Money Makeover: 5 Steps to Turn You into a Money Savvy Woman

money savvy women

Women hold more financial power than ever, but our financial literacy remains dismal. We continue to relinquish our financial decision-making power to our husbands, boyfriends or the guy yelling the loudest on TV. Many women were raised under the assumption that men handled the finances because they understood it best.

Unfortunately, that’s not true. Women underestimate their own ability to manage their financial life and overestimate their partner’s ability to do it right.

If you’re in a relationship, financial literacy shouldn’t even be an either/or situation. It should be a partnership. At some point in your life, there is a good chance you’ll be the primary financial decision-maker.

Women cannot afford to wait for Prince Charming to show-up and take control.

5 Steps to Becoming Money Savvy Women

When women claim their financial decision-making responsibilities, good things happen, including peace of mind and more control over their lives. And guess what? The men in their lives appreciate their input and support too.

1. Set Specific Financial Goals

Every day you make hundreds of decisions.

Do you buy a latte?

Do you buy a new pair of shoes?

Do you plan a family vacation?

Decisions are easy when you know what you want or have goals. You can now filter your decisions against your goals.

Does this bring me closer to achieving what I want or further from it?

This simple question makes it easy for you to honor your goals and walk away without feeling deprived, even when you find something very tempting.

Making good financial decisions is the backbone to creating the life you want.

2. Lower Your Debt and Build Adequate Cash Reserves

financial goalsA common mistake many women make is sacrificing their cash reserve to help reduce their credit card debt.

Instead, you should actually build your cash reserve and reduce your debt at the same time.

While it may seem counter-intuitive to worry about an emergency fund when you're getting out of debt, the truth is things will still break and need to be replaced.

If you don't have funds readily available to cover those costs, you'll have no choice but to use your credit card and undo all your debt repayment efforts, which can be very demoralizing and cause you to give-up.

Ideally, you should build your emergency fund to cover 3-12 months of living expenses.

3. Save, Save and Save Some More

“I work so hard and deserve to splurge a bit" is one of the many excuses we use to defend our lack of savings.

Or we assume someone else is going to save for us, (maybe a spouse, an inheritance, or our government’s Social Security system).

The question we need to ask ourselves is—do we want to depend on someone else for our financial future? I vote no.

A savings plan for cash reserves, goals and retirement creates hope for the future and lowers stress during times of change.

And most importantly—puts you in the driver's seat.

So why aren’t women saving more?

Much of it boils down to a lack of discipline. Don’t let that be your excuse.

Pay yourself first by automatically setting aside money to fund your savings goals. It is one of the greatest gifts you can give yourself.

retirement plan

4. Create a Retirement Plan and Review Regularly

One common mistake women make is not taking time to prepare for their own retirement.

Life moves fast as we care for those around us, but we have to slow down to make sure we remain financially strong as we age.

Contributing to a 401(k) is not a plan, but it is a good start. A plan needs to consider your living expenses, inflation, investments, and income sources.

The two top mistakes that investors make with retirement are not creating an income plan and not considering the need for long-term care.

The first is simply making sure you have a plan as to what assets you are going to use when considering taxes and risk exposure.

The second involves planning for the day when we can no longer care for ourselves, regardless of how difficult it is to think about.

Some of us are already experiencing this with our parents and know the costs are high.

Investing intimidates many women, but you still need to have a baseline understanding of how investing works, even if you work with a professional.

This is where you can really put your money to work for you, so educate yourself and make informed decisions.

5. Protect Yourself and Your Loved Ones

Women are natural protectors; we are “Mama Bears”.

We teach our children to look both ways before crossing the street, to buckle their seat belts and to eat their fruits and vegetables.

However, we commonly fall short when it comes to our own protection planning needs.

Life insurance is typically addressed through a life insurance policy offered as part of our work benefits. We often select an arbitrary number that feels comfortable in a policy that is generally not portable should we chose to leave our employer.

We avoid the hard discussions of what would actually happen if we die or our spouse dies prematurely.

We underestimate the actual value of our lives, and the money we contribute to our family’s well-being.

Should the unthinkable happen, those shortfalls could significantly impact you or your loved ones.

You must determine what amount of protection is needed to cover lost income and to continue living the life you planned. The conversation isn't always the easiest but is incredibly important, so don't put it off.


    • Apollo

      Apollo 06/26/2013 5 a.m. #

      Nice post. It is hard to believe how many people struggle with the most basic principles of money management. I think it is a sign that we have some major gaps to fill as a society and may want to rethink some of our teaching approaches.

      • Shannon @ The Heavy Purse

        Shannon @ The Heavy Purse 06/27/2013 1:53 a.m. #

        Thanks, Apollo! It's unfortunate but many people do struggle with basic money management because no one taught them how to handle money. Money is often a taboo subject in many homes, so we are left to figure it out as we go. I agree that we need to make personal finance a priority in homes and schools.

    • Corina Ramos

      Corina Ramos 06/26/2013 8:01 a.m. #

      Hey Shannon,

      Great tips! I'm the account manger in the house. My husband knows how much we have in our savings and all that but he doesn't know anything about the bills. He leaves all that to me.

      At first I wasn't too happy with the responsibility but I was able to bring down our debt and I can control our expenses that way so it works out.

      And since I know how much we pay on electricity,I'm also in charge of turning off lights and unplugging unused appliances :)

      Great advice Shannon! Happy Wednesday ladies!

      • Shannon @ The Heavy Purse

        Shannon @ The Heavy Purse 06/27/2013 1:57 a.m. #

        Thanks, Corina! It's always interesting to see how couples split up the money responsibilities. That's fantastic you were able to lower your debt and take control of your expenses. It feels good, doesn't it? Sadly, I see too many women who want nothing to do with their finances and want someone else to tell them what to do. The girls weren't the best at turning of lights, etc. but I found when I showed the chart in our electric bill and started challenging them to the lower our usage, they were more conscious of turning things off! :)

    • krantcents

      krantcents 06/26/2013 11:42 a.m. #

      Even as a male who takes care of the family finances, I want my wife to be knowledgeable too. When we have to make financial decisions, we discuss them together and I value her input.

      • Shannon @ The Heavy Purse

        Shannon @ The Heavy Purse 06/27/2013 2:01 a.m. #

        Exactly the way it should be! I am constantly surprised by how many couples don't make financial decisions together and don't discuss what they actually want to do with their money. Glad you're doing it right!

    • Christy Garrett

      Christy Garrett 06/26/2013 4:14 p.m. #

      These are all excellent ways to make sure that you have enough money for retirement or emergencies. You can't ever be too prepared. What would happen if you or you spouse could no longer work? How would that affect your finances? Reducing your debt is a great start and building cash reserves can last a while until you can return to work or get disability.

      • Shannon @ The Heavy Purse

        Shannon @ The Heavy Purse 06/27/2013 2:05 a.m. #

        Thanks, Christy! I agree - you can't ever be too prepared. You never know what life is going to throw at you - good or bad. Having a good cash reserve has helped us through tough times, which is why it is always a priority to me. Peace of mind is priceless. :)

    • anna

      anna 06/27/2013 1:59 p.m. #

      Excellent tips as always, Shannon! I agree that women should be hands-on with household finances, and plan to once we combine ours (I'm nosy by nature, anyway). I agree about saving cash reserves while paying down debt - I had to have car repairs a couple of months ago, and though it was painful to part with some reserves since it takes awhile to build up, it was a confidence booster to not regress in my debt repayment since I had the reserves!

    • Shannon @ The Heavy Purse

      Shannon @ The Heavy Purse 06/27/2013 3:10 p.m. #

      Thanks, Anna! There are few things in life I can guarantee beyond things will break and stuff will happen. :) And not having to rely on your credit card feels so good and I have seen too many people "fall off the wagon" so to speak when a crisis happened and they had to undo all their hard work. I'm so glad you were able to avoid that thanks to your emergency fund!

    • Pension Retirement

      Pension Retirement 06/28/2013 11:34 p.m. #

      When I was working and getting my MBA, my wife did all of the bill paying and saving and planning. However, for the last decade or so I've been doing it. It's not that she was poor at it, she did things just fine, but she just got sick of it. It certainly take effort even if you're automating as much as you can.

    • Laurie @thefrugalfarmer

      Laurie @thefrugalfarmer 06/29/2013 6:23 p.m. #

      Love the advice here, especially "review regularly". This has been particularly helpful for us as we work to stay on track with our goals. Thanks, Shannon!

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