Like most things in life, we humans often avoid the matters we either deem to be uninteresting or that we do not comprehend. This is completely understandable in most instances – for example – why would my husband need to become an expert in preparing desserts when he doesn’t have the inclination nor the desire to learn (and why would he when he has me)?
One area that many of us women tend to ignore and leave to our significant others, is when it comes to understanding our personal finances. This day in age, women tend to live longer and are commonly becoming the larger breadwinners of their households. The most widely accepted view is that women have lower self-confidence when it comes to making financial decisions than men, which I can certainly relate to. However, “understanding” our finances can lead to more sound decisions, better planning and provide our families with peace of mind. There is no need to become an expert because in today’s world either through the internet or from hiring a financial advisor (as your families needs become more complex and change regularly) it is easier now more than ever to get organized.
Full disclosure – I’m lucky enough to be married to a Financial Advisor, who is happy to walk me through these concepts so I have an understanding of our situation. While not all of us have access to someone who wants to discuss financial matters 24-7 (like me), there are many concepts we can afford to learn that will help us better manage our financial lives (whether married or living alone).
The word “budget” is not a concept I’ve ever been quite fond of but once we began building our family and accumulating stuff (house, baby, supplies), it’s become more important. Some months, you look back and haven’t the faintest idea where all of your money went! What do we do? We begin by thinking about our 1-3-5-10-30 year goals and by separating our needs and our wants. The 50-30-20 rule states that no more than fifty percent of your income should go toward necessities, like housing and bills. Twenty percent should then go toward financial goals, like paying off debt or saving for retirement. Finally, thirty percent of your income can be allocated to wants, like dining and vacations. Certain months may be more or less but as long as we monitor and adjust where needed, we feel more confident. And don’t be afraid to have a little fun and treat yourself once in a while! Life is short.
Next, understanding my family’s Goals and Aspirations is really important. For example – A goal of mine (something I simply cannot live without) is taking at least 1-2 family vacations per year. Setting aside a small amount of each paycheck is a great way to stay disciplined but I’m also a fan of using our reward points we receive from credit cards. Finding the right card that rewards you best for the things you spend on most (either travel, entertainment, food) can really help make a difference (plus its free money!). Whereas, an aspiration for us is to renovate our kitchen within the next 2 years and/or to buy a new home within the next 5 years.
Finally, aside from maintaining 3-6 months of living expenses in your checking account (just to be safe) and maximizing your retirement account to save for the future, don’t let your caution or anxiety about investing stop you. If you’re unsure about what to do when it comes to investing, begin slowly by investing a small amount in something that’s simple to understand, like a mutual fund or exchange traded fund that just tracks the general stock market. It felt good when I started getting some market “skin in the game”. Aside from checking my balances daily (which I don’t recommend), its sparked my curiosity and I’ve actually learned a lot since I started. If you need help worst case, seek someone you trust who can help you get started.
There are other concepts and jargon my husband uses daily that I choose to filter
out but I now understand the value of being familiar with these concepts
1) The reality is, one day I may have to manage this all on my own.
2) These concepts and decisions impact me greatly and it’s up to me to empower myself to understand.
There is no right or wrong way to manage your finances as a family - all couples/single women do things differently and have varying situations. One thing is for sure – Time is the
only precious commodity we have on our side so the sooner we prepare the better we’ll be!