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In 2018, it was estimated that in the United States, women earn, on average, only 82% of what their male counterparts earn. The concept of financial freedom has gained a lot of traction in recent times, but there’s still a long way to go. Studies have shown that only 33% of women make their own investment decisions, against 64% of men. Traditionally, men have known to lead the financial investment decisions for the family, however, it is best for women to control their own finances, as leaving these decisions to their husband can result in a skewed relationship.
When the wage gap is broken down, it exposes more nuances related to race, education, and other socioeconomic factors. According to research conducted by the American Association of University Women, for every dollar made by white men, white women make roughly $0.79, Black women make $0.63, Hispanic and/or Latinx women make $0.55, Asian women make $0.87, Native Hawaiian or Other Pacific Islander women make $0.62 and American Indian or Alaska Native women make $0.58.
On top of having the same living costs as men while earning less, women also save less, live longer, and have more long-term and overall health care expenses. When women earn less over time, it has long-term consequences for their financial lives in retirement. The average total retirement savings for women is just $23,000, while the average total retirement savings for men is $76,000.
Becoming financially independent is an essential skill for women to attain. To be precise, financial independence is not about how much money you have, it’s about making good decisions, to grow your finances.
Below we share some tips on how to achieve financial independence for women’s:
- Educate yourself: Have at least a basic understanding of personal finances. Read books and articles, and ask your financial institution or local nonprofits about free educational resources. You might also want to look for relevant groups to join or people to follow on social media to expand your personal finance knowledge. If need be, speak with a financial advisor about the best ways to understand financial terms, money, and how to manage it. A reputable financial advisor can help.
- Be aware of your money and how you spend it: Everyone manages their money in their own way. Our family’s financial history influences how we manage our own finances. Some will follow the example, while others will go in the opposite direction. If you know you tend to be an over-spender, acknowledge that and work on it. Know where your strengths and weaknesses lie when managing money. Always keep an eye on your money. Make a spending plan and stick to it. At the end of the month, review your results and see what you did well and where you could improve. It can be empowering to stick to your plans; success breeds success!
- Create a budget: Make a spending plan and stick to it! Break your expenses down into categories like “needs” such as housing and food, and “wants” such as dining out and expensive hobbies. Subtract your expenses from your earnings. If you don’t have much left over, or if you don’t have enough for your savings goals, see if you can cut any costs or find ways to increase your income.
Spending more than you receive is never a good idea because it leads to debt, bad credit, and even bankruptcy. If you’re in a relationship, it is a good idea to cultivate the practice of sharing certain expenses equally. By handling money in this manner, each person can retain independence in and out of relationships while avoiding being drawn into a standard of living that they could not afford on their own.
- Set financial goals: Setting concrete, targeted goals today will help you achieve long-term financial stability. This exercise provides you with a starting point, and you can work out the details of how to make your dreams a reality. It is critical to have both short-term and long-term goals. These goals can be anything from saving a set amount in your retirement plan, to buying that one thing you’ve wanted for a long time.
Keep in mind that goals can shift over time. So, revise your list of goals at least once a quarter and make changes based on where you are in your financial life.
- Have different accounts for different purposes: Money management is the key to accumulating wealth. One approach is to split the money you earn into separate accounts, assigning each account to a specific purpose and using it exclusively for that purpose. Assign a percentage to those account each time you earn money. Save a bit of your income every month inside a specific savings account. To make it simpler, your employer might be able to directly deposit a portion of your paycheck into a savings account.
Things to consider when in a relationship:
- Have your own accounts – Even if you are married or have combined expenses, it is a good idea to maintain your own source of funds. You can contribute to household expenses while handling the rest of your finances on your own. Even if you have an extremely good relationship and have no intention of leaving your partner, it would be wise to have your own money in case of an emergency.
- Have individual money goals – Women in relationships can have personal goals as well as joint goals. For example, you and your partner could agree to pay off your car loan early by contributing a set amount of extra money as a joint financial goal.
- Get on the same page financially – This is a necessary step to take in strong relationships – get on the same page along dreams, goals, and your financial future as a couple.
- Discuss attitudes about life’s big financial moments – such as going into debt, saving for your children’s college education, and housing.
- Get over the stigma of being financially educated – This is a crucial point: a lot of women in serious relationships fear starting or even taking interest in financial management because of the stigma it comes with.
- Don’t leave your job – Don’t rush into quitting your job after getting married, particularly if you’re moving to a new city. Allow yourself time to look for a new job, a different career path, or even self-employment.
At the bottom line
While the gender pay gap persists, women can take steps to ensure their own financial security by knowing their finances, making savings, planning for the future, setting goals, building credit, reducing high-interest debt, and forming a bond with their preferred bank.
Begin by conducting a thorough review of your financial situation (how much money you have in which accounts), and then prioritize the steps outlined above as they apply to you. Perhaps you already have an emergency fund, but you need to pay off your high-interest credit card balance. If you don’t have any credit in your name, that’s a good place to start.