Young women (of which I am one) are one of the fastest growing segments of investors, home buyers, online shoppers and post-secondary graduates. Strong earning power coupled with financial knowledge can position a young woman for financial success. But, she must learn to avoid common financial pitfalls while embracing financial habits that help build her net worth; the difference between assets and liabilities – her bottom line. Becoming a Financially Independent Young Woman is not difficult.
Becoming a Financially Independent Young Woman:
Overspending leads to debt, and debt is a highly unattractive proposition for a young woman. Living frugally, on the other hand, means saving money by attaining the greatest value for every dollar spent. And, frugality is different than being a cheapskate. Cheapskates don’t leave tips, never take vacations, run out on paying their fair share of a bill and show up to potluck dinners empty handed.
Frugal living doesn’t mean a young woman has to give up travelling or buying a nice pair of shoes. It means sticking to a budget, planning ahead for large purchases, asking for discounts and finding resourceful ways to save money. Savvy young women spenders use coupons, buy on sale, and don’t purchase unnecessary items. Plus, they experience less stress and report higher levels of interpersonal satisfaction when compared to their debt-ridden peers of either gender.
Debt is a major financial barrier for young women. The best strategy with debt is to only borrow to invest in assets (own), such as a home or your education. This is called good debt. Avoid debts that don’t help increase net worth, such as borrowing for vehicles or electronics. This is called bad debt.
Young women, get rid of bad debt fast by:
- Removing the temptation to spend. Don’t go to the mall if you’re likely to buy a new purse. Take your name off promotional lists and online coupon websites. Reduce your available credit and have only one credit card.
- Getting organized and negotiating lower interest rates.
- Focusing on paying a little extra on the highest interest debt because it costs the most. Cut back lunch dates and fancy coffee so you can pay more – even $10 makes a difference. An easy way to pay extra is to set up accelerated bi-weekly or weekly payments, which allow you to tack on a few extra dollars each payment. Once you’ve paid off the highest-interest debt, move on to the next. You’ll have extra money from the old minimum payment on the highest rate debt; and you’ll still be paying a little extra through accelerated payments or by cutting out unnecessary expenses.
- When debt gets in the way of being able to afford the lifestyle you truly want, it’s time to make changes to your overspending habits and potentially see a credit counselor. Whatever you do, don’t incur additional debt while tackling the existing.
Advantage of Investing Young:
On the flip side of the net worth equation, young women can strengthen their bottom line by getting started on investing early. The advantage of investing young is that there is more time to allow money to grow through the power of compounded interest and reinvested returns.
Hands-down, the easiest way to invest is through automatic contributions to tax advantaged investment plans such as the Retirement Savings Plan and Tax Free Savings Account. Both can be set up at most financial institutions or through an employer. Employer plans are advantageous as they typically match a portion of employee contributions for free.
Recommended Read : How to save money in your 20’s or 30’s through Systematic Investment Plan?
Ladies, sign up for your organization’s savings plan and take the free money! If you’re unsure about how to invest, speak to a financial advisor and read financial books and websites.
These days, young women have the power to become financially independent, allowing them to create futures that achieve their personal dreams – and that’s an attractive proposition!