By: Katherine Downs
When you think of ‘Finance’, what do you think about? If you asked me this question just a few weeks ago I would’ve responded with something general like “money” or “math for investing”. I knew it had to do with money and balancing a checkbook but had little to no understanding of how big a role finance actually plays in our everyday activities. I avoided taking finance courses in school because I figured it would just be another confusing math class I wouldn’t enjoy. I knew finance was a complex concept (more than just spending vs saving the money you possess), but recently realized how essential financial knowledge is to have, even if it's just the basics. Many modern-day women generationally have been avoiding the concept of finance in their personal lives, like myself, and by doing so are unknowingly self-sabotaging their financial security in the future.
If any of you caught Robin Hauser’s “$avvy” documentary screening last week in Isenberg, you already know how even in modern times many women don’t control their personal finances. Why is this? Well for me, I never considered looking into finance because it seemed too complicated and I didn’t think I made enough money to really get into it. Hauser’s amazing documentary showed me that this is not the case! It doesn’t matter how much money you currently have or make, everyone can take control of their finances, and with financial knowledge comes financial freedom. It may be easier to rely on someone else (husband, spouse, parents, etc.) to handle the money, but then someone else is in control of how much money you have access to–even if you’re the one who rightfully earned it! In cases of divorce or unforeseen circumstances, women (and sometimes men) often lose the majority of everything they’ve earned if they don’t control access to their money for themselves. About 20% of women fall into poverty due to divorce and this is largely because they did not have any control over their finances prior (Silvestrini).
So how can we change this societal dynamic and improve our own lives through the management of our own finances? Collectively, we can start by being more open to conversations about money management and in turn, improving financial education. Individually, there are 4 steps you can take to get you started on your journey to financial independence:
Create a Spending Plan (or Budget) Based on Your Saving Goals and Income A good place to start taking control of your personal finances is by opening 2-3 types of bank accounts to organize your money:
- A Savings Account
- A Checking Account
- A Retirement Account (separate or combined with Savings)
Having a combination of these types of accounts can make organizing your money easier to manage. For example, putting away a portion of your income into a long-term savings account can allow you to have money for emergency situations you otherwise may not have been able to
afford. A checking account (which comes with a debit card) is a great place to store money you plan to spend soon, without expending money from your savings/emergency funds. In addition to saving for unexpected expenses, it’s a really good idea to begin setting aside some money for retirement! A lot of employers will offer 401K or other retirement investing plans, and some may even set aside a certain amount from each of your paychecks for you! The sooner you start setting money aside for retirement, the more money you will have when you retire and the better off you will feel!
Apply for a Credit Card and Build a Line of Credit
Opening a Credit Card allows you to gain and build credit history, which can help you tremendously when applying for loans, get better rates of insurance, and have more housing/transportation options. Just make sure you pay off the full amount when your monthly bill comes, otherwise, you may end up paying even more later in added interest! If you’re worried about overstretching your current financial limits, try starting by only using your credit card to make a certain type of payment you’re already used to paying each month. For example, only use your credit card to fill your gas tank, or only to buy monthly groceries. This idea can help you better keep track of how much you should set aside to pay your monthly credit card bill, and not overextend your spending limits or put you in debt!
Start Investing (Even if it’s Small Amounts!)
Investing a portion of your finances gives your money a chance to grow on its own! You can invest in different ways, such as through bonds (loans to companies who later pay you back) or through stocks (partial ownership/share of a corporation). A good rule of thumb is to only invest amounts of money that you are willing to lose. This way, you have more control over the amount of risk you take with your investments! It’s not a good idea to rely on investments as a sole form of income, as markets can be unpredictable. Also, I wouldn’t recommend putting all of your savings into investing–as you may need to have some liquid savings on hand for unplanned/emergency expenses. Overall, however, investing can give you a major advantage in increasing your amount of savings and will benefit you in the long run!
Practice Open Financial Communication In Your Household
Practicing open financial planning and communication with your living
partner/spouse/roommate/significant other allows you to not be left in the dark about your financial situation. It also allows you to keep (or gain some) independence over your financial spending in regards to living expenses and personal use. If you’re making an income, you deserve to either have full control and/or have a say in where your money gets to be spent!
Sources:
- “$avvy” (2021) documentary film directed by Robin Hauser
- Silvestrini, Elaine. “Women & Financial Literacy.” Edited by Emily Miller, Annuity.org, Feb. 2022, https://www.annuity.org/financial-literacy/women/.