The wealth gap between married and single has expanded in recent years. In 2019, married couples were worth nine times as much as single-family households, the Wall Street Journal reported.
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Given this wealth disparity, it’s clear that achieving financial security on a single income is more difficult, but with proper planning, it is possible. In this “Financially Savvy Woman” column, we chat with Jordan Sowhangar, CFP, Vice President and Wealth Management Advisor at Girard, a wealth management division of Univeston what single women should do to maximize and protect their finances in the short and long term.
Where should single women focus their money to maintain short-term financial security?
While it is important for everyone to have a sufficient emergency fund, it is even more so for single women. Their paycheck is the only income supporting all of their household needs, making it all the more important to “back up” in an emergency. Whether it’s a total job loss or simply unable to work for health reasons, single women should ensure they have enough savings to cover themselves if they are without work for six or even 12 months or more.
The dollar amount to aim for would be at least six months of expenses, but that should be the bare minimum. More than twelve months of expenses would be the ideal amount that single women should strive to have on hand at all times. This money should be held in insured and liquid accounts, such as traditional or online bank accounts that offer FDIC insurance protection, liquidity in case they need the money immediately, and, if possible, a rate of interest. decent interest to earn a little on their sales as well.
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What should they do for their long-term financial security?
In the long term, it is crucial for single women to plan for their retirement as early as possible. Again, their income is the only income coming into their household, which means it’s also the only income they can use to start saving for their future retirement. As soon as they are able to contribute to their company’s pension plan, they must do so.
Even if they are not immediately eligible for match opportunities, they must still allocate a portion of their paycheck to the proposed retirement account. Once they are eligible for any matching benefit, they should ensure that they contribute at least the amount necessary to take advantage of the maximum “free money” available to them.
The sooner they can contribute, the more that money will accumulate and grow tax-free or tax-free until they need it. This money should also grow at a higher average rate of return than their emergency funds, since it will likely be invested in vehicles like mutual funds, exchange-traded funds, etc., which, in the long term, generally yield more than banking solutions. .
What other steps should single women take to ensure they are in a good financial position?
Keep debt to a minimum. One of the ways single women can derail their financial plan and disrupt their financial security is by taking on too much debt. Getting into debt smartly, like taking out a mortgage to own your own home, is a good thing, but maxing out on that mortgage is not. It is particularly important for single women not to put themselves in a situation where they are “homeless”.
Credit card debt should be avoided as much as possible. Use credit cards strictly to take advantage of any points opportunities that earn you more on what you buy, but then make sure you have enough to pay off that monthly bill in full, if possible. It’s hard to get out of credit card debt in a two-income home, let alone as a single woman with one income.
Examine disability insurance. Emergency funds are a great support, but paying for disability insurance, especially with the right policy, can significantly help a single woman if she finds herself in a position where she is unable to work, or at least at the level where she once was, due to disability/illness. These policies can help provide extra income and allow you to focus on your health or other expenses you may be facing without additional worry.
GOBankingRates wants to empower women to take control of their finances. According to the latest statistics, 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 invest and are more likely to have debt, and women are still paid less than men overall. Our “Financially Savvy Woman” The column will explore the reasons for these inequalities and provide solutions to change them. We believe financial equality starts with financial literacy, which is why we provide tools and guidance for women, by women, to take control of their money and help them live richer lives.
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This article originally appeared on GOBankingRates.com: How to ensure financial security as a single woman