Whether we like to admit it or not, there are several unique challenges that women face when managing personal finances. Taking a career break, juggling a household budget, coping with the aftermath of a divorce and even living longer are factors that affect women of all ages.
To make the most of your personal finances, both now and well into the future, here are some tips to keep in mind:
1. Prepare for reduced working hours
At some point or another, it’s likely you’ll need to cut back to reduced working hours. Whether it’s dropping down to part-time due to a medical condition or taking maternity leave to look after a new family member, many women face reduced working hours during their career.
The subsequent loss of income can disrupt your ability to service debt, such as your mortgage, or to manage daily costs, so it’s important you take measures to prepare for this reduced income.
One strategy you can use to prepare for fewer working hours is to consolidate existing debt so that you benefit from a more competitive interest rate and fewer account-keeping fees. For example, you may want to merge your various credit card debt onto one card through a balance transfer to minimise your interest payments.
2. Draw up a family budget and allow for contingencies
If you haven’t already developed a budget, this is something you should do right away. Setting yourself a detailed budget that lists your total income, assets and expenses will create a visual representation of your financial position.
Raising a family brings with it a series of expenses such as child care, school fees, medical bills, clothing and so on. Be sure to list each family member’s expenses within your budget as this will allow you to identify expenses that you can cut back on.
For instance, if you believe you’re paying too much for your son’s orthodontics, consider getting a quote elsewhere. Or if you’re surprised by the amount you’re paying for school uniforms, consider shopping at the second-hand uniform store.
Having a family comes with a great deal of financial responsibility, which means you need to allow for contingencies within your budget. Even if you set aside 5-10% of your savings in a high-interest savings account, this will help you cope with any unexpected future costs that may arise.
3. Protect your family’s future wellbeing
Taking out insurance policies, including life insurance, health insurance and income protection insurance, is central to protecting your family’s wellbeing in the event that something goes wrong.
For instance, depending on the age of your kids and whether they’re dependent on your health insurance, you may want to opt for mid-range hospital cover including ambulance transportation, as this isn’t covered by Medicare.
If you can, review your health insurance policy and switch to a better provider prior to 1 April to avoid paying a premium.
4. Get smart with your super
Women on average live longer than men, so to retire comfortably during your twilight years, start planning for your retirement early on. Firstly, consider consolidating your super into a single fund and decide on your long-term investment strategy. For instance, you may want to invest in something low-risk like a term deposit account that allows you to earn interest on your funds, or you may want to invest in property or shares.
Of course, there are other income sources that you can lean on during retirement such as the age pension or selling off assets like a vehicle or the family home.
If you’re unsure about retirement planning or how to make the most out of your super, speak to a financial advisor.
While women will face various challenges that will affect their financial future, these challenges can be managed with some research and self-discipline. Careful budgeting, debt reduction, taking out the right insurance policy and planning for retirement are all effective ways that women can set themselves up for a bright financial future.
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