Making a budget and sticking to it, as well as making wise financial decisions, can put you in good stead for emergencies and retirement. Even if you have never been a saver, it is never too late to get started.
Here are six things every woman needs to know to maximize their savings potential:
1. Contribute the Maximum to Your Employer 401(k)
You should contribute as much as possible to your 401(k) plan. Your contributions reduce your taxable income, since they are typically deducted from your income before taxes are assessed.
This may be a good idea no matter how the market is doing, since many employers also offer a match, which can be considered “free” money.
If you switch jobs, consider directly rolling your 401(k) into a self-directed IRA. This gives you far more flexibility. If you are new to retirement savings, call the plan administrator for tips on managing your account.
2. Create a Budget Today
The first step to having a plan you feel confident about is to create a detailed budget so you can determine how much you spend and how much to save. Include your after-tax salary at the top, then make a list of expenses.
Some main categories to include in your budget are:
You may wish to also include things such as education, entertainment, and other items suited to your lifestyle. Don’t forget hair/clothes/makeup/skincare.
Create an estimate if you aren't sure of the monthly expense and update it based on actual expenses.
3. Open a Rainy-Day Account
Regularly put aside money in an emergency account. Keeping this separate from your other funds helps you avoid the temptation to spend it on non-emergencies. Try to save three to six months of your salary in an easy-to-access account.
You may decide to draw on this fund for unexpected emergencies, such as emergency auto maintenance or a new cell phone if your current one is lost or stolen.
4. Control Spending
According to Forbes, women drive up to 80 percent of consumer spending. New wage earners may struggle to use their paychecks wisely. Try to avoid the temptation to overspend on non-essentials such as a hot new car. Just because you might "deserve" to drive around in luxury doesn't mean you necessarily should.
5. Pay Down Debt
Excessive debt prevents you from saving as much as you could. This is especially true if you have high-interest credit cards. A recent National Debt Relief revealed that 63 percent of young women between the ages of 18 and 24 have credit card debt, compared to just 36 percent of men.
Furthermore, 66 percent of women between the ages of 55 and 64 have credit card debt, which is twice as many as men in the same age bracket.1
6. Hire Your Money
Once you have money to invest, put it to work. Many younger women choose a tax-free saving account for medium- and long-term goals, such as a down payment on a home or a college fund for children.
Women face a number of challenges and opportunities when it comes to saving and budgeting. Making responsible decisions impacts their own lives and often drives decisions made by their families.
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This content is developed from sources believed to be providing accurate information, and provided by Kelly Financial Planning. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.