Ten Tips for Financial Independence for Working Moms
By Mary Beth Franklin
With three quarters of all women between the ages of 25 and 54 in the workforce, American women now have more financial freedom than ever before. Despite their increased earning power, many women find money management and financial planning an overwhelming task.
But it doesn't have to be that way. Considering how most working women can juggle their business and family commitments with the aplomb of a circus acrobat, balancing a checkbook or picking a mutual fund should be easy. But if you find money matters a little frightening, here are Ten Tips to help you take control of your finances.
1.
Educate yourself. There's no shortage of books, magazines, newspaper articles, brochures, and Web sites to help you learn more about personal finances and investing. Make a promise to yourself to read at least one financial article a week.
2.
Set goals. Whether it's buying a home, educating your children, or preparing for retirement, you need to know where you are going before you can figure out how to get there.
3.
Take stock of your financial situation. Now that you know where you are headed, take stock of where you are today. Take a financial inventory listing all your assets--personal property, real estate, savings and investments and so on--and your liabilities, including everything from your mortgage and car loan to credit card debts. Together this balance sheet makes up your personal financial statement.
4.
Create a budget. Figure out your monthly earning and spending patterns and determine how much you can afford to put aside for an emergency savings fund and long-term financial goals. If you don't have extra money in your budget, try to cut back your spending on extra items like Saturday night movies or fast-food lunches so you can free up money to invest in your future.
5.
Develop an investment strategy. Even if it's only a small amount, start investing each month. If you are just getting started, a mutual fund that invests in a variety of stocks may be your best bet. If you feel you need professional help, contact a full-service broker--but don't invest in anything you don't understand.
6.
Open a Roth IRA. For most working women, a Roth IRA presents a tremendous opportunity to save for retirement. You can contribute up to $2,000 each year. While the contributions are not deductible, the money you withdraw in retirement will be tax free. That means all the earning that accumulate over 10, 20, or 30 years or more will be yours to keep with no tax bite.
7.
Take advantage of your retirement plan. If you are eligible for an employer-sponsored retirement plan, ask your benefits manager how much you can expect in retirement. Contribute as much as you can to your company 401(k) plan--particularly if your employer matches your contributions.
8.
Ask about your Social Security benefits. Contact the Social Security Administration (SSA) at (800) 772-1213 or visit the agency's Social Security Online to determine your estimated retirement benefit. Also learn about your Social Security rights as a spouse, particularly if you are divorced, widowed, or remarried.
9.
Make sure you are adequately insured. If your family depends on your income, make sure you have enough insurance to cover lost earnings if you should become disabled or die. Many employers offer their workers life insurance and disability insurance as part of their employee benefits package.
10.
Draw up a will. Spare your heirs the added grief of sorting out an estate nightmare. Make sure you have a will to specify how your assets will be distributed after your death. If you have minor children, don't forget to name a guardian. You will also need two other important legal documents--a durable power of attorney and a health care proxy--that appoint someone else to make critical financial and medical decisions on your behalf in the event you become incapacitated.
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