Today’s “Financially Savyy Female” column is inspired by a message I received from one of my readers: “How [can I] live on $39,500? You cannot cut any ‘extra’ when there isn’t any extra. I have real-life expenses — medical bills, mortgage, car and homeowners insurance. I searched for lower car and homeowners insurance, but I do not want to sacrifice services. I have three degrees and am barely able to live at 49 years old. I just don’t see how I can’t work this job and live and retire. I fear I’ll be homeless by retirement, which seems very close. I can’t afford to really contribute to the work 401(k) because this job pays significantly less than my previous job. I got laid off and needed insurance and an income. What am I going to do?”
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While your exact circumstances may be different than this reader’s, there’s an all-too-common thread I see running through this message — fear and anxiety around finances. It seems that for many women, no matter how much money they make, there is a fear it won’t be enough. So I tapped financial experts to find out the steps women can take to ease their money-related fears and anxiety.
Here’s how to feel more financially confident.
Know How Much You Need To Retire
One of the reader’s most prominent fears is that she will be homeless by retirement — but she may not have a clear picture of how much she will actually need in retirement and what it will take to get there.
“Not knowing where you stand financially causes a lot of stress because you don’t know what you need to do, what you can afford and how you’re going to be OK,” said Kristine Beese, founder at Untangle Money.
Beese recommends starting by figuring out how much you will need for retirement using an online calculator.
“A good calculator will let you know how much you need to invest monthly to reach your retirement target,” she said.
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Make Money Moves To Help You Reach Retirement Goals
Once you have figured out how much you need to invest monthly for your retirement, you may find out that you are currently falling short. This means you need to change and reprioritize how you are spending your money.
“Look at what you spend your money on and figure out what brings you the most joy,” Beese said. “What really fills you up when you spend money on it? That’s what you’re going to protect, and try to figure out how to get everything else cheaper or for free. This ensures that you’re maximizing your joy when you’re spending your money.”
Pay Yourself First
Although the reader says she can’t afford to contribute to her 401(k), most financial experts would say that this should be a priority. Even if you can’t contribute much, try to put a portion of every paycheck into your retirement plan.
“We are huge proponents of the ‘pay yourself first’ strategy,” said Clayton Quamme, financial planner at AP Wealth Management. “The idea is that before you pay monthly expenses, you save money first. Most 401(k) plans work like that — you elect to have a percentage taken out of your pay. The money is taken out of your paycheck and put in a separate account for you. If you do not have access to a 401(k), you can set this up yourself with automatic withdrawals from your checking account to a savings or investment account. The more you automate your savings and ‘pay yourself first,’ the better your chances of sticking to a plan.”
Get Professional Advice
Sometimes it will take an outside perspective to help you come up with a budget and retirement savings plan that works for you.
“When we get sick we go to the doctor. When we get into legal trouble we hire a lawyer. Yet, somehow people believe that they should be able to navigate the ever increasingly perilous financial waters without professional help,” said Robert R. Johnson, PhD, CFA, professor of finance at Heider College of Business, Creighton University. “Even if one believes they don’t make enough money to avail themselves of a financial advisor, they should seek one out.”
GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.
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