Financial health is not something that is often talked about and specifically in the context of women. Yet, this is almost as important as physical health. As women, many of our liberties are still very much related to economic status. Women who are financially independent are better able to leave hostile work situations, take up new opportunities such as working abroad, career change or set up a business and they are also in a better position to escape abusive relationships. Traditionally, we have not had a particularly easy time of it when it comes to economic liberation. To this day, women from every corner of the planet and any ethnic, religious or educational background are still more likely to be paid less for doing the same job as their male counterparts. Couple that with fewer opportunities for promotion, maternity leave or taking time off to care for a sick relative and its no wonder that many women find themselves with pension deficits on retiring. There are many things that have to change starting with equal pay and cracking down o discrimination. However, in the meantime, we’ve put together this post as the second installment of our life spring clean on wealth. Let us know what you think and please share any helpful #lifespringclean tips with using the comments below or on Twitter or Instagram.
General wealth health
This is the absolute baseline and consider this as your equivalent of a general medical exam. You can’t do anything without knowing what the status of your finances stands at. It may be painful and you probably won’t like what you see but it’s non-negotiable. I personally think a spreadsheet helps for this but go with what works best for you. Start by auditing all of your accounts. Make a note of:
- Current/checking accounts
- Savings accounts
- Credit cards
- Store cards
- Loans (including mortgages, car payments etc…)
Then find out exactly how much you have (in the case of current and savings accounts) as well as how much you owe to the penny. Following this, make a list of your regular monthly incoming and outgoing money which should include:
- Salary/funds after tax, student loan and pension deductions
- Amount you save
- Credit card bills
- Loan repayments
- Other bills
- Food and drink
As tedious as it sounds this financial autopsy is essential for your wealth check. It’s not quite over yet though. Now its time to look at your debt more closely. Of your outstanding debt, find out the interest rate (particularly compound) for each of these and repayment period (for loans).With this information, you should be able to figure out whether you’re in the black (bring in more money than goes out) or in the red (spend more than you have coming in).
If you’re in the red, take a deep breath and don’t panic. Next, take charge of your finances. The important thing is to avoid adding more debt by increasing your outgoings unnecessarily. If you’re in the black, you can breathe a sigh of relief but in itself is not enough! One of the biggest challenges women face later on in life is not having enough of a financial reserve for an unexpected event. This could be the death of a spouse or partner, divorce, being made redundant or losing work or simply having failed to put enough aside for retirement.
Protect your financial future
There are two elements to this. One is increasing your reserve of cash and the second is putting aside money for emergencies and your retirement. Whilst everyone is different after you’ve performed your wealth check then you can make a start to a healthier financial future by following 4 easy steps.
Get financially fit in 4 steps
Control your spending and borrowing
First of all, stop using store cards. The interest of these can be prohibitive. Then transfer the balance from your store cards (if you can’t pay them down straight away) and any credit cards with a huge interest rate to interest-free options. The key thing is to then stop using your credit cards altogether and try to pay them down whilst the interest-free period is on.If you can’t do that then transfer the remaining balance to another interest-free or low-interest rate card once that period is finished.
Concomitantly, you should try to reduce your spending in order to help you pay down your debt sooner and also reduce you accruing any more. Set a realistic budget and cut back on unnecessary expenditure. Don’t be too austere however as that will mean that you’ll likely relapse. One way to do this is to reward yourself with something in return for meeting a specific goal. If after all this, you need to borrow money, look for a low-interest loan or overdraft or even consider a credit-union as an alternative.
Increase your inflow of money
So here is something you should definitely consider if you’re trying to improve your financial health. The first thing to do is check whether there are opportunities for boosting your income form your current work either by picking up extra hours, more responsibilities or even by applying for a promotion. Also, make sure that you’re being appropriately paid for the work that you do. Double check that if you’ve picked up any extra duties, then you’re being adequately renumerated. If you’re a woman, ensure that they’re not paying you less than your male colleagues for the same work. If that’s not possible and you’re not particularly thrilled with your current work then you could consider moving jobs to a better-paying alternative.
If switching jobs or increasing your current salary isn’t an option, then consider a side hustle. If you have a talent for writing, designing or any sort of skill then there are many platforms which can offer your freelance opportunities. You can also consider become an independent contractor or consultant in your area of expertise. Other things you can try out are even setting up a small business such as selling handmade items on eBay or Amazon. Whatever you do, make sure that you process your taxes correctly and don’t do anything that might breach your contract at work. Aside from this, a side hustle can be incredibly rewarding both financially but also because it may provide you with an outlet for your talents and a sense of freedom.
Make saving a habit
This may sound boring and also not practical if you’re struggling to pay down your debt. However, it is actually a very important thing to do. A lot of people end up falling back on credit cards and loans because they don’t have enough reserved for unexpected events or commitments. Having some money put aside will actually prevent you from falling further into debt in the long term. How much to put aside will obviously depend on how much you have left after you’ve paid your living expenses and a tiny bit extra. If you only have a certain amount that you can afford to pay which you’ve put aside to settling your debt (which should be on an interest-free card), then put 25-30% of that in a savings account. The more of your debt you pay, the more you should increase your savings contributions.
Plan for your retirement
Many women find themselves in financial difficulty when they’re older because they fail to adequately prepare for retirement. Firstly check that you are enrolled in a pension if you’re an employee and whether there are any gaps in your pension (this could be due to periods of study or unemployment). If there are any gaps, you may want to consider whether you should also make voluntary pension contributions. Another thing to consider with regards to your retirement is if you have any investments or assets. It’s worth seeking independent financial advice for this to try and get you in the best possible position when it comes to your future.