Up until the last few decades, women have traditionally taken a backseat when it comes to managing money for their families. Even now, men are still often considered the breadwinners and financial decision-makers in many conventional marriages. According to a 2021 study by UBS, half of married women defer to their spouses for financial decisions.
We’re overdue for a change.
I’m a personal finance coach and a national expert on saving for retirement in the US. I strongly believe that all women, regardless of income or financial background, should see themselves as the chief financial officers of their family’s finances (if they want).
Here are steps to take charge.
1. Track your income and expenses
According to the American Consumer Council, women are the most powerful consumers, accounting for 80% of purchases across categories including groceries, new home purchases and online shopping.
If you’re already driving the majority of purchasing, you’re familiar with expenses and bills, which can help you create and manage your budget.
Given ever-changing needs, it may feel impossible. But think of it this way: If you’re a mother, you’re likely arranging for the care and education of your children. You’re probably planning meals and shouldering the burden of housework and cleaning. All these decisions require money to execute.
Estimating your monthly spending is easy. However, if you want to make sure your family’s finances are on the right track, you’ll need to be thorough. List every expense, big or small, to understand your spending habits and expenses. That may include gas, childcare and your cell phone bill.
Don’t aim for perfection. When you start, no two months will look alike. You may not even know what all your normal expenses are until three months (or more) into the process. The longer you track, the greater confidence you’ll have in understanding your family’s financial picture.
My husband and I have been transparent about money since we were engaged. All our paychecks, bonuses and income are recorded in our family’s financial ledger. We use Money by Microsoft, which lets you track all of your money and goals, including your income, net worth and expenses.
If you don’t know how much your partner makes, that should be part of a broader discussion. Explain how you want to start managing your household finances and what you’ll need, including account information, income and any other financial data (like spreadsheets of past budgets). You might also brainstorm about the best starting point, such as making a list of your expenses and comparing them against your family’s income.
When you’re ready to create a budget, remember there’s no right or wrong way. Think about what style works best for you and your family, and don’t be afraid to switch if the first approach doesn’t work for you. Here are a few methods to consider:
- Pen and paper: If you prefer visuals or journaling, a notepad can be an effective way to get started.
- An online app or tool: I love and recommend You Need a Budget, and CNET editors recommend Rocket Money as two options to consider.
- A spreadsheet: You may design your own spreadsheet or choose a template. I like the one sold by @mywealthdiary on Instagram.
2. Take charge of your debt and savings
Once you have a budget, you can start examining where your money is currently going and where it could be going.
This can start with understanding how much you’re paying for debt, including credit cards. Collectively, Americans owe more than a trillion dollars in credit card debt. And it can be some of the priciest debt, meaning credit cards typically accrue interest at a higher rate than a lot of other debts, like mortgages and auto loans.
Read more: How to Get Out of Credit Card Debt
While paying off debt is important, so is having an emergency fund to cover unexpected expenses — think a flat tire or medical crisis. So, how do you balance these priorities?
If you’re juggling debt and saving, try a twist on the avalanche debt payoff method in which you prioritize paying off debt that charges the highest interest rate while making minimum payments on your other debts. When the first debt is paid off, you’d put all that money toward the debt with the next highest interest rate, and so on.
5 steps I recommend for getting out of debt:
✔️ Make minimum debt payments while you save one month of must-have bills (think rent or mortgage and car payments).
✔️ Once you have that amount saved, prioritize paying off debts with interest rates of 10% or higher.
✔️ When those debts are paid, save three to six months of must-have bills (depending on how stable your household income is and whether you have one or two incomes).
✔️ After you have those savings set aside, prioritize paying off debts with interest rates of 5% or higher.
✔️ Pay off the remaining debt as you pursue other financial goals.
3. Start investing for retirement
Women, on average, live to age 79, compared to age 73 for men, according to the US Census. That means your retirement needs to last six years longer than the average man. But women are also more likely to shoulder the burden of caring for both children and elders, which can mean less time is spent contributing to retirement savings.
If you’re married, don’t depend on your spouse’s retirement fund to cover your retirement. If the unexpected occurs, you want to make sure your financial future is secure.
If you have a job and your employer offers a 401(k), that’s likely the easiest way to start saving for your own retirement. Even if you can’t contribute a lot, any percentage of your pretax income can grow in one of these accounts thanks to compounding interest.
If you don’t have a job that offers a 401(k), you can still save for retirement. If you’re married and filing jointly, the nonearning spouse can have a traditional or Roth IRA. (It’s often referred to as a spousal IRA, but you’d just open and use a regular traditional/Roth IRA as if you were employed.) You may also consider a taxable brokerage trading account, which is available regardless of your income status.
4. Keep your spouse in financial decisions
Even with all of this advice, don’t leave your partner out of financial goals and where the money is going. I always recommend a regular conversation called the “Sexy Money Date.” Try meeting with your spouse at least once a week for one hour to go over your budget, plan for the future and take care of money-related errands. Aim to align on goals and habits, and try not to focus on your differences.
Do something new. There are no limits. And keep in mind your ultimate goal: a better money life for you and your family.
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