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Women face unique challenges that can often make securing their financial future seem daunting. However, with the right tools and approach, you can navigate these challenges and build a strong financial plan tailored to your individual needs.

In this article, we’ll discuss the financial obstacles women face, how to start a financial plan, key elements of a robust financial plan and tips for managing and improving your plan.

Unique financial challenges women face

Financial planning helps you make smart decisions about your money so that you can achieve your financial goals. The key elements of financial planning for women are not significantly different from those for men. All financial plans involve elements of saving, investing, insurance and estate planning — no matter your gender.

However, women often face unique financial challenges men do not, including the gender pay gap. They may also need to take time off work for caregiving duties, which can impact their retirement savings and the size of their Social Security benefit.

The persistent gender pay gap

The gender pay gap is a significant financial obstacle women face. In 2022, women earned an average of 82 percent of what men earned — and that gender pay gap has remained relatively steady in the U.S. over the last 20 years, according to research from the Pew Research Center.

This income disparity can drastically impact women’s ability to build wealth and achieve financial independence. It can lead to reduced contributions to retirement savings, lower Social Security benefits, and less money available for emergencies and other financial goals.

Why women need to plan for retirement differently

Women tend to live longer than men, which means they need to stretch their retirement savings over a longer period. And since women often have lower lifetime earnings due to the gender pay gap and periods of time off work for caregiving, they may contribute less to retirement, resulting in less compounding growth for their retirement funds.

Women are also more likely to invest conservatively, which can lead to lower overall net worth and missed opportunities for growth. Finally, societal expectations often dictate that women prioritize family needs over their own financial planning, which can leave them with less money in retirement.

How to start a financial plan as a woman

Before you start creating a financial plan, it’s crucial to understand your current financial situation, including your income, expenses, debts and savings. Next, you should set clear financial goals that align with your values and long-term plans. These might include paying off debt, saving for a home or building a retirement nest egg.

Establishing a financial identity is also important. It involves taking control of your money and making informed decisions that align with your financial goals. Here are some steps to get started:

  1. Understand Your Finances: Regularly review your accounts, track your spending habits and monitor your bank balances. This will help you understand where you stand financially and make informed decisions.
  2. Control Shared Finances: If you share finances with a partner, make sure you stay involved in financial decisions and maintain access to all shared accounts. Consider establishing monthly check-ins with your partner to discuss finances.
  3. Create an Emergency Fund: Aim to save at least three to six months’ worth of expenses in a separate account.
  4. Plan for the Future: This includes saving for retirement, planning for health care costs and considering life’s ‘what-if’s.’ Having a plan for the future can give you peace of mind and help you feel more secure. Planning for life changes such as career transitions or caregiving responsibilities can also help ensure financial stability.
  5. Build Credit: Establishing a strong credit history in your own name can help you qualify for better financing terms in the future. Making timely payments, maintaining low balances on credit cards and avoiding unnecessary debt can all have a positive impact on your credit score.

4 key elements of financial planning for women

Build an emergency fund

Building an emergency fund is particularly important for women. Creating a financial safety net can act as a cushion when you face unexpected challenges like job loss, health emergencies or car repairs without the added stress.

An emergency fund can also lessen the financial impact of potentially devastating events like divorce or the death of a spouse, which women are statistically more likely to experience. Ideally, your emergency fund should cover at least three to six months’ worth of living expenses.

Pay off high-interest debt

Credit card debt, payday loans and other forms of high-interest debt can keep you in a cycle that’s hard to break. By focusing on paying off these debts first, you can save money on interest charges and free up more of your income to put toward savings and investing.

Strategies like the debt snowball or debt avalanche method can help you tackle high-interest debt in a structured way. The snowball method involves paying off your smallest debt first to gain momentum, while the avalanche method focuses on paying off the debt with the highest interest rate first to save money.

Insurance is essential

Insurance is a crucial part of any woman’s financial plan. It provides a safety net against unexpected events that could otherwise cause substantial hardship for you and your family.

Life insurance can replace income and help your family maintain their standard of living in case you pass away. For single moms, life insurance is critical as they shoulder all responsibilities for their children. If you’re relatively young and in good health, you can secure a term-life insurance policy at an affordable monthly cost.

Health insurance can help cover medical expenses, while disability insurance can provide income if you’re unable to work due to illness or injury. Finally, long-term care insurance can help cover the cost of care in a nursing home or assisted living facility, which women are more likely to need given their longer life expectancy.

Invest for the future

Not only can investing help grow your wealth over time, it can also provide a source of passive income and help protect against inflation. Women should consider making regular contributions to a 401(k) or IRA since these are among some of the best retirement accounts out there and come with special tax advantages. And if your job offers a 401(k) plan, you might benefit from a matching contribution from your employer, which is essentially free money.

It’s also important to understand the risk associated with different types of investments and to invest in a way that aligns with your risk tolerance and financial goals. Working with a financial advisor can be beneficial in creating an investment strategy that works for you.

How to manage and improve your financial plan

Managing and adjusting your financial plan is an ongoing process that requires regular review.

Start by monitoring your finances regularly to understand your spending habits and track progress toward your goals. Automating your savings can help you avoid the temptation to skip or decrease contributions. Regularly reassess your financial goals and adjust your plan as needed to reflect changes in your life and financial situation.

Additionally, taking steps to increase your income, such as negotiating for higher pay or taking on a side job, can also help improve your financial plan. Don’t be afraid to seek professional advice if you need help managing your financial plan.

Tips for overcoming financial challenges for women

Women might face unique financial challenges, but they’re not impossible to overcome. Here are some tips to help women navigate these hurdles:

  1. Seek Financial Education: Knowledge is power. By learning about personal finance, investing and retirement planning, you can make informed decisions that align with your financial goals.
  2. Plan for Longevity: Women typically live longer than men, so it’s important to plan for a longer retirement. This might involve saving more, investing for growth and considering insurance products like long-term care insurance.
  3. Take Control of Your Finances: Whether you’re single or in a relationship, it’s important to take an active role in managing your money. This includes understanding your income and expenses, making a budget and maintaining your own financial autonomy.
  4. Negotiate: Don’t be afraid to negotiate your salary and benefits at work. Women often face a gender pay gap, but negotiating can help close this gap and boost your earning potential.
  5. Invest in Yourself: This can include furthering your education, starting a business or investing in your health and well-being. Remember, you are your most important asset.

Bottom line

Despite the unique financial challenges women face, effective financial planning can empower you to navigate these obstacles and secure your financial future. By setting clear goals, building an emergency fund, paying off high-interest debt, securing insurance and investing for the future, women can take charge of their financial well-being. Remember, it’s never too early or too late to start planning for your financial future.