8 Mistakes that Women Make with their Money (recognise any?
When I first sit down with women to create a financial plan, I often hear the same words: “I don’t feel I understand money”.
Most women want to take action to secure their financial future, but simply don’t know where to start.
Below I’ve put together some of the most common mistakes that I see women making with their money.
Read on to see if you recognise any of these, and how to avoid repeats in the future!
1. Having your Super set to the 'defaults'
Latest figures show a sad story- that women are retiring with around half as much super as men. This is because women are more likely to take time out of the workforce to raise children or to care for elderly parents, leading to years of missed super contributions.
The gender pay gap also has an impact, as women who earn less during their careers also receive less super contributions.This means that women simply cannot afford for their super to be lazy, and just stuck on the ‘default’ investment option that everyone’s been given. Instead, consider going beyond the defaults and invest your super for higher growth – it’s one sure way to give yourself an automatic pay rise.
I recommend that you seek personalised advice in this area, as there are a variety of strategies that women can use to improve their super balance, including the super co-contribution, splitting super with your spouse, additional tax-effective contributions, and quality investments for high growth.
Don’t hesitate in reaching out for this crucial advice. The financial decisions you make now may have ramifications – positive or negative – for years to come.
2. Letting your spouse take care of all the financials... and they’re crap with money
Many women who are going through separation or widowhood find themselves wishing they’d been more involved in how their money was handled.
No matter how uninterested you may be in managing your money, allowing your partner to take care of everything is unhealthy for both of you. This is particularly important if your partner is a big spender or takes care of your family debt.
If you find that discussing money with your partner just ends in arguments, then consider having these talks with a financial professional in the room to add unbiased insight and to keep the conversation on topic.
Having a financial plan in place will also act as a roadmap to keep you both accountable and on track to achieving positive outcomes.
3. Spending based on your emotions
We’ve all indulged in some retail therapy. But just how ‘therapeutic’ is it when you get your credit card statement and realise that you’re now a little further behind?
Whether it’s a bad day at work, a fight with your partner, or the thought that ‘you deserve it’ – spending just to make yourself feel better will, in fact, only serve to make you feel worse in the long run.
Instead of beating yourself up about past emotional spending and setting yourself up for repeat behaviour, take a step back and identify what really matters to you in life.
By working through your emotional triggers and responses, you can equip yourself to respond differently the next time you find yourself fighting the urge to impulsively spend on material possessions that won’t fix your emotional state.
4. Feeling like you’re not ready for that promotion
“I’ll go for that promotion once I have more experience”
Sound familiar?
Hold on… just how do you expect to get that experience?
If you’d like to move up the corporate ladder in your role, it’s time to take this seriously – invest in self-improvement courses, put your hand up for promotions, go the extra mile… and make sure you’re actually taking the credit for it!
There’s a difference between humility and taking yourself out of a race you deserve to be in.
Back yourself, your abilities, and commit to your professional goals without apology.
5. Being too generous with family
This is a tough one, because again, emotions are involved.
Helping your children or parents out financially is fine, but you need to look at the overall impact to your own finances.
If you’re spending your money on taking care of elderly parents, it may be beneficial to ask your siblings to contribute. If they can’t help, make sure to keep records and receipts of expenses paid, as this may be equalised in the way the Estate is distributed down the track.
If you’re still financially assisting your adult children who have moved out of home, it’s important to truly evaluate their needs, their income earning abilities, and your role in their financial education and responsibility.
If you find that you’re enabling behaviour that’s unhealthy, it may be time for a conversation around financial realities.
6. Not protecting your lifestyle and income with insurance
Default super, default insurance…yes, unfortunately there is a pattern here.
It’s highly likely that the default insurance you have within your super would not be enough to allow you or your family to continue to enjoy your current lifestyle.Australians are the one of the most under-insured nations in the developed word, with less than a third of women having income protection insurance.
There’s good news – Life, Disablement and Income Protection Insurance is more affordable than you think, and can be funded from your super if your cash flow is tight.It’s important to seek advice from a Certified Financial Planner® to help you determine the right types of policies and benefit amounts which suit your individual needs.
7. Not having a spending plan
Nobody likes the ‘b’ word- budgeting.
I like to call it a spending plan, because we are essentially making a plan of how your income will be disbursed between a) paying yourself first and b) covering your living costs.
Maintaining a healthy cash flow is the foundation to building wealth.
Luckily, these days we don’t need to spend hours on spreadsheets, as we have technology and apps (such as MoneyBrilliant or Pocketbook) that add fun and ease to the process.
A financial planner or money coach can help you set a realistic spending plan to suit your income and expenses, and your future goals.
8. Not having a positive money mindset
Unfortunately, many women equate the idea of our personal finances with stress and anxiety.
It doesn’t have to be that way.
You’ll be surprised at how your ‘money story’ can change after receiving some powerful and positive advice and support.
Money must be viewed as something you need to have a relationship with.
If you constantly told a friend ‘I don’t like you, I don’t like dealing with you, I don’t really need you…’, do you think they’d stick around for long? I doubt it.
It’s the same with your money. Money is a tool that gives you the power to do what you love – holidays with family, time off work, your dream home.
It’s therefore vital that you treat it with the respect and importance it deserves.If you’re struggling with negative thoughts or set of beliefs about money, speak with a financial planner who can equip you with tools, strategies and insight that can change your personal financial narrative and refresh your relationship with money.
Tamara Gillman is a Certified Financial Planner® and the founder of True Journey Financial Planning. She is based in Brisbane and works online with people all over Australia to turn their dreams into reality. She provides advice in the areas of Debt Reduction, Super, Investing, Property, Personal Insurance and Wealth Creation.