In many ways, men and women share the same “do’s and don’ts” when it comes to managing finances.
Everyone should be vigilant about budgeting so you don’t live beyond your means, pay your bills on time, religiously save a portion of your monthly income for unplanned expenses and/or retirement, keep accurate financial and tax records, and closely monitor all your online financial transactions, such credit card purchases to ensure they are correct and there are no anomalies that might indicate fraud.
However, women have their own concerns, often unique to them, that must be considered in financial planning.
Build a Financial Foundation
If you are a single woman, don’t ignore your financial future. It’s important for you to establish a credit profile that at the very least includes a checking account and a credit card to build a positive FICO score and payment record.
With these in place, you will be able to more quickly establish an independent financial foundation from which you can purchase major items, such as a car, furniture or house. (Some credit unions have special auto loan programs for younger members, like recent high school graduates who qualify, that offer terms and rates which are competitive with traditional auto loans.)
Without a credit track record, you may be required to make most of your purchases with cash or be limited to smaller purchases with credit. This may be the case until you have established a longer-term credit record, or you have been able to accumulate significant funds in your own name, such as savings or a stock portfolio.
Be Involved in Household Finances
A married woman should be actively involved in household budgeting and be thoroughly informed on family investments, life insurance policies and filing joint tax returns. According to Kiplinger, women control 80 percent of all household spending, but when it comes to important financial decisions, it’s the husband who usually takes responsibility for managing the finances.
A 2015 Fidelity survey on couples and their finances showed that more than 40 percent of couples didn’t even know how much each spouse earned, and 36 percent disagreed on the use of their joint assets because women are generally more conservative when it comes to such activities as investing.
One way to close the knowledge gap is for women to regularly engage in discussions and decisions about money matters as well as reviewing in-depth bank account records, retirement accounts, credit card statements, loans, life insurance, medical insurance and basic day-to-day living expenses.
If older, also know the status of your husband’s Social Security and company pension(s) if he received benefits.
Establish Your Own Credit Identity
It’s also particularly important for married women to establish their own credit identity, separate from the husband, which can be established with a credit card and checking account in their name only. As pointed out on oprah.com, “If every bank account and credit card is in your husband’s name, you will be a financial nobody without him. Before you do anything else, open a bank account and get a credit card in your name.”
Why? While you may not want to consider the possibility, if your husband is killed, perhaps in a car accident, or dies unexpectedly, the family estate – including checking and other accounts in his name – could be frozen by a probate court for several months, even in community property states such as California, Arizona and Nevada.
If tragedy does strike, don’t be left with an empty wallet. An independent checking account will give you access to your own funds that might otherwise be unavailable until probate is concluded. Try to keep at least several hundred dollars in that account so it’s there when and if needed to cover immediate household expenses.
It’s also important for a married couple regardless of age to have a current family will as well as a living trust that the wife knows in detail. A trust can help move the estate process along at a faster pace; a will by itself may still have to go through lengthy probate.
Divorce is also unfortunately a possibility, and the average length of divorce proceedings is about a year if not contested, possibly much longer if it is. The wife will be in a much better financial position to support herself through the proceeding if she has her own independent checking account and credit card, the same as if her husband dies. The wife should also have a strong grip on the family finances, especially since hidden debt can be an unwelcomed surprise among divorcing couples, according to divorce adviser Sandra Dulakis.
The divorce proceeding could be a long and bumpy ride, but even if it is an uncontested divorce, it’s smart for the wife to create and stick to a budget, and closely evaluate expenses since this is not the time to incur new debt or spend money that’s not absolutely necessary.
Monitor Your Credit Score
Another “do” for both single and married women is to protect your credit by periodically checking your FICO score to ensure that your personal information and financial accounts are being accurately reported and that no fraudulent accounts have been opened in your name. Credit card fraud especially is happening more often today than ever before to both men and women regardless of marital status.
Credit reports provided by Equifax, Experian, and TransUnion help lenders decide whether to extend you credit or approve a loan, and determine what interest rate they will charge. Prospective employers, insurers and rental property owners may also look at your credit report.
According to USA.gov, you are entitled to a free credit report from each of the three credit reporting agencies once every 12 months. Take advantage of it.
Know About Investing
A Barclays Wealth Insights study found that men are more likely to consider themselves financial risk-takers and are more willing to choose high-risk investments to achieve better returns. Women tended to pursue a steadier course and had lower but more stable returns, even when other investment approaches could have achieved higher gains.
Whether single or married, you should have at least basic knowledge about investing and how to make investments that will grow but won’t endanger your finances or keep you awake at night. It’s important to find a balance between taking too much risk and not enough, which requires knowledge, experience and information. To this end, you may also want to retain a financial adviser recommended by someone you trust.
“Unless you have enough time and resources to research funds, new products, handle paperwork, coordinate with different financial companies you will need the help of a good financial advisor,” said Bekxy Kuriakose, a principal of PNB Asset Management Company, about women and investing. “An independent, fee-based financial advisor who avoids expensive plans and commission-based products, and is not affiliated to any one company or bank, should be selected.”