You work hard, but are you prioritising your financial security?
|Published
As women we have fought hard for our seat at the leadership table; and even when we get there, the battle for survival, respect and recognition continues. Sadly this battle is also fought on the pay front. Women earn on average 27-30% less than their male counterparts for the same job.
While South Africa overall ranks 20th out of 146 countries on gender equality, we only rank 111th on economic progress (which includes pay parity). That being said, we also know that South Africa has a very high number of households led by single mothers (above 40% according to Statistics South Africa).
In addition, women are literally stuck in jobs that are low paying and offer very little opportunities for upward growth. While we see more women in leadership, we must remember that the majority of black women dominate the unskilled and semi-skilled employment levels. All these factors come together to make women’s financial lives very challenging.
So asking women to do more to build financial security may, in itself, be a big ask. However, we don’t have a choice because the government, society and employers will not step up for us.
Financial security is imperative as we age
As I look around me I see many (single parent) women in midlife who are facing a range of challenges, including diminishing employment prospects, a competitive small business environment and a lack of financial security.
As women enter their 40s, 50s and beyond, it becomes increasingly crucial to focus on financial security and independence. This is a time of life transitions, such as children leaving home, career changes, and preparing for retirement. Having a solid financial plan in place can provide the flexibility and freedom to navigate these changes.
My financial story
My own financial story is heavily influenced by my single mother’s experience. While my mother was a social worker, her financial burden was heavy, leading her to rely heavily on credit and debt to survive. This also became my financial way of life because it’s what I knew. Having a fashion store card and dressing on credit was completely normal.
Only paying the minimum amount owing on my credit card was also very normal - until it wasn’t. Even when I earned a good salary my entrenched money habits led me to spend money unsustainably, and as a result, I was always on the brink financially - just surviving. So while externally I looked like I was doing well, the reality was that my lifestyle was funded by debt.
In 2015 when I had a major life crisis (read life fell apart literally), I started working with a coach. While I approached a coach to address a different (external) issue, I learnt that I had a lot of internal work to do about my way of seeing the world and how this informs my actions. I also learnt that this way of seeing the world has heavily influenced my money habits.
The coaching journey was transformational in shifting my inner compass and this significantly improved my inner habits. My biggest learning is that our money (whether we have a lot of it or not) habits are fundamental in building financial security and financial freedom.
Key steps to building financial security
1. Assess your current financial situation
Review your income, expenses, assets, and liabilities to understand your overall financial standing. I was not able to address my financial situation meaningfully until I documented all my debt and all my expenses and income. This included information like the interest rate, how long it will take to pay off the debt, and what that debt is actually costing me (for example if I only pay the minimum amount owing on my credit card).
I also developed an improved understanding of good and bad debt and that having a bond, for example, is good debt because a house is an asset.
Identify areas where you can cut expenses or increase savings and investments. Through a full analysis of my financial situation I could start creating plans to pay off my debt (starting from the debt that is most costly). I still track and document my expenses daily and monthly so that I am always on top of my situation. Technology makes this so much easier.
Improve your financial status (credit score). Consistently meeting my debt commitments and starting to save money has helped me to significantly improve my credit score. While the credit score is a contentious issue, realistically, it is still used by financial institutions to decide whether we can access debt facilities.
2. Save, invest and plan for retirement
Warren Ingram in his book, Be Your Own Financial Advisor, recommends building an emergency fund once debt management is under control. He recommends that you should save 50% of your annual costs for emergencies. This is a long -term endeavour.
I started building an emergency fund with a small monthly debit order that moves money into a separate bank account. This fund has been essential in helping me meet unexpected medical expenses. Every year, I try to increase this monthly amount.
Save money for big expenses, like car or house deposits instead of using credit or credit cards. This can help reduce how much debt you then need to access. We also have a “travel fund”, which I started to allow us to have spending money when we travel without feeling under pressure. This came in handy when we went away recently. This monthly payment is set up through scheduled payments (a kind of self-initiated debit order) that bank apps allow us to do now.
Optimise tax benefits of saving options. Everyone is now allowed to have a tax free savings account which allows you to save an amount of approximately R33 000 per year without a tax implication. Use this as a primary saving option to access this benefit before moving to other savings options. Tax free savings can be accessed through bank savings accounts and investments. Remember this is a long-term investment and should not be used to meet short-term financial needs.
Retirement planning is crucial but often neglected by women. We often believe that what our employers offer is sufficient. However, the fact we may now live to the ripe old age of 90+ means our retirement planning needs to be accelerated to meet these long-term needs. Due to their challenging circumstances, women do sometimes access these retirement savings early leaving them vulnerable later in life. It is, therefore, important to get advice and focus on long-term financial sustainability in retirement.
Grow your financial sustainability by investing in growth assets. These can range from cash investments, to investing in stocks or property, etc. I know many women who are daunted (and overwhelmed) by the investment landscape. Initially, getting advice is good before diving into the many options. Platforms like Satrix and Easy Equities offer simple investment options for ordinary people like us. I use it, but this was only once I felt I understood enough about investments.
3. Protect Your Finances
Ensure you have adequate insurance coverage, including life, health, and disability insurance. A warning - get proper advice and shop around because this is where financial advisers can pull the wool over your eyes. Get referrals from friends before deciding on policies. As a business owner also have an income protection policy and I have a dread disease policy because cancer is a family issue.
Do you have a will in place? Have you considered what will happen to your estate and assets when you die ? Estate planning is a crucial part of building financial security for you and your family. Most banks offer will services and while there is a cost, it can be a safer option. If you die without a will (intestate), your estate could be tied up in government bureaucracy for years, which materially affects your heirs.
4. Seek professional guidance
Work with a financial advisor to develop a comprehensive financial plan tailored to your goals and needs. I am not always a fan of financial advisers but it may be necessary to educate yourself through the guidance of a trusted financial advisor. Remember that financial advisers are in the business of making money from selling products (policies) so they will push these. On the other hand a financial planner helps you manage your finances and gets paid for that - no policy selling. If you are having issues with money management, first start with a financial planner or money coach.
If you are in a relationship or have children or other close family, work together on your financial objectives and seek advice and support together.
Ultimately, your financial security rests on how you see money; which is informed by how your parents and caregivers dealt with money. In recognising this, you can break away from toxic money habits that keep you stuck. Interrogate your fears and phobias around money, and remember that money cannot control you. You have the power to use money to make your life financially secure. Being grateful for what we have, not lots of money, is what we should aspire to.
Shireen Motara is an African Feminist and Thought Leader on Women’s Leadership and Wellbeing. She is a certified Coach that specialises in working with women leaders. Shireen is the Founder CEO of Tara Transform, a social change coaching and consulting practice; and Founder CEO of The Next Chapter which is a platform and community that supports women’s life transitions and brings visibility to the lived experience of women in midlife.
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