Financial independence: it’s a common term that you’ve probably seen in TV commercials,
magazine ads, and billboards. But what does financial independence mean, exactly? And why is it so important, particularly for women?
To put it simply, financial independence means three things:
1. You have control of your own finances. You make your own decisions regarding money
instead of relying on someone else to make those decisions for you.
2. You can support yourself financially. Whether it’s through your job, your savings, your
investments, or a combination of all three, you can stand on your own two feet. You do not have to rely on financial assistance from the government, family, friends, or credit card companies.
3. You have at least a basic level of knowledge about how to manage your finances so that
you can make competent decisions. (Otherwise, you would soon find that having the
ability to support yourself, as explained above, would fly right out the window.)
No matter who you are or where you come from, it’s important to achieve financial
independence. Why? Because without that independence, everything you want or dream will be much harder to achieve. Because without independence, you can only hope to reach your goals instead of actively working towards them.
No one can control what happens to them in life, but people with independence can control how they respond. Those without independence don’t have that ability. They are at the mercy of chance. In other words, financially independent people can make plans for the future. People without independence can only hope the future will be kind to them.
All of this is especially true for women. That’s because women face a unique set of
challenges—challenges that only financial independence can help overcome.
Financial Challenges for Women
There’s no use beating around the bush: for most of Western history, women have traditionally been treated as if they are subservient to men. A woman’s job was to stay at home, cook, clean, and raise children while men worked, built, or hunted.
That fact is still true for many women today. Of course, many women want to focus on homemaking and child-rearing, responsibilities which are as important now as they’ve always been. But whether you are the type of woman who prefers to work in the home or outside it, you may well face a byproduct of this centuries’ old tradition: it’s usually men who manage the money.
For generations, many women have relied on their husbands, boyfriends, or fathers to make financial decisions. This mindset is slowly starting to change as more and more women gain the desire for financial independence. Just as importantly, more and more women are realizing the necessity of financial independence. Whether they want to or not, most women will be forced into managing their own finances at some point in their lives.
Here are a few reasons why:
1. Women have a longer life expectancy than men. Many women who have relied on their
husbands or fathers to handle financial decisions will suddenly find the responsibility
thrust upon them after their loved ones pass away.
2. According to one study, 37% of women over the age of 65 live alone, either because they
are divorced, widowed, or never married. When it comes to managing money, these
women usually have no one else to turn to but themselves.
3. Statistics released by the Administration on Aging indicate that the poverty rate for
women over 65 is significantly higher than it is for men of similar age.
If you’re a single woman, the chances are that you’ve already assumed responsibility for your finances … or you will have to very soon. If you’re married, you should prepare yourself for the possibility that one day the burden of managing your money will fall entirely on your shoulders.
Either way, think how much better it would be to plan ahead, to act now, to achieve financial
independence on your terms rather than wait until you have no choice. By being proactive, your financial independence will become a means to helping you achieve your dreams. By being reactive, financial independence becomes more about trying to deal with unexpected challenges, like getting out of debt, outliving your income, paying for medical expenses, and more Women face other unique financial challenges, too. For instance:
1. Too often, women receive less pay than their male counterparts. In addition, women still
have to contend with the so-called “glass ceiling;” the unseen, but definitely real barrier
between themselves and professional success. This ceiling limits many women’s
opportunities for promotion and career advancement.
2. For many women, a good portion of their lives is spent raising children. That means they
spend less time actually working and collecting an income. (Not that raising children
3. Women are often charged with taking care of their elderly relatives, which is a drain on
both their time and money. The result is that many women can’t rely as much on regular work-related income as men can. This means more attention must be spent on things like saving, investing, and tax planning in order to accumulate the wealth you’ll need to be financially independent.
As you can see, financial independence isn’t just a buzzword. It’s not just a luxury, either. It’s a necessity. By taking steps to become financially independent now, you can secure your family’s future, enjoy more peace of mind, cut down on expenses, and best of all, make your life exactly what you want it to be
STEPS TO FINANCIAL INDEPENDENCE
STEP #1: DETERMINE WHAT YOU WANT
I said before that a key part of financial independence is being able to make your own decisions regarding your money
STEP #2: TAKE CONTROL OF YOUR CASH FLOW
At this point, you know what you want. For example, maybe what you want most is to retire and not have to work at all. Just as important, you also want to make sure your children (or grandchildren) go to college and secure their own financial future. Finally, you want to know you’ll have the money and protection you need to handle any unexpected expenses or health problems
STEP #3: ELIMINATE DEBT
Some people, even those with high paying jobs, can’t support themselves financially … at least, not really. That’s because they’re buried up to their eyeballs in debt. In fact, it’s estimated that “1 in 3 adults are so far behind on some of their debt payments that their account has been put ‘in collections.’” To make matters worse, women tend to have more debt than men. Why? Once again, it mainly comes down to unequal pay. Just like men, many women take on student loans or mortgages, or spend more than they can afford. Unlike men, they don’t make as much income to pay those debts of
STEP #4: EARN, SAVE, AND INVEST
Chances are that even after taking control of your cash flow and ridding yourself of debt, you will still need to focus on building your wealth. This is done through a combination of earning, saving, and investing.
How much you earn, of course, is governed by your job. Again, women face some specific
challenges here. Per the Department of Labor, women are more likely to work part-time jobs, be compensated less, or have to quit working altogether to care for family members.
To overcome these challenges, women need to be very committed to saving and investing … especially when it comes to retirement.
Unfortunately, 59% of women only guess at how much they’ll need for retirement.
That’s not good, because retirement is expensive. In fact, the Department of Labor estimates that most people need to maintain at least 70% of their pre-retirement income (the income you earn while still working) in order to maintain the same lifestyle. Some people need as high as 90%.7 And that’s just to maintain your lifestyle! You can forget about that Mediterranean cruise or motorhome … unless you get serious about saving and investing
STEP #5: ESTATE PLANNING
Estate planning is the best way to ensure your loved ones receive their fair share of what you’ve worked so hard to earn. It’s also a critical part of creating your own legacy
Now, you may be thinking, “I have a will so I’m all set.” While having a will is a very important part of your estate plan, it’s not the only part. A will doesn’t specify how you want to be treated should your health fail. It doesn’t dictate who will carry out your wishes or handle your financial affairs should you ever become incapacitated. It doesn’t help your heirs limit their tax burden. These are all important issues that estate planning is designed to address
STEP #6: GET HELP
At this point, I hope it’s clear that financial independence is something every woman should strive for. But no one should have to strive for it alone. The fact is, finances are complicated. There’s so much to know, so much to keep track of. While this guide is enough to give you a head start, it’s impossible to cover all the details and intricacies of financial independence. After all, it takes years of experience for most professionals to master them. That’s why getting professional help is the sixth step to independence. Because let’s face it—if you’re like most people, you have neither the time nor the inclination to spend all day, every day worrying about finances. With the help of a qualified financial advisor, you don’t have to. Then too, take a look at the best athletes, actors, musicians, or even business professionals. Almost all of them work with trainers, coaches, and other experts to improve their chances of success. No matter who we are or what we’re trying to accomplish, we all could stand a little guidance along the way.