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Hello All! This is my first guest post and I think you’ll enjoy it. The author of today’s guest post is Good Nelly and she is here to give us some actionable tips on how women can reduce the debt gender gap.
Good Nelly analyzes financial happenings and writes articles to bring awareness and help her readers plan for their financial future. She has been associated with Debt Consolidation Care for a long time. However, she has contributed her articles to other websites as well.
Alright, the floor is yours, Good Nelly…
The gender gap is an agelong issue, which is prevalent even today. It is present almost everywhere and the ‘debt’ scenario is no exception. Women have relatively more debt than their counterpart.
A survey conducted by the National Debt survey revealed that among the age group of 18-24, about 63% of women carry credit card debt whereas only about 36% of men have credit card debt.
Likewise, among people aged between 55-64, about 66% of women have some amount of debt whereas about 33% of men have debt.
It has been seen that women’s retirement funds are even 20% lesser than that of men.
So, what can be done to reduce the gender gap?
Here is what a woman can do to reduce the debt gender gap.
Plan a Suitable Budget
I always say that a suitable budget is a primary step in every financial planning. Here also, the gender debt gap can be reduced if women are able to plan a suitable budget.
By this, I mean, you should plan a budget that you can follow effortlessly. That is, through which you can prioritize your spending and save a substantial amount every month.
Don’t think it’ll be possible in the first month itself. It will take some time to plan a suitable and realistic budget.
I always suggest that when you plan a budget, at first, set aside the amount you want to save, and then, try to manage your necessities, especially needs, with the remaining amount.
If you can’t manage with it, revisit your budget or try to increase your income.
For example, if you earn $6000, set aside at least 20% of your income for savings, that is, $1200.
Better if you can manage your needs with 50% of your monthly income.
Then, what about the remaining 30% of your income? You can use it to satisfy your ‘wants’; better if you save some percentage of it for a good financial future.
Another tip: when planning your annual expenses, divide the total amount by 12 and include it within your monthly expenses. By doing so, you won’t face any problem during special times like managing the cost of the holiday season.
Distinguish Between Needs and Wants
A woman is always financially criticized for wasting money on shopping. However, if you also have this habit, do one thing. List the items you usually spend money on, and segregate them among your needs and wants.
While planning a budget, do not allot more on your wants, keep a little portion for that. If you feel enticed to buy a high-priced item, wait for some days. If you still feel the urge to buy that item, save the money and then buy it.
One of the best ways to reduce the debt gender gap is to save the money before buying a high-priced item instead of swiping your credit card and then struggling to repay the debt.
Now, how will you distinguish between the needs and wants? Check it out:
|Points of comparison||Needs||Wants|
|Something that you…||Must have||Wish to have|
|The thing is…||Essential||Not so essential|
|It is a…||Necessary thing||Desire to have|
|With time…||Usually, it remains unchanged||It may change|
So, now, I hope you’ll be able to distinguish between your needs and wants.
Understand the Terms and Conditions of Credit Cards
By not understanding the terms and conditions on credit cards one may incur debt as they’re unaware of the interest rate and late fees. However, gaining knowledge can help you avoid debt, or at least, the debt incurred can be reduced.
To gain knowledge, first of all, take the time to read the terms and conditions completely and ask the credit card company if you don’t understand any point.
Also, compare the terms and conditions of the credit card offers, so that you’re able to choose the most suitable one.
Do Not Have Many Credit Cards
It is difficult to manage a lot of credit cards. So, don’t have many cards. If you have many of them, it will be difficult to remember the due dates of payments, and in turn, you may miss the payment dates. Moreover, it is also difficult to remember the outstanding balances on cards when you have too many of them.
So, do not have more than 2-3 credit cards. By keeping fewer cards, you’ll be able to manage them properly.
You may think about how to choose your cards. Well, there are certain parameters to choose good credit cards. Here’s how:
- Annual fee – If yes, how much
- Purchase rewards – Assess the percentage if any
- Your goodwill with the credit card company
- The credit limit offered on the card
- Hidden clauses, if any
Choose a Suitable Debt Relief Strategy
List your existing credit card debts along with their interest rate and outstanding balance. Then, list as per their lowest outstanding balance to the highest, and another as per their highest interest rate to the lowest.
If you choose the snowball, then after making the minimum payments on all cards, pay a little extra to the smallest balance, and if you choose avalanche, then make the extra payment to the debt account with the highest interest rate.
However, if you think that you need complete professional guidance, then you can opt for credit card consolidation and repay your existing balances, just by making a single payment every month.
After you repay existing credit card debt, reduce the number of your credit cards. However, do not close them abruptly. Closing the oldest credit card may shorten the credit history, thus reducing your credit score.
So, do it with care.
Negotiate Your Salary With the Employer
One of the major reasons for gender debt gap is that women usually don’t negotiate their entry-level salary. So, they start with a relatively lower salary; whereas, men usually negotiate their entry salary.
However, some companies don’t allow anyone to negotiate their entry-level salaries. You are somewhat lucky if you choose such a company.
And, if you’re not lucky enough to choose such a company, research on the company a bit and find out the standard salary for your job role and experience. It will help you to negotiate.
By selecting you, the hiring manager and the company have already invested quite a bit of time, so they might feel the urge to negotiate with you.
Practice with a friend about how to portray your positive points to show how much value you can add to the organization.
Even if your entry salary is not that good, you can always ask for a raise when it’s the right time. It is a bit easier to do so since you’ve already proved your capabilities. And, do not think twice to take extra responsibilities since that might help you to raise your paycheck.
Refinance Your Home Loan
If you think that you are paying more on your home loan, and the market rate is relatively low, then you can opt for refinancing your mortgage.
Your monthly payment is likely to decrease when the interest rate on your mortgage gets reduced. So, you can save a significant amount every month, which you can use to repay your unsecured debts.
A small bit of advice when you refinance your mortgage – always shop for home loans from other lenders so that you can compare the terms and conditions well. Your existing lender will not necessarily give you the best interest rate.
Save Into Your Emergency Fund
Try to deposit at least 10% of your monthly income into your emergency account. Doing so, you can avoid debt during a financial emergency, as you can use the funds in your emergency account to tackle the crisis.
If you can’t save anymore, then when you’re keeping aside 20% of your paycheck, deposit 10% of it into your emergency fund. It is said that you should have 6 months’ income in your emergency fund.
You can use the fund in case of a layoff or a financial emergency.
However, make sure you don’t use the fund unless it’s a real financial emergency. And, try to replenish the fund as soon as possible after you use it.
So, follow these tips and try to reduce the gender debt gap, and build a good financial future.
Ms. Fiology’s Takeaways
- Start saving something
- Get on a budget and analyze your needs versus wants
- Understand the terms and conditions of your credit cards
- Get out of debt by employing either the debt snowball or debt avalanche method
- Negotiate your salary
- Potentially refinance your mortgage for a lower interest rate
- Build up the emergency fund to cover 6 months of expenses
Thanks, Good Nelly! Alright readers, what are your thoughts?