Take responsibility for your financial future
Women’s’ overall wealth still lags behind that of men. The good news is that more and more women are taking control of their finances.
With the number of female business owners and professional women with long and successful careers on the increase, the greater the interest and need to control their financial future. While there is still an overwhelming number of young women who are financially dependent on others and many married women who are completely unaware of their family finances (relying on their spouse not only for income but also to design their family’s financial blueprint) the message is finally getting through. Women should take responsibility for their own financial future.
It simply means not having to depend financially on family, friends, spouse or partners.
Even if you’re doing significantly better than average and you take an active role in your finances, you can take steps to boost your financial knowledge and take a more proactive role in your finances. Four simple steps that can be followed:
1. Understand and monitor your cash flow on a regular basis
An important step to being in control of your finances is to understand where your money is coming from and where it goes. There are several online easy to use and free tools that can assist with this step or you can create your own manual or electronic version of what is essentially a cash flow statement. This should not be a once off exercise. Regular monitoring is essential in order to invest, reduce debt etc.
2. Get rid of debt
If you feel like you’ve got too much debt, especially “bad debt”, then a key priority should be to eliminate debt. Bad debt is essentially debt where the interest you pay is not tax deductible, for example, your home loan.
Remember, not all debt is created equal. Exorbitantly high-rate credit card debt is not the same as a low-interest home loan, which tends to have reasonable monthly payments and longer payoff terms.
Simple things such as paying your credit card debt on time to avoid high interest charges, negotiating/asking for lower interest rates from lenders, make extra repayments where possible especially against ‘bad debt’ will continue to provide you with greater financial security.
3. Save and Invest
An important step in this process is to understand what you need in terms of financial assets for a comfortable retirement. It is not a well understood fact but an important one to help with overall planning. Investing is one of the best ways to beat inflation and reap the benefits of compounding to grow your money.
There’s a reason why Albert Einstein referred to compound interest as “the greatest mathematical discovery of all time.” Compounding is when your money accrues not only on the earned interest but also the principal, allowing your investment to grow at an exponential rate. The key to compounding lies in time and earnings, which is why you should invest as early as possible — even if you don’t have thousands to invest.
If you’re not financially savvy or confident in planning your investments or simply lack time, you might want to consider working with a professional financial adviser to help you with your entire plan or at least a few aspects of it. However, always check in on how your investments are performing and question that performance. Remember that reading does wonders for your grey matter in general.
4. Protect yourself
No matter how comfortable you feel now, whether you’re single, married, or living with a partner, always plan your own financial future as if you were already on your own.
Make sure you have access to savings accounts and investment accounts, get to know your accountants, legal and financial advisers, attend planning meetings and make sure you have an estate plan in place. These simple steps will not only help you stay in control of your finances, but also give you the financial security you need to retire comfortably.
Remember, the data shows that 9 out of 10 women will be in charge of their own finances at some point. It is vital to therefore to control and stay in control of your finances.