The 8th of March, 2012, marked International Women’s Day, which celebrates their economic, political and social achievements. Whilst the general principles of personal financial planning are universal and apply to both genders, women face unique challenges that translate to distinct concerns regarding their finances.
Women’s unique challenges
Some of the distinct differences are evident in the areas of earning potential, roles and responsibilities. Women live longer and are more likely to live alone for significant periods of time. Workforce participation can be intermittent, and the care of dependents, children and aged parents, usually falls on women.
Traditional gender roles presented household income from a perspective where women were expected to mind the home and the children. The economic reality today is that most families have to rely on two incomes to be able to meet important family goals such as educating children, and planning for retirement. Whatever your age, or stage and whether you are single, married, divorced, or widowed, here are some financial tips to help you create a stable financial future:
One of the greatest threats to your financial wellbeing is having little or no involvement in the decision-making relating to your finances. Whilst some women are actively involved in family finances, indeed many are assuming the role of primary breadwinner, studies reveal that many others delegate almost total responsibility to their spouse or partner. Whilst this might be important for the dynamics of a relationship, it can put you at risk.
Women often find themselves ill equipped to handle their finances if they face divorce or the serious illness or death of their spouse. Many have no idea where the financial records are, or find that they are completely broke or deeply in debt.
Set financial goals
Only by envisioning what you are trying to achieve can you take concrete steps to realize it. Decide what is most important for your future, prioritize your goals and assign them values and target dates. Whether they are short-term-goals such as reducing your debt, purchasing a new car or a vacation, or longer-term goals such as purchasing a new home, building a educational fund for your children, or funding your retirement, setting goals brings you closer to achieving them.
Create a budget and stick to it
Do you know where your money goes? If you don’t already have a budget, try to make one, and stick to it. A good budget will help you to monitor your expenses; you will have a clearer idea of where you can cut back and save towards your goals.
Be in control of your debt
Millions of people are in a dire financial situation today because they borrowed more than you could comfortably afford to repay. Debt that is incurred purely for consumption can dent your future financial prospects; this includes borrowing to pay for clothing, jewelry, consumer goods, and holidays. Try to tackle your most expensive debt first.
Debt needn’t be negative; indeed credit can be a most effective tool that helps you to create value through well-planned long-term investments. This includes borrowing to buy real estate, finance education or for a business.
Build an emergency fund
If you have recently experienced unexpected job loss, health problems, or expensive car repairs, you will be better prepared to cope if you have an emergency fund, a financial cushion to fall back on in times of difficulty. Try to have about six months’ worth of living expenses set aside in a safe, accessible interest bearing money market account.
Invest for the future
In general, women tend to take a more conservative approach than men towards investing. In spite of the downturn, continue to invest in stocks if you have a long-term time frame to take advantage of the current prices. However, do consider how much risk you are willing to take bearing in mind that stock market investments, whilst they have provided higher returns over the long term than money market funds, come with greater risk. To help to mitigate some of this risk, ensure that you are well diversified across the primary asset classes.
Raise financially responsible children
Bringing up children to develop a healthy attitude towards money as they grow into adulthood requires some commitment and consistency. Even if you can afford to fund everything that your child wants, be restrained and teach them to distinguish between wants and needs. This will help prepare them to lead disciplined lives and save you from having dependent adult children during your retirement years.
Plan for your retirement
Have you been planning for your retirement or have you ignored it and suddenly find it looming? Your retirement years should be the time of your life for new and exciting opportunities that will keep you productive, mentally stimulated and fulfilled. Those who start saving and investing early have a much better chance of retiring in comfort.
Estate planning is an emotive subject, and in Nigeria, the fear of death often prevents many of us from making plans for this most inevitable life event. Things may be going rather well, so why dwell on morbid thoughts such as your own death? Yet, by considering your own mortality and getting your affairs in order, you give yourself peace of mind and cushion the impact for your loved ones should anything happen to you. Joint accounts, wills, trusts, gifts and life insurance are some of the tools to consider.
Are you insured?
Don’t neglect your insurance. Reduce the risk of loss using appropriate insurance to protect the things you can’t afford to lose. This could be your home, or your car or other property. Life insurance is important where your family depends heavily on your income. Without adequate insurance, an accident, a medical emergency, a fire or other disaster your financial security could be undermined.
Improve your knowledge
There is no excuse these days for being totally ignorant about your finances. Just spending ten minutes a day scanning through the business or personal finance section of your newspaper, magazines, or the web will provide you with a plethora of information. You don’t have to become an expert in financial matters but at a minimum you should have some knowledge of the basic principles and the various options available.
Do seek guidance from an experienced, qualified professional, but remember that ultimately, you are responsible for your finances and the final decision, is yours.