Women and Money: 10 Tips for Building Financial Independence

Achieving financial independence for women is more challenging due to gender-based wage gaps and lower levels of financial literacy.

On average, a woman earns 82 cents for every dollar a man earns. Despite this hurdle, women continue to narrow the wage gap by earning and investing more than they have in the past.

Are you ready to learn how to achieve financial independence as a woman? Here are 10 tips to guide you on your journey, accompanied by personal stories from real women who have already started on this path.

In This Article

Learn the basics of personal finance

Mastering financial literacy can be more manageable by focusing on key concepts such as budgeting, saving, spending, credit, and learning common financial terms.

Why is financial literacy an important part of financial independence for women? It gives you more flexibility in navigating life’s ups and downs. Wanda Belle, now a credit restoration and financial literacy consultant, urges women to learn more about how finances work. “The more you know, the more your finances will grow,” she says. “It allowed me to take my own personal credit score from a 472 to 799 after a horrible divorce.”

Set goals for different time horizons

Evaluating your financial health is smart whether you’re first thinking about your big-picture finances or a major life change requiring a new plan. As you start making a financial plan, consider short-term, mid-term, and long-term goals.

Once you have listed your goals, think about organizing them by timeline. Michelle Onaka is a mom of two young kids, a paraplanner at a local financial planning firm, and the founder of Intentional Money Life. She recommends setting goals based on your values and how you would spend your time if you didn’t have to work.

“Take that information and set some relevant and exciting goals,” she recommends. “You’ll be a lot more motivated to figure this stuff out if you’re working towards something you’re excited about!”

And Michelle has taken her own advice to heart. She and her partner are working towards becoming financially independent by age 55. “Once I knew our goal and an idea of what it would take, then I was ready to dive in and learn. So I did! And now we’re confidently and automatically working towards that retirement goal,” she shares.

Create and update your budget

Creating a budget simply involves comparing your income and expenses and finding ways to reconcile the two.

As you identify spending areas you can cut back on, redirect a portion of your budget towards your financial goals. These might include paying down debt, contributing more to your retirement fund, and creating short-term savings for emergencies and vacations.

Open an emergency savings fund

Not having enough cash to cover an emergency is one of the biggest (and most common) financial mistakes you can make. It can lead to high-interest debt and general financial insecurity. And women are statistically less likely to be able to cover three months of expenses than men.

But you can start building your emergency savings fund at any time with any amount of cash. Starting with a small goal, such as saving $500 or $1,000, can help build a three-month emergency fund and increase financial stability.

Automate your savings

Once you’ve identified how much you want to save each month, put your plan on auto-pilot. You’re less likely to overspend if you set up automatic transfers from your checking to your savings account. Schedule your transfers on paydays to help you stick to your budget.

Maximize your retirement planning

On average, women live approximately six years longer than men, meaning their retirement savings need to stretch even longer. Sadly, of mothers who are 50- to 64 years old, only 23% have more than $100,000 saved for retirement.

Women in the workforce should prioritize contributing to employer retirement plans, especially if there’s a company match. And women who are caregivers without any financial earnings can have their spouse contribute to a spousal IRA. This gives you a retirement account in your own name.

Understand your credit score

Another component of financial independence for women is building and maintaining a positive credit score. A good credit score helps you qualify for better financing terms. Interest rates for car loans, home loans, and credit cards are all impacted by your credit score.

Paying your bills on time is one of the most effective ways to maintain good credit. If you miss a loan payment and it becomes 30 days overdue, it can be reported to the credit bureaus and result in a significant drop in your score. Therefore, it’s essential to ensure all of your payments are made on time to avoid any negative consequences.

Avoid high-interest debt

Having high-interest debt, especially on credit cards, could significantly impede your financial growth. This is because you could end up paying much more than the original amount you borrowed. For example, if you have a credit card with a balance of $10,000 and an annual percentage rate (APR) of 21%, your balance will increase by approximately $175 monthly at this rate.

Not only does it cost more to carry a large balance, it can also damage your credit score. Part of the calculation for credit is credit utilization, or how much of your available credit you actually use. Maxing out credit cards can cause your score to drop.

Plan ahead for life changes

As a woman, your roles and responsibilities in life can change drastically over the years. Women are more likely than men to serve as caregivers for both children and elderly parents. But it’s still possible to work towards financial freedom even during these years of lower (or no) earnings.

“Planning ahead is your superpower,” says Shelina Sayani, founder of a financial practice for women pursuing financial independence. “If you would like to take time off or work less for a career transition or maternity leave, know what your basic expenses are each month and how many months you want save for. Then automate your savings in advance for the number of months you need to save to reach that goal.”

Don’t be afraid to negotiate

It is still uncertain who should be held accountable for the gender pay gap. According to some studies, women tend not to ask for salary raises as frequently as men do. Conversely, a recent study has shown that women’s requests for higher salaries are more likely to be turned down.

Regardless of the situation, developing negotiation skills is crucial. Caroline Tanis, CDFA, MBA and founder of the Tanis Financial Group recommends looking at your entire compensation package. “So many people will just look at salary and bonus,” she says. “They forget things like 401k match, health benefits, employee perks such as gym memberships and food reimbursement.”

Also, consider your future growth trajectory in your new position. “We are very quick to look at just our starting salary number,” Tanis advises. “We need to consider growth in that role both professionally and monetarily.”

Start your journey towards financial freedom

Women often face unique challenges when it comes to achieving financial independence. However, taking control of your finances by prioritizing your financial needs and creating a clear money plan can be helpful.

It may involve setting financial goals, creating a budget, investing in your education and career, and seeking professional financial advice. Taking proactive measures can provide you with a sense of security regarding your financial future.

Written by Lauren Ward | Edited by Rose Wheeler

Lauren Ward is a personal finance writer who is passionate about helping people simplify their financial decisions. Her work has been featured in outlets such as USA Today Blueprint, CNN Underscored, and many more. She lives in Virginia with her husband and three children.