How women can pursue financial freedom
Hundreds of years’ worth of systemic inequalities have put women at a disadvantage when it comes to earning, saving, and investing. Here are just a few ways women can fight that reality and pursue financial freedom.
Women face different barriers when it comes to achieving financial freedom. For starters, women earn less thanks to the gender pay gap (even worse for women of color) and pay more for certain personal care items because of the ‘pink tax.’
Women also take on the bulk of unpaid labor and caregiving for children and elders. Add that to the fact that women also live longer than men while still having saved–on the whole–less for retirement, you’re left with a recipe for financial inequality.
These systemic inequalities put women at a disadvantage when it comes to earning, saving, and investing. Here’s how women can pursue financial freedom.
Start where you are
To come up with an action plan toward financial freedom, women need to review where they’re at now. Starting where you are can help you come up with a roadmap for your financial goals.
“An easy way to start this process is by doing a net worth statement and knowing exactly where you stand today,” says Kasey Ring, personal finance coach at Upward Personal Finance. “Pick one goal for growing assets, things you own, and one goal for combing down liabilities, the things you owe.”
Have the right money mindset
Money can seem like it’s just about the numbers, but it’s far more about mindset than we give it credit for. Shifting your money mindset and creating a healthy relationship with money is crucial to reaching financial freedom.
“For women to move toward financial freedom, we must welcome an aligned money mindset, strengthen our relationship with money through aligned budgeting, and become a money magnet through aligned investing,” says Araceliz Maree, founder of The Latina Investor™.
That means ditching money shame and feelings of scarcity and instead focusing on abundance, spending on your values, and letting your money take care of you. Money is a tool for your financial freedom, not your enemy.
Have a buffer of cash
To achieve financial freedom, women need to have a buffer of cash for emergencies. This can be overwhelming if you have little or no savings.
Lily Ugbaja, founder of the blog Dollar Creed recommends starting small to make your savings habit sustainable. “Don’t try to start with too much that eats into your budget for other things. This can make you discouraged and give up easily. Start with the barest minimum, just make sure you are consistent,” she says.
Strive to have three to six months of expenses saved up as a buffer should you find yourself in a bind.
Be strategic with debt
Debt can affect your mental health and take a bite out of your earnings. Paying off debt can free up money to save and invest.
“By getting rid of the debt, you’re also getting rid of these payments and now get to keep all of the money you’re earning,” says Steffa Mantilla, Certified Financial Education Instructor (CFEI) and founder of Money Tamer.
Depending on the type of debt you have, it could hurt your wealth or help you build wealth as all debt is not created equally.
“Borrowing someone else’s money to purchase an asset, or things that increase in value over time, could be a very wise move,” notes Ring. “But if you have high-interest credit card debt, you could be paying more in interest and not be able to get ahead in the way you want.”
Given the fact that women earn less, live longer, and don’t have as much retirement savings, it’s crucial for women to invest ASAP.
“Include a portion for investing as part of your budget. Be disciplined about this and make it a priority. If you need to let some things go to achieve this, do so,” recommends Ugbaja.
It doesn’t have to be difficult either, as you may be able to invest with your employer’s 401(k).
“Oftentimes, people won’t sign up because they feel that they don’t have enough income left over to save for retirement. But many companies offer to match 401(k) contributions up to a certain percentage,” says Mantilla.
Don’t have access to a 401(k)? Open up a Traditional IRA or Roth IRA.
As a woman, you can protect yourself financially in various ways. You can look into disability insurance, life insurance, and health insurance. Also, saving for health costs and retirement can be done for free with a health savings account (HSA) through Starship.
“Because women tend to live longer and many have the expense of birthing children, our lifetime medical expenses are more,” says Ring. “An HSA acts as a retirement fund for your medical costs as many of them [including Starship] allow you to invest the funds. This can be a big tax savings for women who maximize this opportunity and educate themselves about the advantages.”
Taking these steps, women can protect themselves, build wealth, and work toward financial freedom.