A financial adviser has shared six of the most common modern money challenges women face and her simple advice for preventing them.
Helen Baker, an Australian licensed financial adviser, says ‘women need to plan, not react’ to money obstacles and get foundations in place now rather than fix issues when they arise.
In her new book, On Your Own Two Feet: The Essential Guide to Financial Independence for all Women, she provides a written personal finance guide to empower women to take control of their finances.
Helen says that there’s generally no fair go for the fairer sex when it comes to money, and believes there are six prominent money challenges that are (mostly) unique to women.
Helen Baker (pictured), an Australian licensed financial adviser, says ‘women need to plan, not react’ and get foundations in place to set themselves up now rather than fix issues when they arise
1. THE GENDER GAP/RETIREMENT GAP
Aussie women today still earn 13.9 per cent (or $242.90 a week full-time) less than men on average. It creates two levels of inequality – lower pay packets now and less money going into superannuation for retirement.
Helen’s Tips: Women need to find the confidence to ask to be paid what they’re worth. Get advice, and do so early.
Many women don’t seek financial advice, often because they fear the male-dominated finance world. So they miss out on super, tax and investment benefits.
COVID-19 has demonstrated that people can work remotely. It presents an opportunity for more women – and men – to negotiate flexible working arrangements.
Helen Baker: The saving tricks that will help you save thousands fast
1. Use the 50/30/20 strategy to control spending
This simple yet effective budgeting method involves dividing your after-tax income into three categories. Put 50 per cent of your net income towards ‘must-haves’ like rent, utility bills, school fees and groceries, then reserve 30 per cent for your ‘wants’, like dining out, fashion and entertainment. Keep 20 per cent back for loan repayments or building up your savings.
2. Hide your savings account from yourself
Set up a separate bank account for your savings, and ideally one that you can’t access with your current banking app. Choose a savings account that charges withdrawal fees as the harder and more expensive it is to access your account, more likely you are to realise your savings goals.
3. Avoid signing up for products on your partner’s behalf
It might feel tempting to sign up to products on your partner’s behalf but it’s best to avoid taking out a credit card, loan or mobile phone plan on your partner’s behalf, in your name. If your partner falls behind on repayments, it can affect both your credit ratings, and if you break up or your partner accumulated debt, and you are married or defacto, you will be liable for their debt.
2. HOUSING AFFORDABILITY
Sadly, women in their 60s are becoming the new face of homelessness. They tend to be single (either from relationship breakdown or their partner’s death) or victims of domestic violence.
Many are still working: it’s not that they have no income, they simply can’t afford to meet the high cost of housing on their own.
Helen’s tips: Prevention is better than cure: buying property earlier in life can mean you have a debt-free home later on.
For women in this situation, look at your super – can you access it to for accommodation? It doesn’t need to be huge, just secure and comfortable.
Many homeless women are still working: it’s not that they have no income, they simply can’t afford to meet the high cost of housing on their own
3. WOMEN LIVING LONGER
Women statistically live longer than men. That means that women generally need to fund more retirement years than men.
Some women find greater autonomy as widows, able to travel and do things that their partner never would. But this too comes with a price tag.
Helen’s tips: You can help your situation pre-retirement, such as by using catch-up rules to boost your super balance while you’re still earning.
Don’t count on simply inheriting from your partner once they pass on – often, the money is gone from poor decisions or hefty medical bills.
4. DIVORCE SETTLEMENT MISTAKES
Often during a separation, women accept an unfavourable settlement to put an end to the emotional trauma.
They also often take advice from family and friends who should be a source of emotional support, not money expertise.
Another classic mistake women make is taking the family home they can’t afford by themselves, or at the expense of any superannuation or other joint assets.
Helen’s tips: Women can help safeguard themselves even before a relationship falls: be more active in joint financial decisions. Understand what you have before things turn sour.
Helen said women statistically live longer than men. That means that women generally need to fund more retirement years than men
5. SINGLE PARENTING
Single mums outnumber single dads around 4:1.
Helen advises single mums to firstly change their mindset, to be kind to themselves.
They often try to maintain their kids’ lifestyle, but one income simply can’t provide the same as two. Plus, it’s valuable to show kids that money doesn’t grow on trees.
Helen’s tips: Devise a cash flow plan to make ends meet. If their father earns more than you, he should be contributing more towards school fees etc.
6. CARING FOR FAMILY MEMBERS
Daughters and daughters-in-law commonly assume responsibility over caring for elderly parents. This often means sacrificing full-time work to juggle the needs of their kids and parents.
Helen’s tips: A granny flat is one great option to explore – you can keep parents close, but still with their own independence, and remove commuting time and costs.
You benefit from a higher property value and no ongoing retirement living costs. Just be sure to reach agreement on who owns what, if your parents pay for the granny flat to be built.