What Women (and Men) Need to Know About Money

By Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, boneill@njaes.rutgers.edu

On May 28, 2019, the Military Families Learning Network Personal Finance team is presenting a webinar called Gender and Finances. The webinar will describe research about how women handle money and fare economically versus men with respect to saving, investing, the use of credit, and retirement planning.A woman holding a wallet while removing a credit card.

Why a webinar about women and personal finance? Very simply, women have unique financial challenges:

  • Women live longer than men on average
  • Women earn less than men on average
  • More women than men have employment gaps that impact future retirement benefits (e.g., Social Security)
  • More women than men are impacted negatively by life events such as widowhood and divorce
  • Some women lack financial knowledge and/or experience or depend on others to provide financial support

An estimated 85% to 90% of American women will be on their own financially at some point in their lives. Some will never marry. Some will see their marriages end in divorce, and some will outlive their husbands. Perhaps nobody better stated the need for women to become financially independent and financially capable than American suffragist and women’s rights leader Elizabeth Cady Stanton in 1892:

No matter how much women prefer to lean, to be protected and supported, nor how much men desire to have them do so, they must make the voyage of life alone, and for safety in an emergency they must know something of the laws of navigation.

There are many things that people can learn about personal finance. A good habit to develop is to learn one new thing a day from print, electronic, or social media, family and friends, or other sources. Listed below are 8 key action steps that women (and men) need to take:

  1. Set Financial Goals- Include a specific date (e.g., 2023), a specific cost (e.g., $8,000), and an action plan (e.g., I will save $X monthly). Measure your progress periodically.
  2. Pay Yourself First- Set up automatic savings plans so part of your income gets saved before you can spend it. Examples include employer retirement plan payroll deductions and checking to savings account transfers.
  3. Develop and Maintain Human Capital– Learn new career skills and information on a regular basis and never consider your education finished. In addition, practice good health habits to remain productive.
  4. Maintain a Good Credit Rating- Pay credit bills on time, avoid charging more than 50% of your available credit limit, and check your credit report regularly for errors and evidence of identity theft.
  5. Manage Credit Wisely– Seek a low interest rate (APR) credit card, seek credit counseling if needed, and (ideally) make credit card bill payments in full or at least pay twice the minimum payment.
  6. Practice Tax Avoidance- Take advantage of legal tax-reduction strategies including tax-deferred retirement savings plans, tax deductions and credits, and long-term capital gains tax rates.
  7. Calculate Your Net Worth– Total the value of everything you own (assets) and everything you owe (debts). Subtract debts from assets to determine your net worth and update this figure annually.
  8. Know Your (Cash) Flow– Track and total monthly income and monthly expenses. Compare the numbers and identify expenses that can be reduced to avoid negative cash flow and free up money to save.

 

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