The Women’s Guide to Financial Independence

Financial independence means having the ability to support oneself financially without assistance. Being financially independent is an important goal for people of all backgrounds, but it is particularly important for women who have historically been marginalized by the job market.

Financial awareness and money management skills can lend women a deeper sense of security that makes it easier to save and invest for the future. An understanding of the challenges, advice and resources available to help can facilitate the process.

Financial freedom is a form of personal empowerment, but a variety of roadblocks make it difficult for women to navigate and partake equally in the financial world.

According to statistics from the U.S. Bureau of Labor, for example, women annually earned 82.3% of that earned by men, with the gap being even wider for many women of color. Pay discrimination, household responsibilities and a lack of exposure to financial tools are all issues that women confront. In addition, women may also experience the pink tax, which makes them pay extra for everyday products — further exacerbating financial inequality.

While there are positive movements that advocate for equal rights between women and men, pervasive social structures are difficult to break. The following list elucidates some of the key challenges:

Women tend to know more about managing their finances than they think. While some financial moves make sense at certain stages of life, other strategies are applicable any time. Often, the best way to develop a financial strategy comes down to becoming more financially literate.

According to Fidelity, only 20% of women surveyed said they felt sufficiently prepared by their parents to manage finances as an adult. Setting financial goals and understanding short, medium and long-term money strategies can result in a lifelong safety net.

To build financial independence and wealth, it’s important to start investing, budgeting, saving and planning for retirement.

In addition to providing a reliable source of income, investments can help combat inflation and serve as a vehicle to ensure that savings continue to grow. Many women are familiar with the concept but unaware of the full extent of possible dividends or doubt their ability to invest successfully.

In reality, women are just as effective as men when it comes to investing, and their portfolios tend to be even more successful. A recent survey found that only 26% of American women invest in the stock market, although nearly half of women view the market in a positive light.

Investing allows women to have an equal opportunity at accumulating the same wealth as men.

Finding the right investment strategy will depend on your level of risk and your short and long-term investing goals. Determining if you want to be an active or passive investor is a good place to start. Active investors are frequently involved in the buying and selling of assets, while passive investing tends to mean more “sitting and waiting.”

Generally speaking, short term investments are designed to provide results within three years, while long term investments involve stocks, bonds, real estate and other assets that can provide financial benefits for many years down the road.

Portfolios can also be low or high risk. A high risk portfolio includes an aggressive strategy that could result in several ups and downs with the potential of high rewards. Low-risk portfolios are not as volatile but may not yield as strong of results.

Budgets allow you to spend within your means and save for financial goals. According to Smart Asset, single men earned roughly $2,000 more on post-tax income than women, and they also outspent their female counterparts.

Despite common stereotypes, men were actually found to have average post-tax expenditures of $42,000 a year, compared to $39,100 by women. While women are often better at managing money than they give themselves credit for, it is worthwhile for them to evaluate where their money is going.

Basic budgeting can help women get even further on track. A good place to start is by listing out how much money is earned each month, then itemizing spending into categories to separate frivolous purchases from necessary spending.

Uncontrolled debt not only batters finances but also generates stress which threatens the health of women and prevents them from attaining financial freedom. In 2020, consumer debt reached nearly $15 trillion. Individual strategies toward paying off debt are crucial for helping lessen the weight of owing money.

To start, women should consider adding debt into their monthly budget. The debt avalanche and debt snowball methods are two strategies to do so. The avalanche method advocates paying off debts with the highest interest rate first, while the snowball method proposes paying off debts by prioritizing the smallest debts first.

Regardless of the strategy, it’s important to always make more than the minimum payment.

When outlining a monthly budget, it’s important to set aside a specific amount for savings. Most financial experts suggest keeping an emergency fund with enough money to cover 3 to 6 months of expenses. Such savings can help in the worst of times, such as during a health scare, job loss or family emergency.

Building credit is another way to make financial headway, and you can start by paying off your credit card balances every month to enhance your credit score.

On average, women live 6 to 8 years longer than men, according to the World Health Organization. Since women often have less than men saved, however, they frequently outlive their money. Women can have a more enjoyable retirement by saving for their later years.

Below are common types of retirement planning to consider:

According to the U.S. Bureau of Labor Statistics, women made up 57.4% of the labor force in 2019, up from 57.1% in 2018. Women are more likely to have higher levels of education and are increasingly likely to work full-time and year-round. Female employees help diversify a company, provide varied perspectives and increase revenue.

While women have come a long way, many who participate in the workforce still face challenges. The wage gap is one of the most persistent hardships.

In 2019, women working full time in wage and salary jobs had median weekly earnings of $821, compared to $1,007 for men. Taking proactive steps can help women to advance their careers and negotiate pay.

Many women want to return to work after having children, but a lack of flexibility in the workplace and diminished pay can make it a difficult transition. In a recent survey from FlexJobs, 42% of women said it was difficult or extremely difficult to restart their career after taking a break.

However, having and raising a baby costs money and returning to work can help women maintain a feeling of independence. Here’s how women can keep on track with a career while raising children.

Big life changes often result in sudden changes of financial ownership. For example, marriage, divorce and widowhood can all have a significant financial impact.

Marriage can create a need to combine finances. Divorce can mean that agreed-upon arrangements need to be adapted, while widowhood can lead a woman to abruptly become a family’s main money manager, often requiring additional financial support.

Marriage can affect your financial situation in a number of ways. From the ability to build wealth by combining incomes to utilizing tax-related benefits, there are several financial positives to tying the knot. However, sharing financial responsibility with another person can also be stressful. Courses such as the Marriage Money Bootcamp and other resources can help ease the transition.

Below are some additional tips to keep financial conversations positive and stress-free. Incorporating such tips can help you and your partner get on the same page and discuss dreams, goals and your financial future.

Getting divorced is often a stressful event without even factoring in the role that money plays. When you add in dividing up joint coverage such as auto insurance or homeowners insurance, financial disagreements can easily arise.

In addition to consulting resources that can assist with financial planning, such as divorce coaches, the following steps can help ease the financial transition.

Since women outlive men, they are often forced to take control of financial assets when their spouses pass. Sudden ownership of finances can be overwhelming, particularly when compounded by the loss of a loved one.

But today, roughly 70% of U.S. household investments are controlled by baby boomers. In addition to making a financial checklist, incorporating some of the following tips can help.

From guides and tools to mobile apps, courses and information, a variety of resources are available to help women who want to become more financially literate and independent.

• TwentyFree: This website is run by a millennial money expert, financial coach and award-winning personal finance podcaster. It is focused on teaching millennial women how to pay off debt, save, invest for retirement and achieve financial independence.
• Money and Mimosas: Money and Mimosas is a financial wellness platform for the self-employed. It also offers a series of guides and resources for freelancers.
• Nav.it: Nav.it is a mobile app that assists users in learning about finances, organizing and managing money and providing support. You can also access money coaches and find community support to help you reach your goals.
• Hapi: Hapi is an app designed to help parents invest in their children’s futures. It also allows close family and friends to facilitate the learning process.
• Savvy Ladies: A variety of free financial education resources like Savvy Ladies can empower females to take control of their finances. Savvy Ladies provides a professional network and offers free financial advisors and educational programming.
• Your Money Matters - A Financial Guide for Women: This tool offered by the Women’s Law Center of Maryland supports and enhances women’s financial literacy and autonomy by providing straightforward and useful information about women’s financial independence at all stages of life.
• Wife.org: The Women’s Institute for Financial Education (WIFE.org) is the oldest non-profit organization dedicated to providing financial education to women. WIFE is run by volunteers who help other women find resources to help them prosper and grow financially.
• Wiserwomen.org: WiserWomen offers a variety of resources and guides on investing and financial planning for all stages of life. It also provides information about events and networking opportunities.
• Financial Independence 101: This free online training course on how to become financially independent. It can help you master your fear of money issues and shape your financial future.
• Clever Girl Finance: Clever Girl Finance is a personal finance platform that provides free guidance, products and services to empower women to reach financial independence.
• National Financial Educators Council: The National Financial Educators Council offers financial literacy services and resources for low income individuals, including women.
• Real Money Answers for Women: This book is geared towards self-sufficient women and provides tips on how to dig oneself out of debt. It’s a straightforward read for those looking to get a handle on money issues.
• The Women’s Resource: The Women’s Resources offers a six-class series that helps women build up a foundation for a strong financial future. Teachings are designed in conjunction with a nationally recognized expert in the field.
• Women’s Guide to Making Financial Moves After College: A guide offering financial tips for women graduates, covering student debt, the gender pay gap, and steps to build financial independence.
• Navigating Pregnancy Discrimination: A guide that covers the signs of pregnancy discrimination, legal protections and steps to address it, with resources for seeking help and support.