Let’s face it: the last two years have been extremely difficult in many ways. If you managed to pay all your bills on time throughout the pandemic and this year’s inflation, congratulations. You should be proud of yourself. But the longer we tread water financially, the further away we get from accomplishing our financial goals. This is especially true for women, who still face a pay gap and shoulder more responsibility for child care. Now is a good time to regroup, take stock of where you are, and make a new plan for the future of your finances. Here are some financial goals for women and some tips to get started.
Take Stock of Your Assets and Debts.
Before you can plan to reach your goals, you have to really know where you stand financially. Whether you prefer to use paper and pen or computer spreadsheets, begin compiling a list of all of your assets and debts.
Don’t leave out any assets or debt. For instance, you may have an old 401k from your first job out of college. Even if you plan not touch that money until you reach retirement age, you should include it in your list of assets. The same goes for debt. You may owe money to your parents that is not due for many years, but it is part of your full financial picture and should not be left out.
Be sure to note the terms for each asset and piece of debt. Interest rates are particularly important. Make a note of the current interest rate on debt and whether that rate may or will change in the future.
Examine Your Recent Use of Money
Take a good look at your expenses over the last few months. This is not meant to be a judgmental process. It’s just the facts. Did your expenses exceed your income, leading to the growth of credit card debt? Or did your income exceed your expenses in any month? If so, what did you do with that extra income?
Make a List of Your Priorities
Priorities come in short-term and long-term varieties, and some of your short-term priorities may seem to be in conflict with your long-term goals. For instance, you may have a desire to take a family trip to Disney World while your kids are still young. At the same time, you likely have a goal to save enough money during your working years to have a comfortable retirement.
Once you identify your long and short-term priorities you can rank each category in a list of most important to least important. This way you can judge whether the Disney family vacation is more or less important to you than getting a new car in the next few years. Having a list from most to least important will make it easier to plan your budget in the next step.
Create a Budget with Your Priorities in Mind
Any good budget starts with the expected income. For some people, mostly those with salaried jobs, monthly and yearly income is easy to predict. For others, their income may be much less predictable. For budgeting purposes, use a conservative estimate of future income.
Next, create a list of your necessary expenses. Housing expenses, utility bills, car payments, food costs, and medical expenses all must be made. Some expenses are necessary but can be negotiable. Insurance policies are worth revisiting as are your plans for entertainment, the combination of cable and internet providers, and streaming services.
Finally, we all have expenses that are truly “discretionary”. Dining out, movie and show tickets, and vacations fall into this category. Once you put aside enough money to cover your necessary expenses, what is left over of your income needs to be allocated either to saving or discretionary spending. Consult your list of priorities and come up with a plan that balances your short-term and long-term goals.
But What if There is Not Enough Money Left for Savings?
If you finish your budgeting process and realize that there is not enough unallocated income left to meet your goals, it’s time to rethink your lifestyle. Where can you cut expenses? If you work remotely, you could consider moving to a less expensive area of the US. If that’s not an option, look for less expensive housing options where you are. It may be difficult to consider parting with your current housing. The idea may be easier to accept if you redo your budget with reduced housing costs and see how much more you could be saving and still have some income left over to treat yourself. Making a change is difficult, but peace of mind and financial stability are worth it.