Photo courtesy of Fabian Blank
With the mainstream focus on women’s empowerment at an all-time high, women continue to climb to positions of power in the workplace and at home. However, because money and finances have traditionally been considered a part of the “man’s world,” it’s common for women not to be taught how to plan for their financial futures. In fact, the majority of women still struggle with financial literacy, which can, in turn, make women feel uncomfortable talking about money or exploring how to make more. At a time when women are achieving so much, why don’t we feel empowered to take hold of our financial future?
It’s important for women to achieve financial literacy because, statistically, women live longer than men. We need to be prepared for retirement and late-life costs, feats that are hard to accomplish when we’re still paid significantly less than men because of the gender pay gap.
So what is financial literacy? Also known as personal finance, financial literacy is an understanding of how to apply a variety of financial skills to your life, such as budgeting and investing. Financial literacy allows women (and all people) to become independent and make informed decisions about personal finance. Below are seven steps you can take to get organized and achieve financial literacy.
1. Create a budget to track your spending
Budgeting is the best way to dip your toes into financial literacy because it helps you take stock of the assets and expenses you already have and see where there’s room for growth. You’ll start with your after-tax income, deduct all necessities, i.e. rent, utilities, loan payments, etc. and see how much you have left for saving, investing, and personal spending.
For a step-by-step guide and recommendations for your first (or new) budget, check out this “Budgeting 101” article from NerdWallet. And to learn more about finance for beginners, try listening to the So Money podcast by Farnoosh Torabi where you can hear about everything from paying off credit cards to starting your own business.
2. Start saving
Saving is an important part of planning for your future because you never know when unexpected expenses might come along. Be sure to include them in your budget, and if you are paid via direct deposit, it’s best to automate your savings. This out-of-sight, out-of-mind method ensures accrual of wealth over time and keeps you accountable so you don’t find something better to do with those funds.
3. Make a plan to pay off your debt
If you’re anything like me, you might feel like you’re drowning in debt sometimes. Between student loans, credit cards, and medical bills, debt can feel overwhelming and impossible to tackle, but it’s possible to pay off your debt so that you can take those extra funds and invest them. You can build your payments into your budget or make a separate plan, altogether. Many financial advisors recommend paying off one debt at a time, starting with the most expensive while others argue that paying the least expensive one off first can help debt elimination feel more manageable. No matter what you choose, make sure it’s right for you and your budget. For more great tips on paying off debt, listen to The Money Nerds podcast by Whitney Hansen or pick up a book by renowned financial planner Suze Orman.
4. Learn about and start investing
Investing is pretty intimidating for some people, but it’s actually easier than you think. When you invest, you’re essentially putting your money in a place where it can make you more money. You can start small by contributing a little bit to index funds each month and then go from there. Learn more about investing from Laura Abrams, host of Money Girl, or read a few columns by Mellody Hobson, president of Ariel Investments and renowned advocate for financial literacy.
5. Understand your options for retirement
The average American retires at age 62, and while that might seem like a ways off for some of us, financial literacy involves planning for our future. Are you contributing to a 401(k)? Are you investing? What plan works best for you? Remember the earlier you start saving for retirement, the earlier you might be able to retire. Wander Wealthy is a great resource for retirement planning, or you can check out this article from Investopedia.
6. Stay up to snuff on global economics
Did you know the global economy affects the U.S. economy? Maybe this seems like a no-brainer, but staying up-to-date on the global economy is one way to try and predict the U.S. economy, thus figuring out which stocks are best to invest in and when. Any mainstream media outlet will have articles about the global economy. If you want something more specific, check out the global economy section of the Financial Times.
7. When in doubt, consult a financial advisor
Financial advisors are personal money experts who can help you take a look at your assets and advise you on where and what to save, invest, and more. They can even help you with debt elimination. You can hire a financial advisor at any point in your life, but they can be expensive, so it’s best to hold off until you have room in your budget to pay them. Some workplaces have financial advisors you can set up meetings with, so it’s good to check with your HR department to see if that’s one of your untapped benefits. NerdWallet has this great article, which explores ways to receive cheap or free financial advice. And remember, there is a plethora of information out there—you only have to go and search for it.