Guide to Achieving Financial Independence for Women

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Financial independence means having the ability to support oneself financially without assistance. Being financially independent is an important goal for people of all backgrounds, but it is particularly important for women who have historically been marginalized by the job market.

Financial awareness and money management skills can lend women a deeper sense of security that makes it easier to save and invest for the future. An understanding of the challenges, advice and resources available to help can facilitate the process.

Challenges Women Face in the Financial World

Financial freedom is a form of personal empowerment, but a variety of roadblocks make it difficult for women to navigate and partake equally in the financial world.

According to statistics from the U.S. Bureau of Labor, for example, women annually earned 82.3% of that earned by men, with the gap being even wider for many women of color. Pay discrimination, household responsibilities and a lack of exposure to financial tools are all issues that women confront.

While there are positive movements that advocate for equal rights between women and men, pervasive social structures are difficult to break. The following list elucidates some of the key challenges:

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    Women are paid less than men

    According to the U.S. Bureau of Labor Statistics, there continues to be a wage gap between women and men, with women making less than their male counterparts. The gap widens for women of color.

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    Children can disrupt a career

    Working women who have children tend to experience a wage penalty of 4% per child. This number increases to 10% for women of color.

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    Women have less exposure to financial literacy

    Women are less likely to study courses leading to finance careers. For example, men study economics at an almost 2:1 ratio compared to women.

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    Women live longer than men

    A woman’s life span is typically 8% longer than a man’s. Most women will be left to manage their own finances at some point in their life, particularly when their male counterparts pass away.

An illustration of a young woman strategizing and planning her financial goals.

Strategies to Maintain Your Financial Independence

Women tend to know more about managing their finances than they think. While some financial moves make sense at certain stages of life, other strategies are applicable any time. Often, the best way to develop a financial strategy comes down to becoming more financially literate.

According to Fidelity, only 20% of women surveyed said they felt sufficiently prepared by their parents to manage finances as an adult. Setting financial goals and understanding short, medium and long-term money strategies can result in a lifelong safety net.

To build financial independence and wealth, it’s important to start investing, budgeting, saving and planning for retirement.

1. Tap Into Investments

In addition to providing a reliable source of income, investments can help combat inflation and serve as a vehicle to ensure that savings continue to grow. Many women are familiar with the concept but unaware of the full extent of possible dividends or doubt their ability to invest successfully.

In reality, women are just as effective as men when it comes to investing, and their portfolios tend to be even more successful. A recent survey found that only 26% of American women invest in the stock market, although nearly half of women view the market in a positive light.

Investing allows women to have an equal opportunity at accumulating the same wealth as men.

Types of Investment Strategies

Finding the right investment strategy will depend on your level of risk and your short and long-term investing goals. Determining if you want to be an active or passive investor is a good place to start. Active investors are frequently involved in the buying and selling of assets, while passive investing tends to mean more “sitting and waiting.”

Generally speaking, short term investments are designed to provide results within three years, while long term investments involve stocks, bonds, real estate and other assets that can provide financial benefits for many years down the road.

Portfolios can also be low or high risk. A high risk portfolio includes an aggressive strategy that could result in several ups and downs with the potential of high rewards. Low-risk portfolios are not as volatile but may not yield as strong of results.

Expert Thoughts on How to Invest

MoneyGeek spoke with industry leaders and academics to provide expert insight on how women can have a successful portfolio and start investing today.

Do you have any specific advice for women when it comes to investing? What general financial advice do you think benefits women the most?

Cynthia Caruso:

Investing can be daunting at first, but it does not need to be overly complicated. Sticking with investments in low-cost, index-based funds is a great way to start out participating in the markets while diversifying risk at the same time. Your workplace retirement plan likely has many resources as well, and leveraging those resources can help in getting started.

Lynn Toomey:

Women tend to be more conservative investors, which serves women as they approach retirement as it’s generally better to take that approach. Also, women should trust their instincts as it’s proven that women are better investors. Generally, we are not over-confident and tend to stay the course vs. trying to beat the market.

What can women who want to get started with investing do to start?

Lynn Toomey:

Join an investment club for support and education. Read the Simple Path to Wealth by J.L. Collins. Check out Her Retirement’s free e-class on investing. And check out Ellevest.com (a robo advisor in which women can dip their toes into investing).

Frank Byskov:

Just do it! Investing is a skill and habit that builds over time, and you will likely never feel “ready” to get started if you expect to know all the details beforehand. Start small, contribute on a regular basis and have a plan. Markets are volatile and will move up and down. Try to make your investment decisions with your end goal in mind rather than based on emotion.

What barriers do women face to investing, and how can they overcome them?

Lynn Toomey:

Fear, intimidation and knowledge are big barriers. Women need to learn that investing is something that can be learned, and investing is the fastest way to wealth. There is a smart way to invest. Women who don’t want to spend time learning about investing should find a good CFP who can help them create and manage their investment plan.

Cynthia Caruso:

Studies indicate that many women feel less confident about their ability to invest and invest less of their income proportionally as men. Overcoming that crisis in confidence around investing can be achieved through education. The good news is that there are many resources to assist women in acquiring the requisite foundational knowledge, including advice from investment professionals, online resources and financial apps, non-profit organizations and continuing education classes in personal finance.

2. Evaluate Your Spending Habits and Create a Budget

Budgets allow you to spend within your means and save for financial goals. According to Smart Asset, single men earned roughly $2,000 more on post-tax income than women, and they also outspent their female counterparts.

Despite common stereotypes, men were actually found to have average post-tax expenditures of $42,000 a year, compared to $39,100 by women. While women are often better at managing money than they give themselves credit for, it is worthwhile for them to evaluate where their money is going.

Basic budgeting can help women get even further on track. A good place to start is by listing out how much money is earned each month, then itemizing spending into categories to separate frivolous purchases from necessary spending.

Paying Off Any Debt You Have

Uncontrolled debt not only batters finances but also generates stress which threatens the health of women and prevents them from attaining financial freedom. In 2020, consumer debt reached nearly $15 trillion. Individual strategies toward paying off debt are crucial for helping lessen the weight of owing money.

To start, women should consider adding debt into their monthly budget. The debt avalanche and debt snowball methods are two strategies to do so. The avalanche method advocates paying off debts with the highest interest rate first, while the snowball method proposes paying off debts by prioritizing the smallest debts first.

Regardless of the strategy, it’s important to always make more than the minimum payment.

3. Start Saving, Establishing Emergency Funds and Building Credit

When outlining a monthly budget, it’s important to set aside a specific amount for savings. Most financial experts suggest keeping an emergency fund with enough money to cover 3 to 6 months of expenses. Such savings can help in the worst of times, such as during a health scare, job loss or family emergency.

Building credit is another way to make financial headway, and you can start by paying off your credit card balances every month to enhance your credit score.

4. Retirement

On average, women live 6 to 8 years longer than men, according to the World Health Organization. Since women often have less than men saved, however, they frequently outlive their money. Women can have a more enjoyable retirement by saving for their later years.

Below are common types of retirement planning to consider:

  • Common Approach
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  • Contributing to work-sponsored retirement accounts in attain full company matches
    Common plans are known as 401(k) or HSA
  • Opening a traditional or Roth IRA.
    In 2021, the contribution limits for all combined Roth and traditional IRA cannot exceed $6,000 (or $7,000 for those age 50 and older).
  • Maxing out your work-sponsored 401(k)
    Human Resources departments can provide more information on signing up.
  • Taking advantage of a Health Savings Account
    Families with a qualifying High Deductible Health Plan (HDHP) can contribute up to $7,300 to a tax-advantaged Health Savings Account.
An illustration of a woman and her male coworker discussing her role and concerns.

Your Role in the Professional Space: How to Advocate for You

According to the U.S. Bureau of Labor Statistics, women made up 57.4% of the labor force in 2019, up from 57.1% in 2018. Women are more likely to have higher levels of education and are increasingly likely to work full-time and year-round. Female employees help diversify a company, provide varied perspectives and increase revenue.

While women have come a long way, many who participate in the workforce still face challenges. The wage gap is one of the most persistent hardships.

In 2019, women working full time in wage and salary jobs had median weekly earnings of $821, compared to $1,007 for men. Taking proactive steps can help women to advance their careers and negotiate pay.

Amplify Your Confidence

Women tend to feel insecure about their abilities to perform at a high level. The pressure to perform at 100% at all times often leads to the feeling of imposter syndrome. In addition, most women strive to find a work-life balance as they look to be successful in the workforce while also parenting children and being a present spouse and friend.

These insecurities lead women to frequently undersell their experience and capabilities. Maintaining confidence in your workforce skills is one of the best ways to ensure you earn what you deserve. Below are a few steps which can help.

1

Create a supportive professional network

Women who have a circle of supportive female friends to confide in are 2.5 times more likely to become high performers at work. Strong professional networks can help women attain higher positions of leadership and better pay, according to the Harvard Business Review.

2

Take note of your wins

Keep a reflection log of your accomplishments and achievements. Making time to reflect on successes you have in the workplace can go a long way to furthering your professional goals and boosting your confidence in the long term.

3

Set holistic goals

Women who set and achieve personal goals are more likely to feel confident in achieving their professional aspirations. Set aside time to focus on your well-being, even if making time for self-care doesn’t always seem like it will help you attain a better salary or higher position.

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Be honest about your challenges

Everyone faces challenges in their personal and professional lives. Showing weakness or sharing your difficulties with someone else can lead to unexpected support from others and help you establish long lasting relationships.

Get Credit for Your Idea

Claiming credit for your work and ideas can be difficult if you’re working as part of a large company or team. Acknowledging your role can make you feel like you’re tooting your own horn or asking for unnecessary attention.

But making your accomplishments known is vital when it comes to being recognized for hard work. To combat persistent gender inequality and wage discrimination, it’s particularly important for women to speak up for their work, contributions and ideas.

The following steps can serve as a guide to help you start claiming credit for projects and discussions.

1

Be an authority

If you are knowledgeable in a specific area, don’t be afraid to project yourself as an authority figure to co-workers and peers. Even if you are not an academic, your knowledge on a topic may be more expansive than previously realized, and you will be likely to share something that someone else was unaware of.

2

Look for projects to make your own

When you become wholly involved with a project, there will be no questioning who to credit for success. Becoming committed to an idea can also show others that you feel passionate about furthering your personal and professional development.

3

Promote yourself

Discuss what you’re working on and have accomplished with your peers. Be confident in sharing your contributions to projects so nothing goes overlooked. Also, look for opportunities to present your ideas. Hiding behind the scenes leads to others taking credit for your work.

Negotiate a Good Salary that Acknowledges Your Worth

While women are making better salaries than ever before, they continue to be underpaid for equal amounts of work compared to their male counterparts. Making your worth known starts with negotiating a salary that properly represents your capabilities.

Women should also ask for periodic raises. Those who ask for raises are twice as likely to get one than women who don’t. The following steps can help you make the money you deserve.

1

Research salaries to know your worth

Before accepting a position, research salaries for comparable positions so you know what you should be making. Sites like Payscale can help you figure out what other individuals are being paid based on their position and experience, and those numbers can serve as a baseline when you negotiate.

2

Have confidence in yourself and your abilities

Women strive to be 100% perfect which often leads them to doubt their capabilities. Perfection is impossible to achieve and can lead women to live with anxiety and stress. Believe in your abilities, do the best you can and know that you deserve to make the same as others.

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Negotiate without fear

Studies show that women are less likely to negotiate salary when confronted with a job offer, which can result in $650,000 to $1 million in lost lifetime earnings. Based on the research of Linda Babcock and Sarah Lashever, the authors of "Women Don't Ask," job candidates should know their worth and negotiate with a tone that is true to their personality. Stay positive, and don't settle for less.

4

Work out a salary goal with the company

If you do not land the amount of money you want when negotiating a job offer, ask an employer to put you on a three or six month plan to get a raise to your desired salary upon meeting specific goals and accomplishments.

How to Develop a Work-Life Balance

Typically, women take on a large share of responsibilities within a household. When they enter the workforce, their life at home does not cease. Adding on professional responsibilities makes having a work-life balance even more important.

Without a proper balance, women are more likely to experience burnout which can negatively impact both their personal and professional life. Creating a balance will look different for every person, but the following steps can help you start.

1

Accept your imperfections

Your idea of work-life balance may differ from someone else's. Recognizing your thoughts and feelings can help you begin to find a balance. Remove the pressure to be “perfect” and accept that you are human and will have less productive days than others.

2

Practice self care

Prioritize your mental and personal health over others and create boundaries. If you are consistently working more than an 8-hour workday, consider whether you are prioritizing your well-being. Starting to do so will allow you to perform your best at home and work.

3

Organize your day

Maintain a flexible but structured schedule that includes dedicated times for necessary activities. Prioritize some tasks and delegate responsibility where you can. When you sit down to work, try to stay focused for at least 15 to 25 minutes at a time.

4

Be cautious of your energy

Determine who and what you want to put your energy into and eliminate people and situations that don’t support your general well-being. If you are feeling overworked or burnt out, give yourself permission to take some time off and do things you love.

Becoming a Working Mom

Many women want to return to work after having children, but a lack of flexibility in the workplace and diminished pay can make it a difficult transition. In a recent survey from FlexJobs, 42% of women said it was difficult or extremely difficult to restart their career after taking a break.

However, having and raising a baby costs money and returning to work can help women maintain a feeling of independence. Here’s how women can keep on track with a career while raising children.

1

Delegate chores

Often, working women feel responsible for picking up slack at home, meaning they work even when they return from a physical office space. Make an attempt to share responsibilities with family. Delegating chores among household members and children can ease some of the burden.

2

Set boundaries at work

Before returning to work, set expectations and boundaries with your workplace to minimize working overtime. Remember that you should not be expected to single-handedly complete an entire project, and your co-workers are there for a reason.

3

Plan out meals

Meal planning can save you multiple hours a week on cooking and clean-up both for yourself and others. Instead of cooking every night, try making food at the top of each week and eating portions. This can save both time and money.

4

Maintain self care

The ramifications of poor mental health can trickle down to other aspects of your life. Don’t forget to take time for yourself and let go of the thought that you have to “do it all.” To help, try doing one activity a day for at least 15 minutes that gives you a sense of peace.

An illustration of a woman on the floor organizing her life events, such as juggling work, emails and appointments.

How to Adapt to Changing Life Events

Big life changes often result in sudden changes of financial ownership. For example, marriage, divorce and widowhood can all have a significant financial impact.

Marriage can create a need to combine finances. Divorce can mean that agreed-upon arrangements need to be adapted, while widowhood can lead a woman to abruptly become a family’s main money manager.

Marriage

Marriage can affect your financial situation in a number of ways. From the ability to build wealth by combining incomes to utilizing tax-related benefits, there are several financial positives to tying the knot. However, sharing financial responsibility with another person can also be stressful. Courses such as the Marriage Money Bootcamp and other resources can help ease the transition.

Below are some additional tips to keep financial conversations positive and stress-free. Incorporating such tips can help you and your partner get on the same page and discuss dreams, goals and your financial future.

TIPS TO CONSIDER
  • Live within your means to minimize arguments and disagreements over money.
  • Make sure both spouses are aware and realistic about all financial issues.
  • Consider independently contributing to your own retirement accounts.
  • Create separate wills or trusts.
  • Buy life insurance to pay final expenses in the event of a death.
  • Discuss attitudes about life's big financial moments — going into debt, saving for children's college education and housing.
  • Take advantage of all marriage-related tax breaks and incentives.

Divorce

Getting divorced is often a stressful event without even factoring in the role that money plays. When you add in dividing up joint coverage such as auto insurance or homeowners insurance, financial disagreements can easily arise.

In addition to consulting resources that can assist with financial planning, such as divorce coaches, the following steps can help ease the financial transition.

TIPS TO CONSIDER
  • Maintain access to legal counsel that can guide you through the divorce process and ensure fair distribution of assets.
  • Create a new budget that will cover living expenses without the benefit of a second income.
  • Invest in yourself and your career to maximize your earning potential.
  • Continue saving adequately for the short- and medium-term and retirement goals.
  • Negotiate child support or alimony, if applicable.
  • Update your will so that it reflects your current financial situation.

Widowhood

Since women outlive men, they are often forced to take control of financial assets when their spouses pass. Sudden ownership of finances can be overwhelming, particularly when compounded by the loss of a loved one.

But today, roughly 70% of U.S. household investments are controlled by baby boomers. In addition to making a financial checklist, incorporating some of the following tips can help.

TIPS TO CONSIDER
  • Research survivor benefits, and collect on any life insurance policies.
  • Consider downsizing to save money and time on upkeep.
  • Create a new will that reflects your widowed status.
  • Define new beneficiaries on your own life insurance policy, if applicable.
  • Keep living expenses as low as possible to minimize any potential loss of income.

Expert Insight on Financial Independence for Women

To better understand the challenges that women face when seeking financial independence, MoneyGeek spoke with industry leaders and academics.

  1. What unique challenges do women face when it comes to their finances?
  2. How has COVID impacted finances for women, and what can they do to overcome these additional barriers?
  3. What career advice should women follow to make sure they are maximizing the amount of money they earn?
  4. What can women do to boost their savings rate?
Cynthia Sharp
Cynthia Sharp

Business Development Strategist at The Sharper Lawyer & Co-Founder of The Legal Burnout Solution

Lynn Toomey
Lynn Toomey

Founder & RetireMentor Coach at Her Retirement

Cynthia Caruso
Cynthia Caruso

Associate Professor at Endicott College

Maria Victoria Colón
Maria Victoria Colón

CPA, Money Coach & Creator of Hablemos de Dinero en Español

Laura Adams
Laura Adams

Personal Finance Expert and Analyst at Finder

Judy Herbst
Judy Herbst

Executive Director at Savvy Ladies

Resources for Financial Independence for Women

From guides and tools to mobile apps, courses and information, a variety of resources are available to help women who want to become more financially literate and independent.

  • TwentyFree: This website is run by a millennial money expert, financial coach and award-winning personal finance podcaster. It is focused on teaching millennial women how to pay off debt, save, invest for retirement and achieve financial independence.
  • Money and Mimosas: Money and Mimosas is a financial wellness platform for the self-employed. It also offers a series of guides and resources for freelancers.
  • Nav.it: Nav.it is a mobile app that assists users in learning about finances, organizing and managing money and providing support. You can also access money coaches and find community support to help you reach your goals.
  • Hapi: Hapi is an app designed to help parents invest in their children’s futures. It also allows close family and friends to facilitate the learning process.
  • Savvy Ladies: A variety of free financial education resources like Savvy Ladies can empower females to take control of their finances. Savvy Ladies provides a professional network and offers free financial advisors and educational programming.
  • Your Money Matters - A Financial Guide for Women: This tool offered by the Women’s Law Center of Maryland supports and enhances women’s financial literacy and autonomy by providing straightforward and useful information about women’s financial independence at all stages of life.
  • Wife.org: The Women’s Institute for Financial Education (WIFE.org) is the oldest non-profit organization dedicated to providing financial education to women. WIFE is run by volunteers who help other women find resources to help them prosper and grow financially.
  • Wiserwomen.org: WiserWomen offers a variety of resources and guides on investing and financial planning for all stages of life. It also provides information about events and networking opportunities.
  • Financial Independence 101: This free online training course on how to become financially independent. It can help you master your fear of money issues and shape your financial future.
  • Clever Girl Finance: Clever Girl Finance is a personal finance platform that provides free guidance, products and services to empower women to reach financial independence.
  • National Financial Educators Council: The National Financial Educators Council offers financial literacy services and resources for low income individuals, including women.
  • Real Money Answers for Women: This book is geared towards self-sufficient women and provides tips on how to dig oneself out of debt. It’s a straightforward read for those looking to get a handle on money issues.
  • Women’s Financial Academy: The Financial Academy provides classes and crash courses related to financial education for women including investing, financial planning and retirement.
  • The Women’s Resource: The Women’s Resources offers a six-class series that helps women build up a foundation for a strong financial future. Teachings are designed in conjunction with a nationally recognized expert in the field.

About the Author


expert-profile

Sara East is a freelance writer and content marketing professional based in Reno, NV. She has more than 10 years marketing experience in public relations, content and digital marketing. Sara has been a published writer for more than 10 years having written articles about finance, business, entrepreneurship, education, travel, real estate, insurance, healthy living, social media, travel and study abroad.

Sara's writing has been published in national news sites including Mashable, The Muse and The Next Web as well as on a variety of blogs. When she's not writing, Sara enjoys spending time with her fur kids exploring the mountains of Reno/Tahoe and enjoying the outdoors.


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