Here are 8 easy steps on how to become a financially independent woman and why you absolutely need to do so!
Whether you are a stay-at-home mom, a working mom, a single mom, or going to become a mom soon, you need to make sure that you are able to be financially independent.
Financial independence for any woman is essential.
So, what does this mean exactly? What is financial independence?
Simply put, financial independence for women is when women are able to manage money well and reach their personal and family financial goals.
Sometimes financial independence is also defined as no longer needing to work because you can live off of your investments.
For this article, let’s focus on the first definition.
If you are happilly married, you might think why does it matter?
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Why Should Women Be Financially Independent?
Single or married, women need to be able to understand money and how to manage it. Even if you are married, you need to be able to handle money and, in the case that something happens, know how to take care of yourself (and your kids) financially.
I was settled and married with 2 small kids when I was abruptly faced with divorce and had to very seriously analyze my finances and expenses.
I’ve known women whose husbands died suddenly and unexpectedly.
Women need to be prepared for any emergency or sudden change to their financial situation.
Women should be financially independent so they can:
- pay bills without stress
- be ready in an emergency
- support themselves (and their kids)
- help others
- plan for the future and their dreams
Financially independent woman can prepare well for the future (whether that would be marriage or divorce or having children or adopting).
Challenges that Face Women in The Financial World
Women should be prepared financially, but even in today’s modern society, women still face challenges at work and in the financial world.
Some of these challenges are:
- In general, women still earn less than men.
- Women’s financial literacy is lower than men.
- Children can make a woman’s career path more challenging (due to time off for maternity leave, daycare expenses, etc.).
- Women tend to live several years longer than men (and thus need to spend more money for longer).
Don’t be disheartened by these challenges! With some financial education and long-term planning you can be prepared for a stable financial future for yourself and your family!
8 Steps on The Road to Becoming a Financially Independent Woman
If you want to start off down the path to becoming a financially independent woman (and, like me, teaching your daughters to do the same!), here are 8 simple things you need to do:
1. Financial Education
The first thing you should do is start by learning as much as you can about money. In fact, learning about money, saving, and investing is a life-long process, so don’t feel upset that you don’t know much right now or are overwhelmed by how much you need to learn.
Do what you can to start learning about money management and investing today!
Some of my favorite books to get you started:
- Get a Financial Life by Beth Kobliner
- Make Your Kid a Money Genius by Beth Kobliner
- The Bogelheads’ Guide to Investing by Lindauer, Larimore, and LeBoeuf
- The Simple Path to Wealth by JL Collins
Everyone starts somewhere!
No one is a financial pro at the beginning of their journey. Just start!
Don’t be afraid to ask questions and seek out help.
Start by learning about financial terms, saving, investing, and anything other financial topics that you don’t know well.
My favorite, easy-to-understand financial book from the above list is The Simple Path to Wealth by JL Collins. This book developed from a series of blog posts by the author to his daughter to teach her about finances (and he admits that she wasn’t that interested, but he still wanted to give her a basic foundation and set her off on the right path). As someone who felt completely financially illiterate, this book helped me set off on a solid financial course to prepare and plan for my future.
If you want to become a financially independent woman, then you need to know how much money is coming in each month and exactly where it is going.
This is why you need to create a budget, so you can evaluate your spending.
You can use a fancy app like Mint or just a simple sheet of paper. The important part is that you need to regularly review your budget (try weekly or monthly) and make adjustments as needed (change in income or change in regular expenses, for example).
If you keep a close eye on your budget, you will be much more prepared for any financial situation that might come up in the future.
Be sure to also evaluate your spending each month. Get rid of subscriptions you don’t use, look for increases in prices on things you buy often, and try to find ways to cut expenses or save money.
Tips for Living on a Tight Budget
Cheap Ways to Live – Cut Costs & Save Money
3. Set Financial Goals
If you don’t set a goal, you won’t know if you are on the path to get there!
Setting goals is important, especially financial goals.
Having a few solid, realistic financial goals will keep you on track and motivated to reach them.
Try for 1-2 short, medium, and long-term goals. Write them down and make a plan for getting there.
Here are some examples of goals of each length:
- Short-term: (~ 1 year) setting up an emergency fund, buying a car, debt payment, travel, minor home improvements
- Medium: (~5-10 years) saving a downpayment for a house, vacation, larger home improvements
- Long-term: (10+ years) retirement, paying off mortgage, college tuition
Money Saving Challenge (52-Weeks) Checklist
$10,000 Money Saving Challenge
4. Pay Off Debt
Nothing can keep you from reaching your financial goals like having a lot of debt.
If you have debt, make it one of your top priorities (financial goals!) to create a solid plan to pay it off (and stay out of debt in the future!).
Start by calculating your total debt (all credit cards, loans, mortgages, etc.), and then set up a payoff plan with monthly payments.
Pay as much as you can each month to get rid of your debt as quickly as possible. You can’t grow financially with debt looming over your shoulder.
If you have extra money one month, put that toward your debt.
How to Pay Off Debt Fast
Habits to Debt-Free Living
5. Build Up Your Credit Score
Work to improve your credit score. You can check your credit via Annual Credit Report and monitor it regularly.
If you don’t know much about credit scores, start by learning how your credit score works.
Some basic things you can do to improve your credit score:
- pay your bills on time
- keep your total debt low (it is recommended to not have more than 30% debt. So, if your credit limit is $1000, then 30% would be $300.)
Your income plays a big part in financial independence.
If you already have a job, negotiate a raise! Think about how long you have been with your company and emphasize your successes and contributions at work when discussing a pay raise with your manager.
If you are looking for a new job, be sure to negotiate the salary before accepting.
- research the average pay rate for the position
- know what your personal and family needs are
- have other job opportunities in line (to use for negotiations or to consider if this job isn’t able to pay you what you are looking for)
Women can’t be financially independent without saving money. In addition to the above points, saving money should be a top priority for financially independent women.
Having savings can help you be prepared in an emergency and can provide opportunities for you and your family.
Be sure to save for retirement as well. You can start with a traditional or Roth IRA and max out any 401K contributions matches through your employer.
Emergency Funds – Why You Need One & How to Start
Last, but certainly not least, you won’t be able to get far without investing.
Your money won’t grow quickly in an ordinary checking account; the interest rates are generally too low. And money growth in these accounts won’t match the government inflation rates either.
Investment accounts provide long-term growth opportunities and a way to fight inflation.
Start by opening a simple investment account.
Learn more about investing (and what kind of account to open) with my favorite, easy-to-understand book, The Simple Path to Wealth by JL Collins.
The Wonderful Benefits of Financial Independence for Women
It doesn’t matter what your stage of life is at the moment, financial independence has so many benefits for any woman.
- accomplish their financial goals (return to school, go on a much-desired vacation, plan for retirement, build up savings, etc.).
- build confidence! You can feel good about yourself and your family’s financial future.
- gain financial security. You will be ready to handle financial emergencies, not worry about being able to pay your bills, and have money to invest wisely for the future.
- prepare for retirement!
How to Become a Financially Independent Woman – Yes, It IS Possible!
You can stop living from paycheck to paycheck and live a life of financial independence. Start by looking seriously at your finances and come up with a realistic plan to pay off debt, save money, and prepare for emergencies. What other steps would you include? What have you done to take charge of your finances and become a financially independent woman?