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Women’s Guide to Financial Success

We get it: Managing money and saving for retirement aren't exactly the most inspiring tasks.

Plus, money doesn’t always go hand-in-hand with what is deemed feminine. Report after report show that women feel less financially literate than men. Which is a problem since women tend to make less and live longer than their male counterparts.

Here’s what to do to get on track.

Feel Confident Managing Your Own Money

For some women, the prospect of managing their finances instead of their husband, or asking mom for money advice instead of dad, seems foreign. While men typically earn more, it turns out that women are better at credit management and investing.

Women and Credit

Women are actually better at money and debt management, according to Experian. In 2013, the credit bureau analyzed their vast amount of data to look at not only credit scores, but also average debt, how much debt they had, mortgage amounts and missed mortgage payments.

The actual scores were only one point apart, men had an average Vantage Score of 674 and women had an average of 675. While one point different isn’t very significant, they did find these differences:

  • Men had 4.3 percent more in debt.
  • Men used 2 percent more of their available credit.
  • Men took out larger mortgages.
  • Men had a higher frequency of late mortgage payments by 7 percent.

Women and Investing

Women today are also making better decisions about investing. The average man is saving 7.9 percent of their income, while the average woman is saving 8.3 percent, according to research from Fidelity Investments. That .4 percent might not seem like much, but when you consider how long retirement takes to grow, that can mean tens of thousands of dollars later.

Once women invest, that money performs better, too, according to a report from Betterment. How much better? 1 percent each year. When the firm dug into their findings they found a possible reason why. Men were more reactionary: They logged into their accounts more often and changed their asset allocation more often.

The average man is saving 7.9 percent of their income, while the average woman is saving 8.3 percent— Fidelity Investments

Women are More Educated, Living Longer

It’s hard to argue with the data: Women are earning more college degrees and living longer than their male counterparts.

In the past 40 years, America has seen a dramatic shift in college attendance. More Americans are seeking higher education than ever before, and this is most true for women. 2015 was the first year where more women earned degrees from universities than men. As women have become more educated, the gap between what women earn and what men earn has decreased. Women still, however, continue to earn less than men once they enter the workforce.

Women live longer than men by about 5 percent. The average life expectancy for men is 79.5 and 83.5 for women. Four years may not seem like a big difference, but it is significant when you consider it increases retirement by more than 27 percent for women. This puts women at risk for falling into financial hardship in a very vulnerable time. To meet that difference, retired women are forced to make their money stretch further.

Managing Non-Traditional Income Streams

Structured Settlements

Settlements often come after a serious emotional loss. No amount of money can take away suffering from an ailment that wasn’t your fault . And it certainly can’t bring back someone you loved. You can, however, spend the money in a mindful way to honor the situation.

Child Support

Child support can be a great way to provide a better life for your child. Child support offers a great boundary in your finances: it’s money to help with day to day expenses. Things that make a child’s learning or home situation better are great uses for child support.

Alimony

Also known as spousal support, alimony is the legal obligation of an ex-spouse to provide financial support after a divorce or separation. Alimony is something you get during an emotional time, but since it often dries up quickly it’s best to use it strategically to get your life in order. This is a good time to put a deposit down on your own apartment, or invest in things you’ll need to advance your career.

Women Struggle More with Financial Literacy

So, if women are more educated, have better credit scores, and invest for retirement better than men, what’s holding women back? Many answers point to fear.

Despite outperforming men at planning for retirement, many women feel insecure about what they know about their careers and money management.

Imposter Syndrome and Income

Even though it was coined in 1978, the term imposter syndrome is suddenly popping up more and more in conversations about career advancement. Imposter syndrome is a collection of beliefs held by high-achieving individuals that they aren’t worthy of their success or simply landed there by luck. These individuals report feeling afraid that people around them will find out they aren’t living up to the expectations around them and will be “found out.”

Recently, more women in high positions have started to openly share their struggles with those fears. Chief Operating Officer Sheryl Sandberg wrote in Lean In: Women, Work, and the Will To Lead, “Many people, but especially women, feel fraudulent when they are praised for their accomplishments.” Reluctant to accept the praise as valid, it can leave women workers feeling unhappy even when they are succeeding.

Imposter Syndrome is also keeping women from applying for jobs that could mean more money in the bank. An often-cited, internal Hewlett Packard report showed that men will apply for a job when they meet only 60 percent of the qualifications, but women will only apply when they believe they meet 100 percent of them.

There’s more to that study though. The report also asked people why they don’t apply. The biggest difference between women and men was that women were twice as likely to say “I didn’t think they would hire me since I didn’t meet the qualifications and I didn’t want to put myself out there if I was likely to fail.”

Money Management

For women, fear and talking about money management seem to go hand in hand. The 2015 Fidelity Investments Money FIT Women Study found that 80 percent of women don’t like to talk about money, even with friends and family.

Further, only 47 percent said they felt confident discussing investing and money management with a financial professional on their own. To put that in perspective, 77 percent said they would feel comfortable on their own discussing medical issues with a doctor.

A deeper dive into the data showed that it was less the day-to-day finances that bothered women, as 82 percent felt comfortable with everyday purchases and bill paying. It was navigating long term financial planning, where 62 percent said they were confused.

Taking Control of Your Finances

Budgeting and saving for retirement can seem so overwhelming that many people – male and female – put it off. But taking control of your finances doesn’t have to be something you put off forever.

Getting a snapshot of where you’re at puts you ahead of the curve, only 32 percent of Americans have a household budget.

If you don’t have a budget, here’s a great way to start:

  • Start with a blank spreadsheet using a program like Google Docs or Microsoft Excel to collect all of your data.
    • Put the name of the money in one square, and the amount in another.
  • Gather up your monthly income sources and add them up.
    • Traditional income from a job
    • If you have it, nontraditional income like stock dividends or settlement payments.
  • Gather all of your recurring monthly expenses, such as:
    • Rent or mortgage payment
    • Utilities
    • Cell phone
    • Car payment
    • Car insurance
    • Subscriptions (magazines or streaming video)
    • Health care costs like medication
    • Health club membership
  • Look at your last three months of statements to find the average of how much you spend each month on:
    • Groceries
    • Eating out
    • Gas
    • Entertainment, such as movie tickets and bar tabs
    • Average shopping each month
  • Once you have these, you can subtract all of your costs from your income and see what’s left over. That amount can then be applied to debts and long term savings.
  • Collect all of your credit accounts, how much you owe on each and how much you put towards them each month:
    • Credit cards
    • Other small loans

  • You should be able to use the functions with the spreadsheet software to do the math for you. If not, there’s no shame in grabbing a calculator and plugging in the numbers yourself.
  • At the bottom you should have a small amount left over. What you do with this is personal preference depending on your goals, but a good rule of thumb is to split it down the middle, putting half into savings and using the other half to pay of your credit cards.
Sample Budget
Income:
Work $1,980
Settlement Payment $500
Total Income: $2,480
Expenses:
Regular
Rent – $700
Utilities – $120
Cell Phone – $115
Car Insurance – $60
Car Payment – $150
Subscriptions – $20
Health Care – $30
Gym – $20
Variable
Groceries – $240
Eating out – $150
Gas – $60
Entertainment – $100
Shopping – $100
Credit cards
Card A – $50
Card B – $75
Total Expenses: – $1,990
Remaining after Expenses: $490

Traps to Avoid, Hacks to Use

In some ways it’s logical, if your husband is better at cooking and you’re better at cleaning, it makes sense for you both to do what you’re good at. But what about when your husband is better at managing your household finances and you’re better at helping the kids with their homework?

Relying on Others

That scenario is all too common. When one partner – and  it’s often the husband – handles all of the finances, the other is left in the dark. This can snowball into further problems. If you don’t understand the big picture, how can you make the best day-to-day decisions about money?

A marriage is a partnership. When both husband and wife are in the know when it comes to the family’s financial situation, the relationship and finances are both in a better position to thrive. That doesn’t mean that you both have to literally be in the same room to put the stamps on the envelope of your electric bill. Tasks can be split up, just make sure you’re making the decisions together.

Avoiding the Caretaker Trap

Women often find themselves in the position of taking care of others. That means different things for different people. It can mean caring for children, caring for aging parents – and sometimes it means caring for both at the same time.

This caregiver assumption can influence how women use money. Often it means investing in others instead of investing in themselves.  For instance, rather than saving a little extra for retirement maybe you send your daughter to an expensive summer camp. While giving your children the best childhood possible should be important, it doesn’t have to come at the cost of your financial health down the road.

Instead, Volunteer

However, the impulse to help the people around you can be used to the benefit of everyone – including yourself. One in three women said they volunteer in their community.

Not only does this come with great feel-good perks, such as feeling more fulfilled and living in a better community, it can lead to career perks too. A study out of the U.S. Committee for National & Community Service found that those who had periods of being out of work and volunteered had a 27 percent higher chance of getting a job than those who didn’t volunteer.

This is especially great for women, who are more likely to have periods of time off from work. Whether it’s cleaning up a nature preserve, helping under-privileged kids, or feeding the homeless, there’s always a way to help out.