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Financially savvy you: Money makeover tips for women

Most women enjoy makeovers. A new look -- whether it's changing your hairstyle or updating your wardrobe -- often leads to a fresh outlook and renewed confidence. Imagine how fabulous you could feel if you had your finances in tiptop shape.

With an eye toward starting 2005 on the right track, asked several experts for money tips geared specifically to the financial issues women frequently face.

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Like any makeover, not every tip will work for every woman, but you should be able to find one or two ideas to freshen up your financial style.

Check out these five savvy tips for breathing new life into your finances.

1. Buff up your investing prowess
If Carrie Schwab Pomerantz could get women to change one thing in 2005, it would be to educate themselves about finances and get more involved in the investment process.

"Far more women than men lack confidence in their investment abilities," says Pomerantz, president of the Charles Schwab Foundation and vice president of consumer education for the investment giant. "They're likely to avoid it, abdicate it to someone else, or dislike the process. It has to do with a lack of culture for women. They don't have role models or experience and don't have anyone to validate their worth."

That's unfortunate, she says. Today, more women than ever are the primary decision-makers in their families.

"Women are finding themselves having to handle the family money and finances and there's resentment because they're not necessarily prepared to do it. They're put in a situation they don't want to be in."

She offers several solutions for becoming a more confident and educated investor. First, take advantage of the wealth of educational materials available, both online and in print. If you have an investment account or a retirement fund, check the broker's Web site for self-paced tutorials. Then, do what women have always done when they're stumped about a situation -- talk to other women.

"Your friends can be a great support system," she says. "Women feel they're doing it alone. They feel like there's an old boys' network they aren't allowed to participate in. In fact, there are enough women out there."

The tendency of women to share tasks and information was behind the creation of Money Clubs, a program of the nonprofit Women's Institute for Financial Education (WIFE), co-founded by financial professionals Ginita Wall and Candace Bahr. Money Clubs are similar to book groups or other small group studies, meetings where women discuss various financial topics in a non-threatening environment.

"One of the great strengths women have is in chatting," Wall says. "We talk about child rearing and how to get bargains, but money is taboo. If we create a forum where women can support each other, how powerful is that?"

2. Massage your retirement accounts
Women in particular should take advantage of the federal government's "catch up" benefits for putting extra money into a retirement plan after age 50, Pomerantz says. Under the Tax Relief Act, the maximum allowable contribution to a 401(k) is $13,000 in 2004, $14,000 in 2005 and $15,000 in 2006. Workers 50 and older can tuck away another $3,000 on top of that in 2004, as long as the contribution is made by April 15, 2005. In 2006, it will increase to an extra $5,000. Those who also have an IRA can add extra funds there as well.

Those tax rules were designed with women in mind because they tend to go in and out of the workforce during their lifetimes to raise children and take care of aging family members. The need to play catch-up is why Pomerantz also recommends that women have both a 401(k) and an individual retirement account, if possible.

3. Fatten your savings
When it comes to saving, Americans are bad at it, and women are worse at it than men, says Gail Perry-Mason, co-author of "Girl, Make Your Money Grow" and first vice president of Michigan investment firm Oppenheimer and Co. And, women still earn less money than men.

She compares the savings strategy to a New Year's diet regimen, starting small and gradually working up to a serious savings routine. To help get in the habit, she recommends getting a jar and putting aside a dollar a day in January. "When you wake up in the morning, pay yourself first," she says. In February, save $2 a day; in March, tuck away $3 a day; in April, $4; and so on. By the end of the year, it's nearly $2,400 to put into a retirement account.

"Women need to go on a money diet," she says, "but we can't deprive ourselves. This way, you start out in baby steps. The more you save, the less you spend. Wouldn't it be great to lose weight and gain assets? It's a woman's dream."

4. Trim credit usage
Credit expert Gerri Detweiler, education director for Consolidated Credit Counseling Services Inc., and author of "The Ultimate Credit Handbook," says that most credit issues impact men and women equally, but two issues pop up fairly regularly for women. One is shopping to relieve stress or to make them feel better, which can lead to serious impulse spending and excess debt.

The makeover strategy here is identical to the one weight-loss experts recommend for emotional eaters. Make a list of alternative activities to shopping when you're stressed out. That could include exercise, taking a long walk or a bubble bath, reading a book or doing some volunteer work.

The other bad habit women have is co-signing loans for loved ones.

"Women help people out -- a husband, boyfriend, child or other relative -- by co-signing and they end up getting burned," she says. "It does go along with that mentality of taking care of people."

Her advice? Don't do it. Once you're a co-signer on a debt, it's tough to convince a creditor to take you off the loan.

5. Exercise your budgeting and tone up your spending
Along with Money Clubs, WIFE offers its own 21-day money makeover, offering three weeks of small steps that can be taken one day at a time to start taking financial control. One step might be writing down your expenses for a day.

"People say, 'I take $200 out of the ATM and I don't know where it goes,'" Bahr says. "Write it down. Cut out the things that don't give you any pleasure and don't get you ahead. If you stop at Starbucks every morning, is that a highlight of your day or is it a way to stall going to work? If it's stalling, then cut it out and do something that doesn't cost anything."

Bahr also knows how tough the idea of budgeting can be. It's so tough, in fact, that she doesn't have one. What she does have is an automated system to save for retirement, her children's education, and charitable contributions.

"Whatever is left after that is fair game," she says. "We know we have the future taken care of."

Bahr might call it automated saving, but Wall says it's actually the best kind of a budget, and one tailor-made for the money management strategies of most women, who tend to take care of their family's day-to-day needs first and tuck away whatever, if anything, is left over.

"That's budgeting from the top down," Wall says of automated savings plans. "Women try to do it from the bottom up."

Pat Curry is a Georgia-based freelance writer who specializes in personal finance topics.


-- Posted: Dec. 29, 2004

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