Financial missteps can occur at any stage in life. Here's what often goes wrong and how to correct it.
The wage gap indicates that women earn less than men, but financial errors can occur well before entering the job market or even afterward.
Regardless of your career stage, you may recognize some of these money blunders in yourself or others. Discussing finances may feel uncomfortable, yet it's essential to address these issues with the women in your circle. Below are key mistakes and strategies for improvement.
1. Overlooking women-specific scholarships and grants
As high school graduation approaches, many young women fail to seek out the financial aid available specifically for them.
The downside: Missing out on this funding can have long-term effects. According to the American Association of University Women (AAUW), women hold nearly two-thirds of the nation's student loan debt, totaling nearly $929 billion. This financial burden, exacerbated by the wage gap, leaves women with less income to repay their loans swiftly, resulting in higher overall costs due to interest.
Corrective action: Ensure that young women in your life apply for scholarships tailored for them before they graduate high school. Websites like Scholarships.com organize these opportunities for easy access. Different awards cater to various majors and interests, and all aim to help women secure funding.
2. Failing to negotiate your first salary
Reflecting on my first job after college during a recession, I was thrilled just to secure a position and didn't question the salary offered. I happily accepted it without hesitation.
The downside: This decision negatively impacted me later. I had no reference point regarding standard salaries for my experience level. When I later applied for new jobs, questions about my previous salary limited my potential earnings growth.
It wasn't until my third job that I finally negotiated my salary. Not only did I secure a higher starting salary, but I also received a raise shortly thereafter, establishing a pattern for future positions.
Corrective action: Research average salaries in your area using resources like Glassdoor and Payscale. Prepare for negotiations by practicing with friends or family. Discuss scenarios with hiring managers, using your findings to advocate for a salary that reflects your worth—aiming for 10% to 15% above the initial offer, or more if justified.
3. Neglecting retirement savings
Women typically live longer and earn less, leading to smaller retirement savings compared to men. This often results in women needing to continue working longer or returning to lower-paying jobs after a break.
The downside: Due to lower earnings, women contribute less to retirement plans. A study from the Transamerica Center for Retirement Studies (TCRS) revealed that 71% of women lack confidence about retiring comfortably, with many fearing they will outlive their savings.
Corrective action: Start contributing to a retirement plan as early and consistently as possible, whether through your employer or an IRA. Maximize contributions if you can, and take advantage of any employer matching—this is essentially free money for your future.
4. Hesitating to invest
Investing can feel intimidating without a solid understanding of the market. Even those who are informed may struggle with fluctuating market conditions, making avoidance tempting but not beneficial for financial growth.
The downside: Research shows that women tend to invest less and start later than their male counterparts. According to a report from S&P Global, only 26% of women engage in investing, even though over 40% believe it's an opportune time to invest. Women's reluctance often stems from lower earnings, leaving less disposable income for investment and a fear of financial risk.
Corrective action: Begin with your retirement account, either through work or a personal IRA. (Check out how to choose between Roth and traditional IRAs.) Regularly assess your investment choices and adjust to be as aggressive as you can manage. Aim to maximize your contributions to fully benefit from any employer match, and consider investing additional funds if possible.
