Let’s be honest: Women are on top of things.
Whether a homemaker or a career professional, any woman you meet is likely busy juggling countless responsibilities. However, because she is so busy, she may not be able to slow down enough—or even know where to start—to get a read on her financial wellbeing.
So, ladies, what better occasion than Financial Awareness Day to start a discussion on how important it is to get our personal financial houses in order? And how appropriate that the day falls in the summer months, when life slows down a bit and perhaps provides a little free time for this reflection.
Let’s start with some sobering statistics about Americans provided by the National Today website for Financial Awareness Day:
• Americans hold $1 trillion in credit card debt
• 50% live paycheck to paycheck
• Only 32% maintain a household budget
• 20% don’t save any annual income
• 44% don’t have enough money to cover a $400 emergency
• 58% have less than $1,000 saved
• Women save 68 cents for every one dollar saved by men, down from 70 cents in 2019
These statistics are heavy even for those who have some financial acumen. With today’s cost-of-living squeeze and household debts rising, it is more important than ever for each of us to review our personal financial picture. FINRA research has shown that individuals who have a higher level of investment knowledge are less anxious about their finances and saving for emergencies and tend to have more positive outcomes in planning for their retirement.
Let’s start with some ways to plan and set goals to increase your financial savviness and take control of your personal financial journey:
1| Educate yourself – There is an alarming gap between the financial literacy of men and women. Bridge the gap by signing up for a money management class; join an investment club; seek out books, newspaper articles, magazines, blogs or videos on personal finance; and/or consult a financial advisor. Perhaps it’s also time to set a goal to spend some time analyzing your personal finances.
2| Understand your spending – Review your cash inflows and outflows to know where you are spending your money. It may be helpful to track your activity for 2 to 3 months to get a handle on it. If you use online banking, you may be able to download your last 12 months of activity into a spreadsheet, which can be categorized to provide a complete view of your average monthly activity.
3| Know your money motivators and instincts – Money means different things to different people. For some, money is just a tool. For others, money—and the things it can buy—may be symbolic of how they measure their self-worth. Reflect on how your financial habits align with your values and beliefs. You may be a natural saver, a joyful giver or perhaps an impulsive spender.. Consider what challenges may arise as you begin to change your finances.
4| Create a spending plan – Once you’ve done the work to understand your cash flow, build a monthly spending plan to help guide you through the process of managing and adjusting your spending and realigning it with your goals and values.
5| Establish your goals – Your most important objective should be to save money for emergencies in the short term and for retirement in the long term, but there are other reasons to seek financial health. Maybe you want to save for a down payment on a new home, buy a car, travel, save for your children’s education, donate to a charity or establish financial independence ahead of seeking a divorce. Set short-, medium- and long-term goals to help keep you motivated.
6| Invest in yourself first – Your most important goal should be establishing emergency and retirement funds. Commit to setting aside a certain amount of money each month or each paycheck for these, though exact amounts and timing may differ from person to person. If you cannot commit to saving large amounts today, start small. Have a plan in place for how you will increase your savings as your circumstances change, which brings us to the next point…
7| Pay off credit card debt! – Consumer debt is by far the biggest problem facing Americans’ finances, and, unfortunately, women are more likely than men to mishandle credit cards. To begin the process of getting out from under this debt, gather details on your accounts—balances, interest rates, minimum payments, payment terms—and incorporate a plan for paying off this debt into your spending plan.
8| Keep an eye on your credit score – It may seem counterintuitive to suggest that you ought to pay off your debt but also have a good credit score; however, credit scores are necessary for more than just obtaining loans and credit cards. In today’s environment, credit scores may be required to secure a job, sign up for utilities, or get preferred auto and home insurance premiums.
9| Phone a friend – Strike up conversations on finances with like-minded individuals. Questions to get the conversation started: Do they have a 401(k) plan, long-term care insurance or life insurance? Have they done a financial plan or consulted with a financial advisor? These discussions may provide ideas for your own planning or help identify friends with whom you can reciprocate accountability and encouragement.
10| Annually review and update your plan – Life circumstances change. In any given year, you might face an addition to your family, a marriage, a divorce or the death of a spouse or loved one. You might start a new job, get a raise or receive a bonus. Also, financial markets and laws can change. Set a date each year to review your plan, take stock of your progress and make any necessary adjustments.
Eleanor Roosevelt famously said, “It takes as much energy to wish as it does to plan.” It can certainly seem overwhelming, particularly when the statistics on women’s financial literacy and health suggest the cards may be stacked against us. But what better time than today, National Financial Awareness Day, to begin the work on improving your financial health.
If this describes you, and you find yourself stumped at where to begin the process of wrangling in your spending or how to begin saving and investing, please reach out to an Argent wealth manager. We’d love nothing more than to help you get on the path to a bright financial future.