I recently watched the new documentary film, $avvy, that describes a multitude of financial challenges faced by women. The film also repeatedly emphasizes how critical it is for women to understand and take charge of their personal finances. A partner/spouse is not a financial plan and women should never abdicate financial control.
$avvy combines case study profiles of a diverse group of women with different financial “issues” (e.g., student loans and widowhood) and successes (e.g., debt repayment and a successful 37-year old investment club) with expert commentary, compelling facts and research findings, and dozens of financial recommendations.
Below are my key take-aways for strategies to become a financially savvy woman:
¨ Understand the Financial Hurdles- Women live longer than men, are more likely to go in and out of the labor force for care-giving, and earn less, on average, with lower Social Security benefits. Stated another way, women “have more years of retirement to save for with less money.” This is a formidable challenge.
¨ Bite the Bullet- Several case study stories showed women who simply “had enough” of living subpar financial lives with high debt, low savings, and lack of certainty about their future. They all made major life changes in their lifestyle and finances to turn things around. One woman noted that “It starts with me.”
¨ Be a Financial Role Model- One woman in the film talked about being the first one in her immigrant family to invest and repay debt. Another made difficult adjustments as a widowed single parent. Children and other family members are watching can learn from, and be inspired by, financially savvy women.
¨ Frame Debt in Dollar Terms- People tune out when they see percentages, such as a 27% APR (interest) on a credit card. To appreciate fully what this means, turn percentages into dollar amounts. For every $100 that you spend on that credit card, you have to pay back $27. Dollar amounts get people’s attention.
¨ Negotiate Interest Rates on Debt- One speaker encouraged “bullying back” your creditors by politely requesting a lower interest rate on your credit card and subtly stating that there are other credit cards out there with better terms that you can transfer your balance to. Clearly state the terms that you are requesting.
¨ Have a Personal Emergency Fund- Even if it takes months or years, save 3 to 6 months of essential household expenses. Earmark this as “no touch” money in a special savings account. A lack of savings makes it difficult to pay for unexpected expenses, cope with income loss, or leave an abusive relationship.
¨ Maintain A Good Credit Score- Bad credit can cost hundreds or thousands of dollars per year. The two best ways to improve a credit score are to pay at least the minimum due (preferably pay in full) before the due date and to keep balances low. Some credit scores now factor in on-time rent and utility payments.
¨ Savings = Freedom and Options- One speaker called savings “take this job and shove it money” and “living your fullest life money.” Another noted that financially secure women “don’t have to stay in scenarios that don’t serve them” (e.g., bad relationships or jobs). Investing is key to growing your money.
¨ Shame Can Be Overcome- Talking about money can have shame associated with it (e.g., overspending debt, abuse). Speakers advised women not to be ashamed of what they went through and, instead, focus on how they can change their story. Taking financial control can provide a huge boost to your self-esteem.
¨ Have Your Own Accounts- Married women should hold some money in their own name and spouses should be transparent about each other’s finances (e.g., income, assets, expenses, debt (e.g., student loans), and credit scores. Avoid co-mingling assets and debts and strongly consider a pre-nuptial agreement.
¨ Name Savings/Investment Accounts- Naming an account (e.g., “[child’s name] college account” or “[your name] financial freedom account”) is a powerful emotional act and makes it less likely that earmarked money will be spent and more likely that you will delay gratification and set money aside.
To learn more about women and money, download my free book, Money Talk: A Financial Guide for Women.