Top Financial Mistakes Women Make
By Samantha Chang
Ladies, it’s time to wake up and smell the coffee. I know the mere thought of money management and financial planning makes your eyes glaze over, but the practical reasons for why we should all be a little more knowledgeable far outweigh a little glaze.
Here are the top financial mistakes women make and how to avoid them.
Mistake #1: Not Having Any Financial Goals
As women, we set goals all the time. We make goals to lose weight, work out more and we meticulously plan our vacations, yet few women take stock of their money situation and set financial goals. In fact, I know women who keep food diaries and obsessively track every calorie they consume but have no idea where they want to be financially five years from now.
Take some time to think about what you want in your life. For example, do you want to own your own home within five years? Or have a net worth of $2 million by the time you’re 45? Or retire by 50? These goals are all achievable, but you need to first decide that’s what you want and then come up with a strategy for achieving them. Define your financial targets just as you set your target weight, suggests Lois P. Frankel, author of Nice Girls Don’t Get Rich: 75 Avoidable Mistakes Women Make with Money. A financial map can help you get to your destination without getting sidetracked.
This doesn’t make any sense, because if you want to have a fabulous collection of Jimmy Choos or continue getting weekly manicures, how do you think you’re going to pay for that? It takes money and some financial management.
Mistake #2: Assuming Your Current Status Is Permanent
There’s an adage that if you fail to plan, you plan to fail, and nowhere is this more true than in the area of money management. Life changes such as a losing a job, divorce, death of a spouse, or a sudden health crisis can really damage your financial stability. And since so many people have at one point or another experienced job, relationship or health disruptions, it’s silly to not have a contingency plan. To prepare, consider the following, suggests Jennifer Openshaw, author of What’s Your Net Worth?
- Set aside up to 6-9 months of living expenses in the event of an unexpected job loss or medical or family emergency.
- Don’t overcharge your credit card.
- Make sure you have some credit available for emergencies.
- Consider appropriate insurance, especially if you have children or own property.
In addition, women should have a bank account and credit card in their own names, even if they’re married, suggests Frankel. And don’t loan out money you can’t afford to lose, because you probably will, she says.
Mistake #3: Waiting to Save Money
We all like to put off unpleasant tasks, and setting aside money for a rainy day definitely tops the charts. Remember: Saving doesn’t have to make a huge dent in your current lifestyle. If you haven’t done so already, invest in a company-sponsored 401(k) or pension plan or set up a savings account where you regularly deposit a portion of your paychecks every month—and don’t touch it. The sooner you start saving, the faster your money can grow.
Mistake #4: Living on Credit
Far too many of us live paycheck to paycheck and are in credit card debt. This is a frighteningly easy predicament to fall into: a little purchase here, and another there, and before you know it, you’ve racked several hundred—or thousands—of dollars over a couple of months. There is an old saying “spend less than you make and you will always have money.” Well, that may be easier said than done. But in order to be financially sound, you need to get out of debt and fast. Interest rates on credit cards are at an all time high. This means if you are paying the minimum amount each month, it will take you almost twice as long to pay off your credit card debt. And that’s if you don’t charge anymore. If you must charge, make it for necessities only. Self control is hard – especially when retailers are having incredible sales. But restraint is the only way to free yourself from debt. My advice: pay cash or don’t buy at all.
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