As a group, women are in financial trouble.
Ninety percent are likely to handle their own finances at some point–often because they’ve been widowed or divorced. Yet, statistics indicate that when they do, they end up poor.
But you don’t have to become another statistic. Women who are persistent and willing to work at it can avoid the financial woes typical of their gender. How?
There are four financial tips that can help women vastly improve their long-term financial picture.
– Know the pension rules. When reviewing women’s pension statistics, one fact appears clear: All too often, women don’t understand the rules, says Karen Ferguson, director of the Pension Rights Center in Washington and co-author of “The Pension Book.”
Women work an average of 4.8 years in a single job. Most company pension plans “vest” (become yours) after five years. That’s just four months more.
What if you leave to have a baby? If you go back to the same company within five years of leaving, federal law requires the company to restart your pension benefits where you left off. That allows you to retain the previous years of service for pension purposes and vastly increases the chances of collecting monthly stipends when you retire.
Second, about 18 percent of women with part-time jobs work between 500 and 999 hours per year, and thus don’t qualify to participate in most company pension plans. Generally, if you work 1,000 hours in a year, you are entitled to participate in the pension.
“Make sure you’ve got a pension, and make sure you know the rules,” says Ferguson. “It’s critical. Pensions are often the deciding factor in whether women will make it or not.”
Notably, companies publish their pension rules in a “summary plan description.” If you don’t have a copy, ask your employee benefits representative to send you one.
– Do your homework. In school you worked on the “three Rs.” In finance, it’s the two Bs–budget and balance sheet.
To do a budget, sit down with your check register and figure out how much money is coming in each month and how much is going out. While you’re at it, consider how much of that money is spent on necessary things that can’t be cut back and how much is luxury. (Retirement savings ought to be in the necessary category.)
The second step is the balance sheet, simply a listing of the approximate value of the things you own–such as your house, savings account, cash value of life insurance and the vested amount of your pension–and what you owe. Subtract the “owe” from the “own” to figure out how much you have.
It’s simply impossible to make wise financial decisions when you don’t know how much money you need and how much you already have, she adds.
– Establish credit. Right now, women are being offered credit cards at a breakneck pace. If you don’t have credit in your own name, consider accepting one no-fee, low-rate credit card. Use it occasionally. Pay it off promptly.
Done right, having your own credit card doesn’t cost a cent. It simply allows you to establish a credit history, in case you someday need to borrow money on your own.
– Be (just a little) selfish. Here’s a telling statistic: Between home and office, the typical working woman puts in 75 hours of work per week, compared with 62 hours for the average man, according to a survey by Temple University School of Business and Management.
For many working women, the most precious luxury is time alone. And that’s precisely what you need to invest wisely. Even the simplest investments take some time to investigate and establish. To invest well–matching your assets and feelings about risk with appropriate specific investments–can easily take several hours a week.
Every week, women need to set aside a little time and money just for themselves.
Spend the time learning enough about stocks, bonds and mutual funds to invest wisely. Regularly save some money. Don’t spend it on your husband or the kids or a dress or a nice vacation. This time and this money will ensure your future comfort.
If you’re too selfless to do it for yourself, do it for your kids–so they won’t have to support you when you’re old.
