Forging a pathway to financial freedom on your own doesn’t have to be an uphill battle. But if it feels like that sometimes, know that you are not alone.
For many single women, achieving financial independence seems like a distant, or even impossible, goal. There are some very real financial challenges that are unique to women, which can make your journey feel that much more daunting.
Women earn about 83 cents to every $1 a man makes, and this wage gap is much greater for women of color. Female-dominated fields often pay less, and traditional gender roles push many women into part-time work, further limiting their earning potential.
Understanding the specific challenges women face is a great start if you’re striving for financial independence. This article digs into these obstacles and offers practical tips to help you overcome them and build a secure financial future.
Getting Started With Financial Independence
What financial challenges are unique to women?
White women earn about 83 cents to every dollar a man makes, with an even wider gap for Latina, Black, and Native American women.
Women spend more time away from the workforce as family caregivers.
Women have a longer life expectancy and require more retirement savings and planning.
How can I help myself reach financial independence?
• Know your worth.
• Live within your means and budget.
• Make automatic retirement savings a priority.
• Go after your personal and professional goals.
• Negotiate with your employer.
The Unique Financial Challenges Women Face
Traditional gender roles often push women into fields that earn a lower-wage and are dominated by part-time work. Consequently, women face a higher risk of poverty in later life due to restricted job opportunities and lower incomes.
Wage Gap and Income Limitations
- Women earn about 83% of what men make, with the wage gap widening to an additional 20-30 cents on the dollar for Black, Latina, and Native American women.
- Female-dominated fields like teaching and care jobs pay less than those dominated by men like finance and construction. For example, female physicians and surgeons collectively earn $19 billion less than their male peers every year.
Career Interruptions
- Historically, women are primary caregivers in their families, and take time away from the workforce to raise a family and care for aging parents.
- Women are more likely than men to miss work to care for sick family members and to tend to family emergencies.
- Women are still more likely than men to be dismissed from their jobs than their male counterparts.
- According to a peer-reviewed study, women at the peak of their earning potential are also 8 times more likely than men to have their employment interrupted by family caregiving responsibilities.
Longer Life Expectancy
- Women generally live longer than men, requiring more retirement savings to support those additional years.
- Increased healthcare costs as women age further heighten the need for a larger retirement fund.
- According to the CDC, women live an average of 6 years longer than men. Without a spouse to care for them, women often face additional expenses for healthcare and overall support.
Taking Action: Financial Tips for Women
- Establish an Emergency Fund
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- Emergency funds can keep you afloat during unforeseen financial hardship. Having a secure source of cash can eliminate the need to sell from investment accounts during a volatile market period. They can also help you sleep soundly at night knowing that you have cash earmarked for life’s next curveball.
- Single women without children or dependents will want to maintain emergency savings of three to six months of expenses. If you have secure employment or a higher risk tolerance, you may want to be on the lower end of this range. If your income fluctuates or you are generally more conservative, you may want to be on the higher end of this range.
- If you have children or other dependents to support, you should be looking to increase your emergency funds to be six months to one year’s worth of expenses.
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- Prioritize Retirement Savings
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- Social Security can be extremely beneficial. Understanding the impact it will have on your cash flow will allow you to make an honest educated decision as to the most beneficial claiming option.
- While Social Security will only cover part of your retirement expenses, strategically combining it with your 401(k) or an individual retirement account (IRA) can significantly boost your nest egg. Start participating in your workplace retirement plan as early as possible to harness the power of compounding interest.
- Take full advantage of your employer’s matching contributions, if available, and set up automatic increases to accelerate your savings. Remember, saving doesn’t have to be all-or-nothing. Even if you have to start small, or you find yourself only beginning to save at an older age, start now.
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- Budget and Track Expenses
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- Begin by tracking your spending to understand where your money goes each month. Use manual tracking or a free budgeting tool to monitor your expenses. Understanding your spending habits allows you to create a budget that suits your financial situation. If you have an understanding of your spending habits and expenses, you can set savings goals to help you have enough saved up for your retirement.
- Utilize popular budgeting techniques like the 50/30/20 rule, where 50% of your income covers essentials, 30% goes to discretionary spending, and 20% is set aside for savings.
- Automate transfers between your checking and savings accounts for consistent saving that you don’t have to think about. Being proactive and disciplined in managing your finances can boost self-confidence, provide security, and help mitigate the impact of rising inflation on a single income.
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- Obtain Adequate Insurance Coverage
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- Long-term care insurance covers services not included in regular health insurance, such as assistance with daily activities and care for chronic conditions or disorders like Alzheimer’s. Policies typically reimburse care provided at home, in nursing homes, assisted living facilities, or adult day care centers.
- Your financial plan should be incorporating the possibility of needing long-term care, especially as you age into your mid-50s and beyond. If you determine that long-term care insurance is right for you, apply before developing debilitating conditions. Insurers often reject applicants over 75, so you will want to apply well before then. Note that women often pay a higher premium than men for long-term care insurance due to their longer life expectancies.
- Social Security Disability Insurance (SSDI) provides crucial benefits to workers unable to support themselves due to serious medical impairments. It offers vital support to those meeting stringent work-history and medical criteria, without discrimination based on gender.
More Ways To Empower Yourself & Find Financial Independence
- Partner with a tax professional to optimize tax benefits.
- Explore increasing your income through negotiation with your employer or career advancement.
- Pursue personal and professional goals such as travel and continuing education.
- Build a legacy through charitable giving.
- Create an estate plan so your wishes are carried out when you’re gone.
- Everyone, but especially single women, need comprehensive estate plans. That includes having a will, a power of attorney, and making sure that beneficiary designations are in place to protect your assets and ensure that wishes are carried out.
Finding Support and Resources
- Create a professional network of supportive people you can trust.
- Consider working with a financial advisor for personalized guidance.
- Check out some of these great books:
Final Thoughts
You have the power to build a secure and prosperous future. Keep pushing forward with confidence and determination, and know that every small step you take today brings you closer to financial freedom.
Remember, financial independence is about gaining control over your finances and creating the life you want. Stay disciplined, seek out resources and support, and never underestimate your ability to overcome obstacles.
Achieving financial independence as a single woman is possible despite the challenges you face. By taking proactive steps such as establishing an emergency fund, prioritizing retirement savings, and obtaining adequate insurance, you can set yourself up for long-term success. A trusted advisor can provide personalized advice to help you achieve your financial goals with confidence.
For the last quarter-century, the professionals at SK Wealth have perfected The Integrated Financial Advantage™, a unique financial planning approach crafted to provide our clients with personalized guidance so they can live with intention both tomorrow and today.
