3 Money Blunders Women Make And What To Do About Them
Published in Business Fit Magazine
Oh no, I didn’t know that. Financial wisdom doesn’t arrive by magic on your first birthday, beautifully wrapped in ribbons. It doesn’t evolve as you mature or manifest out of the blue each time you apply for a loan or make investment choices. Just like any other skill, it must be learned consciously and through practice.
Make a fresh start by confronting three of the biggest money blunders many women make.
1) Not Being Proactive
If your parents didn’t help you to build a strong foundation of financial knowledge as a child, there’s little you can do but float in the wind hoping that your wealth will manifest all by itself—no proactivity required.
What gets measured, gets managed
Learned helplessness is the fastest route to financial failure, and it’s difficult to avoid if you have no idea where to begin understand essential financial concepts in making informed decisions about saving, investing and borrowing.
The only way to gain confidence in your money skills is by learning and practicing them, and that requires you to take ownership of your financial life.
The first step to taking ownership is through awareness of how much you spend, save, earn, and owe. When you know your numbers, you position yourself to achieve your goals and have confidence that you’re on pace to financial freedom.
Knowing your monthly expenses is equally important. It’s just a matter of keeping track of how much money is coming in and how much is leaving your pocketbook. This lets you know you’re in control of your finances instead of your finances controlling you. Now is a good time to re-evaluate your budget and free up some cash.
Your savings rate is critical to achieving financial success. Saving at least 10% of your income is the minimal amount to save annually, but 15-20% is even better.
Knowing your net worth is important for these two reasons. It helps you understand your current financial situation. It gives you a reference point for measuring your progress toward your goals.
To determine your net worth is to subtract your liabilities from your assets. It’s what you own minus what you owe. Think about this. If you have $2 million in your savings and investments and you have $2 million in mortgages and other debts, your net worth is zero.
Trying to gain financial skills while ignoring these basic numbers is like trying to follow a map with your eyes closed.
If you pay conscious attention to which numbers grow and which numbers shrink and why, you’ll grow out of your small mistakes and gradually grow into a greater sense of control and empowerment.
2) Ignoring Lifestyle Changes - Lifeboat Strategies
Fail to bend like a reed, and you’ll break every time the wind blows. No creature ever evolved by insisting their ecosystems would adjust to them, so it’s critical for women to prepare for unexpected transitions and changes.
For women marriage finances aren’t end-of-life finances. College money bears little resemblance to job-loss money, and yet few women prepare for their minor life transitions, let alone their major ones.
Whether your financial future takes the form of recessions or Corona virus, job loss or disability divorce or death of your spouse there are ways to build your “lifeboat strategies” in advance.
Women’s financial security is impacted by divorce and they experience a 41% reduction in their standard of living.
One in five women who gets divorced go into retirement in poverty. KNAPP 2014
To reduce this probability is to become more interactive in your financial decisions. Get educated about investing. That will help decrease the possibility of outliving your money.
We live an average 5-8 years longer than men and have higher rates of disability which increases the likelihood to need long term care.
Women need adequate insurance protection because we are more likely to have chronic health conditions and earn lower wages than men.
Build your 6-12 months emergency savings to cushion the effects of financial disruptions.
Living a life of complacency can obliterate your foundation in a single swipe, so keep a wide view of your financial future with all its potential.
You’ll feel a thousand fears evaporate from your life because you’re ready for any financial crises before they occur, and the solid foundation you’re left with will give you peace of mind and serve you well.
3) Penny Wise - Pound Foolish
You build your entire life around professionals who are specialists in their fields: dentists, doctors, attorneys and CPA’s, but for some reason, when it comes to money, everyone thinks they’re supposed to be experts.
And most people are not. Financial decisions don’t arrive in a convenient textbook format.
Retirement plans don’t come with investing advice presented in Ted X format with easy-to-follow PowerPoint slides. Rely on the best in the field for financial advice, and you’ll reap impressive rewards on your investment.
If you want to enjoy the best your finances can achieve, consult the best professionals. Asking for help is one of the wisest things you will ever do.
The best professionals in the industry will guide you towards your ideal life, and not to their idea of what that life should be.
A study by Morningstar found that advice from a financial planner can add 29% more wealth through retirement
Avoiding these BIG money mistakes will help you live within your means.
Without all that financial hand-wringing and anxiety, you’ll finally be free to manage your money with purpose and clarity.
When you’re in control of your finances, money becomes a tool to create a life of fulfillment.
Wield it well, and you’ll soon build the secure financial future you’ve always dreamed of.
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