As the father of two adult daughters the subject of financial independence for women is one that remains near and dear to my heart. 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
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. Why is financial independence a necessity rather than just a luxury? Because of this basic fact:
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.1
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 isn’t work!)
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.
So what are the steps to financial independence? Come back next week to find out more!
1. “A Profile of Older Americans: 2011,” Administration on Aging, November 2011. http://www.aoa.acl.gov/Aging_Statistics/Profile/2011/10.aspx