Women are no longer relying on Prince Charming and it seems that sisters-are-doing-it-for-themselves. Despite the fact that Australian women earn $0.83 for every dollar earned by men, women have 22% less credit card debt and are 32% less likely to be financially dependent on their parents. According to Harvard Business Review, if they splurge, they tend to spend on self-care items such as healthcare, skin care or good food.
Then why aren’t women thriving when it comes to money, investing and building wealth?
Daily worth magazine calls it the Female Financial Paradox. They surveyed 10,000 women and found that “While 90% of the respondents to our survey identify themselves as the chief bill-payer and purchaser, and 76% say they’re the primary retirement planner, a full 60% admit their investing and planning skills are below average. Worse, less than half of the responding women actively seek out financial resources for assistance.”
A recent study by RMIT found that women’s finances were intertwined with all of their relationships and that talking about money was an emotional topic. Finance is simple maths, its our emotions that make it tricky.
So we have worked on 15 tips to help women take the emotion out of money and work towards financial freedom.
1. Have a big vision
The main reason that women don’t make a decision to build wealth is because they don’t believe that its possible. And yet, if you have a vision and a plan for wealth, you are far more likely to achieve it. A 30-year study by Harvard Business School showed how the 3 percent of participants with written goals produced 10 times the results when compared to the 83 percent of participants with no clearly defined goals
2. Pay yourself fist.
Take the emotion out of deciding whether or not to save by asking your employer to debit an amount into savings from every pay packet. You will be surprised how quickly your spending will adjust.
3. Start with 1%
If you believe that you can’t save you never will. Start by saving 1% and work your way up gradually. If you are young and single, aim to be saving 20% of your income. If you are married and have children, work towards 10%.
4. Get educated
Take personal responsibility for getting educated about your money. Read a finance blog or magazine, or listen to a podcast. Talk to your friends who are good with money. Women are naturally more collaborative and happy to talk about their experiences. Ask about the good, the bad and the ugly. It’s better to learn from others mistakes than to make your own.
5. Establish a Freedom Fund
A day might come when you need to break free from a job, a relationship or a living arrangement. Having a stash of cash will give you the power of choice if you decide it is time to take a walk.
6. Give purpose to every dollar of income
It is important to take the emotion out of choosing how much to save and how much to spend. Set up bank accounts for different purposes – lifestyle savings, bills, spending and have the funds you need directed into each account. Only the spending account has a debit card, so that when you go to the ATM, you know exactly how much you can spend.
7. Have regular dates
Set some time aside in your calendar to hang out with your finances on a weekly basis. I like to do mine on a Sunday night because it sets up my mindset for the week. I like to plan ahead and know what’s coming up. If I have a hair appointment and a night out with the girls, then I will know to be more careful with small, incidental purchases.
8. Have protection
When you’ve met Mr. Wonderful and you’re ready to commit, get a binding financial agreement (pre-nuptial). This needs to be crafted by a legal professional and each party will need to get their own advice before signing. Financial Agreements can be signed at any time in your relationship. It doesn’t matter if you’ve been together for twenty years. It is never too late to put some protection in place.
9. Combining money
Sharing finances is all about proving trustworthiness. If you are living with a partner, start with a joint account for running the home. Decide what each of you is going to commit each week and what expenses will come out of the fund. See how your partner goes with this. Do they contribute regularly? Do they only make the agreed withdrawals? If so, then move to an additional joint saving account for a specific purpose, like a holiday, home deposit or motor vehicle. Again, watch and see if they can be trusted with larger sums of money. If so, move to a joint investment. As a rule of thumb – do not buy a property with anyone that you have known for less than two years.
10. Don’t shop the sales
Don’t buy something because it’s cheap and it’s on sale. Chances are you won’t wear it. When you buy the things you really love you will get the use out of them that justifies the expense of buying them. It’s not so much about cost, its more about cost per use.
11. Talk to your spouse about money
Finance is the highest cause of separation with 43% of separating couples saying money was the reason for their breakup. If your partner is super tight, tell them how you love that you can always pay the bills but it would be great to have some splurge money. Conversely, if they’re the big spender in the relationship, tell them how your love their spontaneity, but its important to you to feel safe around savings and bills.
12. Don’t rescue
If there is someone that you love who is not good with money and in debt, please don’t rescue them. This includes children, family members, boyfriends, girlfriends and even spouses. Don’t co-sign loans, don’t have joint credit cards, don’t lend them your credit card, don’t go guarantor for them. Love them, support them, keep them close but don’t rescue them. Love them enough to say “no”. Like a little bird leaving the nest, if they don’t learn to fly on their own they never will. Everyone needs to learn to be responsible for their own money. If behaviour got you into a money problem, then only a change in behaviour can get you out.
If you are hiding money and or debt from your spouse, its worth spending some time to explore what really going on for you.
13. Don’t Keep Secrets
If there is a reason that you need to keep something a secret, then for some reason, you’re attaching shame, and that’s disempowering. The power of the secret is gone the minute you open your mouth. The more overt you are about financial problems, the less power they have in your life. You need to get things out into the open and talk about your financial struggles. Keeping secrets stops us from experiencing true intimacy.
14. Look after future you
Women in Australia will retire with approximately half the super balance of their male counterparts. It’s important to start planning for your retirement by making a contribution from your first pay-packet. According to a study by Yale University, because women generally earn less, and take time off to care for family, they literally need to save $1.80 for every dollar saved by men, if they want to have the same retirement balance.
15. Get Professional Help
A financial planner can help you to identify your financial goals and keep you accountable to staying on track to reach your goals. They can also show you tips and strategies to save you thousands. If you think its expensive to hire a financial planner, consider the consequences of inaction.
You are important and your financial future is important, and everything you’re doing today is creating a stronger financial future for you to live in.