Money is something that is present in all of our lives. Studies show that the average person makes 5-7 financial decisions everyday. It governs where we live, where we go to school, the quality of life our children experience, the type of food we have access to and our ability to pursue the life of our dreams. Unfortunately, women continue to make big mistakes with their money that is holding them back from living the life of their dreams.
Understanding how money works and making it work for you is the most important skill anyone can learn- whether you are an entrepreneur building a blog or a tech company, or an executive working for a large corporation. For women, especially, learning how to build wealth is going to ensure that you are empowered to lead a life of fulfillment. Otherwise, you will be living on someone else’s terms - and those terms will likely not be in your favor.
Here are the seven biggest mistakes women make with their money. And more importantly, how to fix them.
Not talking about it. Money is more taboo than sex and politics. And in some circles, it’s considered crass or low-brow to bring it up. How backwards is that?! Talking about the very thing that propels someone into a high social class, is considered pauper. If you want to change anything, the first step is to acknowledge it and talk about. Start chatting about money with your girlfriends. You can start with talking about shopping deals, but expand the conversation to include monthly expenses such as insurance and business costs, eventually moving to topics around high-yield savings accounts and investment vehicles. Not sure how to get the conversation started? Here is a link to talking about money with your girlfriends.
Going on a budget. While budgeting isn’t a bad practice, many women start thinking of ways to cut expenses before thinking about how they can increase their income. Being able to spend below your means is ideal, but if you don’t know how to generate an extra $1,000 or $5,000 a month for yourself, you will never truly feel financially independent. Before setting a budget, jot down three or five ways you can make the same amount of money you were going to cut out.
Charging low prices. When you are an independent contractor or entrepreneur, you are in charge of setting your prices. The issue that many women fall into is forgetting that their prices needs to include your fees for delivering the service and your overhead. If you sell products, your cost is not just the tangible expenses of producing the product. It also includes the retail space you are renting and staff. When setting your prices, be sure to include a buffer for taxes, health insurance, your retirement savings and overhead costs.
Not saving or investing. Ladies, this is huge! While we all know about the pay gap, women earning 80 cents on the dollar, the wealth gap is even bigger. Women have a net worth of just 32 cents on the dollar. The reason for this is, of course related to the pay gap, but also because we do not save or invest at the same rate as men. Start setting aside a fixed percentage each month that you will use to invest. Check out the Ellevest program, founded by Wall Street mogul Sallie Krawcheck to support women, that helps you identify your financial goals and create an investment strategy to reach them.
Not having a side hustle or at least two income streams. This is especially important for all the corporate executives. 2008 taught us that no job is 100% secure and we all need to have a back up plan. The key is to have a back up plan before your back is up against the wall. It could be starting a blog and offering consulting services in addition to your full-time gig. Always have at least two income streams so that your livelihood is never dependent on just one source.
Not trusting yourself. So many women leave the financial decisions to the men or financial professionals in their life. Whether it’s a father, husband, tax accountant, financial advisor. The reason for this ultimately boils down to a lack of self-confidence. While it is a good idea to do ask for insights from others, at the end of the day you are the best judge of what to do with your money. And research shows that women are actually better at investing and managing money than their male counterparts. Start by opening up an investment or savings account that is all your own and making decisions with it.
Not “dealing” with the finances. As a follow-up to #6, many women leave the big financial decisions to other people. Many women do manage the household budgets, but when it comes to investing, purchasing property, understanding tax implications- they leave the research and decisions to others. Start by having a weekly money date where you review all of your and the family’s accounts. We like to call this your #MoneyandMimosas date, because when you’re done you should treat yourself to a mimosa.
Want to test your financial independence? Take our quiz, “How BOSS are you?” to see if you are living life on your terms or by someone else’s rules.