Money Talk: A Financial Guide for Women

These words above were uttered by one of America’s most prominent women’s rights leaders 110 years ago.  Yet they are as appropriate today as they were during the late 19^th century.  For a variety of reasons, some women have not had experience making financial and/or investment decisions. For men and women alike, financial knowledge and economic self-sufficiency are important life skills to develop.

Lack of financial savvy can put women (and men) at a substantial disadvantage.  Statistics say it is only a matter of time before 85% to 90% of women will be on their own financially.  Some will never marry, some will see their marriages end in divorce, and many will outlive their husbands. Women also have lower average earnings than men, more gaps in their employment history due to child rearing and/or care of elderly parents, and more severe impacts resulting from life events like widowhood and divorce.

The 192-page workbook Money Talk: A Financial Guide For Women was developed to teach basic financial topics with an emphasis on women’s unique financial needs. There are five chapters: Financial Basics, Insurance Basics, Investing Basics, Investing for Retirement, and Planning for Future Life Events. The book is available for free downloading online or print copies can be purchased from the publisher.

Simply reading printed material or attending a seminar will not change anyone’s financial situation, however.  You need to take action (e.g., starting an IRA) to achieve your financial goals.  A more contemporary twist on Ms. Stanton’s quote is “If it is to be, it is up to me.”  Today is the first day of the rest of your financial life.  Make the most of it.

How to Manage Credit Wisely

Managing credit wisely is a key factor in achieving financial security. Below are seven recommended practices:

¨      Shop Around for Credit- Compare at least three different lenders for loan and credit card terms (e.g., APR (interest) and penalty APR, late fees, grace periods, rewards programs).

¨      Negotiate a Discount- Ask lenders for a lower interest rate (e.g., 12% credit card APR instead of 18%) or transfer balances to cards with lower interest rates and fees if the savings exceeds the balance transfer fee.

¨      Pay Credit Card Bills Promptly- Do this to avoid interest and late fees and to reduce the average daily balance on which interest is charged.

¨      Pay More than the Minimum Payment- Double the minimum payment, at the very least, and, ideally, pay credit card bills in full. Doing this can save hundreds (even thousands!) of dollars of interest on outstanding balances and years of payments.

¨      Match Credit Cards to Debt Repayment Style- Select low-interest credit cards for a revolving balance with partial payments and no-annual fee cards with grace periods for balances that are paid in full.

¨      Know Your Ratio- Keep consumer debt-to-income ratios at or below 10% to 15% of take-home pay. For example, if a service member owes $300 a month for a car loan and $150 for credit card bills and take-home pay is $3,000, the debt-to-income ratio is 15% ($450 divided by $3,000) and further debt should be avoided.

¨      Check Credit Reports Annually- Request reports from the “Big Three” credit bureaus (Experian, Equifax, and TransUnion) and look for errors and evidence of identity theft. Credit reports are free once a year to consumers upon request. Check the Web site www.annualcreditreport.com for details.

For additional tips, Rutgers Cooperative Extension has a downloadable Wise Credit Management Quiz.

Savings is the Key to Financial Success

Do you want to save money? Below are six action steps to build a base of savings:

Save a Dollar a Day- Put a dollar a day, plus pocket change, into a can or jar. At the end of each month, there will be about $50 to deposit into a savings account. Financial planners advise saving 3 to 6 months expenses for emergencies but any amount of savings is better than none.

 

Live Below Your Means- Track expenses for a month or two to identify spending leaks and to “find” money to save. David Bach, author of The Automatic Millionaire, calls these expenses the “Latte Factor™” because many people spend $5 (or more) a day on fancy coffees, fast food, and similar “impulse” items. This calculator can help you identify personal “lattes” so you can save this money instead.

 

Make Savings Automatic- Automate savings because people are less tempted to spend money if they don’t see it. Automated strategies include: transferring a set amount from a checking to a savings account, making payroll deposits to a credit union, and transferring a set amount directly each month from a bank account to a mutual fund or stock dividend reinvestment plan (DRIP).

 

Complete a Savings Challenge- Aim to finish savings challenges, like the 30-Day $100 Savings Challenge, 15-Week Savings Challenge, 52-Week Money Challenge, and 50-week $2,500 Savings Challenge. Challenges provide a savings goal, a designated time frame, and suggested daily or weekly savings deposits.

Contribute to Tax-Deferred Retirement Plans- Save as much as possible in a tax-deferred employer retirement plan and/or open an Individual Retirement Account (IRA). The earlier you save for retirement, the more time your money has to grow, even if it is a small sum. Tax-deductible traditional IRA deposits and earnings are taxed upon withdrawal. Roth IRAs have no up-front tax deduction but earnings are tax-free after age 59 ½ for accounts open at least 5 years.

Earn “Free Money”- Try to save at least the maximum amount of money that can be matched. This is “free money” that should not be passed up. Dollar for dollar matched savings is like getting a 100% return on an investment. When pay increases, raise your retirement plan contribution, which can raise matched savings.  Savings plans offer four benefits: employer matching, a federal income tax write-off, ongoing tax-deferral, and automatic deposits via payroll deduction.

Planning a Fun and Frugal Wedding

Planning a wedding? Below are strategies to have a memorable day without breaking the bank:

¨      Choose a Frugal Venue- Reduce the cost of getting married by addressing the largest expense, the reception. Consider holding it at a less expensive location (e.g., at home with a party tent or at a rented lodge, firehouse meeting hall, college campus building, library, or outdoor park pavilion instead of at an expensive hotel or catering hall).

¨      Choose an Off-Peak Time- Reduce the cost of a reception by holding a wedding in the late fall instead of the summer. The timing of a wedding reception and honeymoon can have a big impact on their cost. Another way to cut costs is to hold a wedding on a Thursday evening instead of a Saturday afternoon.

¨      Choose Less Expensive Meal Options- Reduce the cost of a reception by serving a buffet instead of a sit-down meal or a sit-down brunch instead of a dinner. Another low-cost option is a baked potato bar or foods prepared by the couple and their family. Limited liquor options instead of an open bar (e.g., wine only or a couple of kegs of beer) or non-alcoholic beverage only receptions will also reduce expenses considerably.

¨      Skip the Fancy Cake- Reduce this expense by substituting a nice dessert that is served right after dinner for a wedding cake. Another option, instead of an expensive tiered cake, is a fake cardboard tiered cake with a small top cake layer to cut for photos and a basic sheet cake to serve to guests.

¨      Follow “The Rule of Three”- Compare at least three providers of every wedding product or service (e.g., gown, gifts for the wedding party, DJ, photographer, reception hall, and honeymoon). Attend free or low-cost bridal shows to efficiently shop around for wedding-related products and services.

¨      Do Your Own Flower Arrangements- Purchase inexpensive vases for centerpieces and silk flowers for centerpieces and bouquets at a craft store (e.g., Michaels, Hobby Lobby, and A.C. Moore). Another alternative is for bridesmaids to carry something other than a bouquet (e.g., inexpensive lanterns or candles).

The Kansas State University Extension fact sheet With This Ring…We Plan! has additional information about planning a beautiful, but frugal, wedding.

 

 

Are You Financially Fit?

Many people like to want to measure their accomplishments in relation to accepted standards and guidelines. Want to improve your personal finances?  Start by taking the Rutgers Cooperative Extension Financial Fitness Quiz. Choose the score that best describes the frequency of your performance of 20 financial management practices.

Seventeen of the quiz items have the following five-part responses: always (5), usually (4), sometimes (3), seldom (2), and never (1).  For the remaining three items (e.g., “I have a current will”), respondents are asked to indicate “yes” (5) or “no” (1).   When you’re done, scores for each of the 20 questions are tallied and a summary at the end of the quiz tells how you’re doing. The higher your score, the more often you are doing things that financial experts recommend.

Financial practices included on the quiz include having enough money to pay for emergencies and monthly household expenses, having a written budget and financial goals, calculating net worth annually, having investment diversification and a personal investment account for retirement, and paying credit card bills in full to avoid interest charges.

In addition to providing individualized feedback to people who take the quiz, the data that it generates are used for research. Studies to date have indicated that having a current will and having written financial goals are the least frequently performed financial management practices. Having a bank account and enough money to pay bills had the highest scores.