The old stereotype about struggling single moms is a little played out, but it’s based in a truth that hasn’t gone away — in a society built around male-dominated family units, single women generally have to work harder to get ahead.
But sometimes, working hard just isn’t enough. Single women — like all women — tend to have lower salaries than men, so how they approach money management matters. When the deck is stacked against you, an intelligent game plan is the only way to win.
Here are some key strategies for single women looking to build wealth.
Have An Adequate Emergency Fund
The first step to building wealth is building a solid financial foundation, which starts with an emergency fund. Single women, especially single moms, should have at least six month’s worth of expenses saved up.
Having a bigger emergency fund will keep you afloat if you lose your job, get furloughed or quit to start your own business. Focus on building the emergency fund before you start investing.
Keep the emergency fund in a high-yield savings account, where it will earn more interest than a traditional savings account. Only use the emergency fund for surprise expenses, like a last-minute flight for a funeral or a trip to the emergency room.
Find A Trusted Financial Planner
Having a reliable financial planner will help you determine exactly how much you need to save for retirement and other goals.
CFP Shea Newton of Financial Journey LLC said she learned this the hard way when she was a single mom and didn’t know where to save for her daughter’s college fund. She got some bad advice from a friend and later realized that a simple visit to a financial planner could have helped her avoid that mistake.
Newton said it’s easy to think that because you don’t have a lot of money, it’s not worth talking to a financial planner.
“The reality was that I needed to stretch every little dollar I had to get the maximum value out of it, and that’s what a professional could have helped me with,” she said.
The ideal financial planner should charge on a fee-only basis, which means you only pay per consultation. You should also verify that they have a fiduciary duty to you, which means they’re required to make recommendations in your best interest and won’t be getting commissions based on what they sell you.
A Certified Financial Planner (CFP) is the highest designation a financial planner can have. It’s like a CPA license for accountants. You don’t absolutely need to find a CFP, but it shows that they’ve reached the highest level of education a financial advisor can obtain.
The following networks have qualified financial planners and are a good place to start your search:
- Garrett Planning Network: This is a group of advisors who charge on a fee-only basis.
- XY Planning Network: These advisors focus on financial planning for people in their 20s, 30s and 40s.
- National Association of Personal Financial Advisors: All these advisors are fee-only and uphold the fiduciary standard.
Embrace The Risk of Investing
Historically, women have been more risk-averse than men when it comes to investing. But as any financial planner will tell you, some amount of risk is necessary to build real wealth. You can’t rely on a savings account or bonds to build a sufficient nest egg.
Learn to embrace risk by understanding how the stock market generally recovers after a loss. If you can accept the reality of market volatility, you’ll be able to stay calm when things get dicey.
This is also where having a dedicated financial planner comes in handy, because they can ease your mind during a market downturn.
Always Negotiate Your Salary
For years now, women have heard one message over and over: always negotiate. While this may seem like a trite refrain, it’s one of the few ways to bridge the gender income and wealth gap.
Negotiating for a higher salary is crucial, especially when you’re a single woman. You should always negotiate when applying for a new position and when you’re bringing more value to your current employer than your salary would indicate.
Consider Disability Coverage
Part of being single is accepting that no one else will take care of you, even if you’re unable to work. That’s where disability insurance comes in.
Disability insurance will pay a certain amount every month to cover the essentials until you can get back to work. Your employer may offer disability coverage, but you can also shop around with an independent broker.
Make sure to choose “own occupation” coverage, which kicks in if you can’t perform your job anymore. If you choose “any occupation” coverage, it will only kick in if you’re unable to work in any job – even if you would be earning much less than your normal salary.
Most long-term disability policies have a 90-day waiting period, meaning it will only activate once you’ve had the disability for 90 days. Your emergency fund should fill in during that time.
Feature Illustration: Laura Caseley For The Money Manual