Easy steps to improve your long term financial health

Upon first glance, the numbers look rather daunting for women planning for their long-term financial future.  Women earn 25% less, average 11 years out of the workforce, and live 5 to 7 years longer than men. 

As a result, one in eight elderly women lives in poverty, compared to one in twelve men according to 2003 figures from the U.S. Health and Human Services Administration. The statistics become even more concerning when disability is factored into the equations.

Women with disabilities are only half as likely to be employed as their male counterparts, while employed male workers earn 44% more than their employed female counterparts. Women are also far less likely to be involved in vocational rehabilitation services₁.

Women receiving benefits as disabled workers also receive less than men: In 2003, women received $734.40 on average monthly, and men received $965.90₂. Women with a work-related disability also experience higher poverty rates—about 34 percent—than men with a work-related disability (24 percent)₃. These statistics can be discouraging, but it is more important to stay positive, figure out a plan, then act on that plan.  In fact, an argument can be made that the direr your financial situation, the more you should learn about managing those limited resources effectively. 

No matter what your age, disability status, or situation, every woman is capable of improving their daily finances and long-term financial situation.  The people in the best position to improve their financial condition are not the ones who make the most money, but the ones who are the most disciplined.  It is surprisingly straightforward, you just need to learn the basics and be willing to take steps toward a new, better financial future for yourself and your family.

Contrary to some popular belief, women and money do go hand-in-hand. The current perception is that most women continue to be tentative about managing their finances, either online or off, because historically, men have handled the majority of the family's finances. "Not so, anymore," says Dr. Judith Briles in her book The Female Finance Factor.

Things have really started to change; did you know that women now head more than 40% of U.S. households with high net worth (over six hundred thousand dollars in net worth)?  In these households, salaried wives earn at least half of the household income₄.  In fact, by 2010, Condé Nast reports that women’s projected share of private wealth will reach 50%, or $12.5 trillion. When women become interested in financial planning and investment they tend to do their homework, research a question thoroughly, and aim for stable consistent returns.  Perhaps that quest for stability is one major factor separating the sexes when it comes to money.  A recent study published in the Proceedings of the National Academy of Sciences postulated that men’s hormonal make up can lead to irrational risk taking in financial markets and that “if people want to get practical, it would be good for both banks and the financial system as a whole if we had more women [in the markets].” Such a change would produce a much more stable financial system, said the study author.

A WingspanBank.com study that looked at 1,000 men's and women’s relationship to money demonstrates the changing financial landscape and confirmed that women have come a long way in their handling of money matters for themselves and their families.

The study reports:

• 62% of women manage the family's checking account (compared to 38% of men).

• 59% of women review the bills prior to paying them (compared to 32% of men).

• 58% of women actually pay the bills (compared to 35% of men).

• 53% of women decide where their family banks (compared to 35% of men).

• 46% of women head up savings and investment accounts for their family (compared to 42% of men).

• 53% of women create the family's budget (compared to 30% of men).

WingspanBank.com Financial Index

Several traditional financial planning moves are easily adaptable for people with disabilities.  While EQUITY often illustrates specific anti-poverty tools, here are a few traditional strategies and techniques to implement now to improve your long-term economic health:

1. Do not assume that your current financial status is permanent. 
Regardless of your present situation, remember, things always get better if you continue to work hard.  Over time, volunteer jobs or internships can turn into part-time jobs.  Part-time jobs turn into full-time jobs, and those full-time salaries increase as one gains skills, experience, and embraces additional responsibilities.  Similarly, over time, small disciplined savings programs can really begin to add up.  For example, if an 18-year-old woman chooses to save only $50 dollars per month in a conservative investment account, by the time she was ready to retire, she would have over $274,400 available to her.  That nest egg could produce a monthly income in access of $1,400 per month for twenty-five years.  This amount would be in addition to social security and any other retirement benefits.  These numbers and dollar calculations are not wishful thinking, they are just simple math.  Twelve dollars a week, saved over a life time, can really add up.
Run your own savings calculations at: http://www.drcalculator.com/calc/savings.html.
   
2. Develop a plan.
It is often said in financial planning circles that people do not plan to fail, but they fail to plan.  It is important to develop a financial plan that will address the big three issues of savings, debt, and retirement.  We are not talking about developing a budget that accounts for every last penny you spend, but having a plan that redistributes and prioritizes the income you have in a disciplined intelligent way. 

Develop a banking relationship.
Far too many people with disabilities are un-banked. Often they deal in cash or use check cashing or “alternative banking institutions.”  Every service provided at such an institution is available at your local bank or credit union. Further, these services are provided free or at very low cost for account holders. Many community development credit unions provide free bill pay, checking, and savings accounts for low-income individuals. These institutions protect your financial privacy to the limit of the law. 

Start an emergency savings account.
Everyone needs to have an emergency savings account for when life happens.  The van may need a new lift, there may be an unforeseen medical expense, or the guide dog needs a root canal.  This emergency account provides for such eventualities allowing you to avoid expensive credit card or pay day loan options.

Rather than working out how much you spend on rent, food, entertainment, utilities, etc., commit to saving a certain amount at the beginning of every month.  It’s called “paying yourself first” and is a powerful planning technique.  Have the amount automatically withdrawn from your account and placed into a separate account at the beginning of every month.  Pay yourself first; your budgeting will automatically compensate the rest of the month and you’ll never miss the money.

Once you have accumulated a small emergency account of a thousand dollars or so, it is time to tackle your outstanding debt.  There are several approaches one can take to eliminate debt.  You could start by paying off the debt with the highest interest rate.  This certainly makes financial sense.  The higher the rate you eliminate, the more money you will save.  An alternative is to create a list with all your outstanding debt.  Concentrate on paying off the debts one at a time.  This approach is not the most efficient, but removing each debt from the list one after another provides a certain psychic satisfaction with real value.  Use fifty percent of windfall income such as tax returns, the economic stimulus payment, and family gifts to pay down your debt.  It may not be the most exciting thing to do with the money, but it is probably the smartest.

Once your debt is eliminated, it is time to build up that emergency fund even more.  Experts suggest saving enough to cover three to six months of living expenses. 

3. Start your long-term saving now.
Do not wait too long to start saving.  It is tempting to think that it will be easier to save in the future.  You may have a better job; you may be earning more money; there is always time.  While it is crucial to save throughout one’s lifetime, postponing savings can be detrimental to one’s wealth.  Remember the 18-year-old woman who accumulated $274,400 by saving only $50 per month?  If she waits to start saving until she is 40 years old, she will have to save over $260 per month to accumulate that $274,400.  If she waits until she is 50?  Then she will need to save over $635 per month to reach the same goal.  Remember, stick with the plan, pay yourself first, and watch the money grow.

4. Don’t go it alone and don’t get too conservative.
Let’s face it, dealing with money and long-term planning can be scary.  Try forming a small group whose principle goal is to gather once or twice a week to discuss financial options and develop a long-term plan.  You may be surprised to find that many of your friends have similar concerns, fears, and expectations.  Learn together, track your progress, and succeed together—it can actually be fun.

Check out the Resource section of this month’s EQUITY for a list of financial resources specifically for women.

______________________________________________________________
Footnotes
1. Off Our Backs, Inc., Jan/Feb 2003
2. Social Security Administration 2003 Master Beneficiary Record
3. Jans, L., and S. Stoddard. 1999. Chartbook on Women and Disability in the United States. An InfoUse Report. US National Institute on Disability and Rehabilitation Research [online]
4. U.S. Census Bureau 2003