomorrow.
MONEY & MARRIAGE:
Whether or not you choose to have children or even make your union official, entering into a long-term relationship requires that you integrate your finances in some way. But shared financial values don’t automatically follow, which can strain relationships. New research from Experian warns that too many couples commit to one another without a basic understanding of the other’s financial reality—and pay for that ignorance in the long run with arguments and even divorce.
4) Choose love, not security
Especially concerning is the fact that a significant proportion of women who return to abusive relationships cite their inability to deal with their finances as a major contributing factor. Often the abuser has complete control over the family finances, and women feel unable to take care of themselves or their children.
Financially independent women are able to make better decisions about their partners. They enjoy freedom to search out healthier and happier relationships or choose to be single while remaining financially stable.
5) Speak up, speak often
Communication is key to creating harmony between couples and their cash. The downloadable workbook Equal from the Start prompts couples to talk about money before they move in together. And the Consumer Financial Protection Bureau offers good conversation starters for couples looking to buy a home.
6) Know the cost of caregiving
As professionals join the Sandwich Generation, women are more likely than men to adopt caregiving roles, whether for children or parents or both. As a result, women spend comparatively more time out of the workforce. Yet, even after parents return to work, working fathers continue to earn more than working mothers. That’s in part because employers perceive mothers as less committed to their work and fathers eager to serve as the family’s breadwinner. If you envision yourself as a caregiver, you will need to compensate for lost wages. Factor this into your savings plan from the start.
FINANCES & YOUR FUTURE:
Financial insecurity is stressful at any age, but at the end of your life it can be devastating. Women take a double hit when it comes to their retirement years. Because they earn lower salaries and spend more time out of the workforce throughout their lives, they reap less in social security payments. At the same time, women are likely to live longer than men.
7) Invest more
Like it or not, women must invest more and earlier into their retirement accounts. A recent Vanguard study reveals that men’s retirement account balances are on average 50 percent larger than those of women, even though women are 11 percent more likely to contribute to a workplace retirement plans in the first place. It may feel unfair to devote more of your already-smaller earnings to your sunset years but, with more years to enjoy your time off, the security will pay for itself.
8) Spend less
Retirement brings an entirely new set of financial parameters. Some costs naturally wane—work clothes, commute costs and sometimes even mortgage payments. But other needs—healthcare comes to mind—take a front seat. If you don’t financially prepare for your retirement years, it could mean not being able to afford prescriptions or procedures that could improve your quality of life or even save your life. AARP offers seniors myriad suggestions for curbing their costs. Here are just a few tips to start: stay abreast of changing Medicare policies, take advantage of senior discounts and use your extra time to seek out bargains and deals.
There’s no better time than the present!
Whatever stage in life they are in, women need to make time to learn about personal finances and take the necessary steps to secure a financially healthy future for themselves and their families.
Guest Blogger: Roshni Chowdhry
Mike Murray, Policy Director