What all women should know about money

Latest research from the US suggests single women are generally more cautious spenders than men.

The US Bureau of Labor Statistics reveals that women tend to splurge on a few items – the expected ones: clothing and personal care products like shampoo and teeth-whitening products. Single guys, on the other hand, tear through more money overall on things like eating out, entertainment and car ownership.

Meanwhile, a separate Australian study has found that women are also better savers than men. A survey conducted by RAMS last year revealed that three-quarters of women would be willing to hold off buying clothes and shoes and dining out to meet their savings goals. Around 60 percent of men said they’d be willing to cut costs in order to save; tightening the belt in areas such as buying alcohol and eating out.

Take control of your finances this year starting with these four tips that all women should know about – and that men will benefit from too.

Track your expenses

Barb Chang, head of product for money management site Mint.com, said single women often say they’re too busy and don’t often see the payoff of putting in a lot of time budgeting.

“But staying on top of the money that comes into and goes out of the ‘bank of you’ every month is the first step in financial planning,” she said.

The federal government’s MoneySmart website offers a comprehensive budget planner, which helps you to check where your money is going, if you’re spending more than you can afford and whether your money is going towards your priorities.

For those with a home loan, RateCity’s loans calculators help you estimate repayments, as well as the interest you can save by making additional repayments.

Emergency fund

The old rule of thumb was to have about six months’ pay in an emergency fund, according to Alexa von Tobel, founder and CEO of the women’s finance site LearnVest.com. But in the current economic climate, she recommends saving around nine months’ pay.

The best place to keep an emergency savings account, von Tobel said: “Is in a place you can easily access without penalty at any time.”

Debt trap

Latest Reserve Bank data shows that Australians owe more than $50 billion in credit card debt – or around $3282 per card. But the real number that matters is not the initial spend, but rather the balance accruing interest.

RateCity found it would take 24 years and five months to repay the average credit card bill of $3282 if making only the minimum repayment each month. The figures were calculated using an interest rate of 17.21 percent, which is the average rate of all personal credit cards in the RateCity database. The situation is obviously much worse for cards with higher rates, such as some rewards credit cards

But by increasing monthly repayments from the 2 percent minimum to 4 percent of an outstanding balance has a huge impact. On a $3282 debt at 17.21 percent, paying 4 percent off every month will see you clear the debt in eight years and seven months, and reduce the total interest to $1663, as opposed to almost 25 years if you only repay 2 percent.

What many cardholders may not realise is if you fail to pay off a debt in full each month, and carry a balance over to the next billing cycle, you may forfeit any interest free days on new purchases until the balance is repaid.

Insure your biggest asset

Australians are pretty good at insuring material items, but “the Barefoot Investor”, financial planner Scott Pape, said many of us are reluctant to get insurance for the most important things.

There are three insurances that can help you be safe, according to Pape.

“The first is income protection; over the course of 65 years there’s going to be a one-in-two chance that you’ll have at least three months off work so you need to insure against that,” he said.

The second is total permanent disability insurance; that is, if you get sick – illness or accident – and can’t return to work that will pay your wage. And the final one is life cover.

“All three of those you can get through your super fund. So give [your provider] a call, ask if you have enough and how you can get some more.”

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