This guest post is brought to you by Valentina from bestdebtconsolidation.org! Thanks for your insight to help more women understand their finances!
How to Financially Empower Women
If we think about the jugglers of real life, then women should be considered one.
Balancing between the household chores and their respective professional lives is really a tough task. And women are doing it superbly!
To apprise you more, let me share some surprising facts with you.
A Fidelity report shows that women control about 51% of our country’s total wealth. And it’s predicted that, by 2020, they will take control of 2/3rd of our country’s economy.
Isn’t that awesome? It is indeed!
To your surprise, earning less money doesn’t reduce their spirit. In fact, they have a tendency to save more, as much as 8.3% versus 7.9% for men.
You might be thinking that this is a piece of arbitrary information but actually it’s not! This report has been published by Fidelity Investments.
On the contrary, women are paid less because they work less than men. The reason is none other than allotting time for their motherhood. As soon as you take up this huge responsibility, your work life gets compromised.
But, women do have an average longer life expectancy than men. As a result, you have to save more for leading a healthy and decent retired life.
Despite all these, there are some reasons for which women feel less confident about investing. Commonly cited reasons are a paucity of knowledge and experience of investment, complicated policies of investments, etc.
To make investing more friendly and easier, we have compiled some of the best investment options, which can be helpful to women like you. But you should keep yourself updated with prevalent investment terms.
Obviously, this makes you more eager to know more about them. And we also don’t have any intention to make you wait!
Let’s dig in!
Go for a Profitable Savings Account
“Consumers lose out on hundreds or even thousands of dollars by keeping their money in low-earning accounts instead of high-yield savings accounts or CDs,” says banking expert Kimberly Palmer.
So, before opting for a savings account, you should compare each benefit of it with other banks of our country. Why so?
Let me help you understand by a simple example:
Suppose, you have deposited an amount to your savings account in one of the major banks of our country. Generally, most of these banks offer 0.01% interest rate to their customers.
But if you opt for the high yielding internet banks like Synchrony, Ally, etc. then they will offer you interest rates approximately ranging from 1% to 1.55%.
Obviously you are gaining that extra percent of interest which the internet banks are offering. Now you may ask how come these internet banks are offering higher interest rates?
The answer is that they are saving huge expenses which are usually borne by the major banks like opening branches, maintaining the infrastructure, paying salary to a lot of people, and so on.
But unlike major banks of our country, the internet banks don’t have a lot of ATMs which help you to access your money instantly.
Utilize your Credit Cards Wisely
Credit cards are of great help if used wisely. Didn’t get it properly right? Let me explain this to you!
The tempting reward programs of the credit cards are worth getting attracted. You can earn cash back and rewards bonus by paying through your credit card. You could even get $180 as a sign-up bonus by spending $600 within 90 days for some cards.
But, don’t forget to make payments for your credit cards on time. If you fail to do so, you might end up being debt trapped.
Now, a question might be arising in your mind: What if an unforeseen situation arises and you become debt trapped?
Don’t worry! We have got a solution for that too.
Suppose you are overwhelmed with multiple unsecured debts like credit card bills, etc. with respective higher rates of interest.
Instead of getting worried, you can opt for debt consolidation to rescue yourself from the debt trap and improve your credit report and credit score.
Through this debt relief option, you can consolidate debt with bad credit and pay them off through single monthly payments, with a lower interest rate.
Be an Enthusiastic Employee
Fidelity’s report shows that 65% of women of our country are not using the resources, which their employers are providing through 401(k) or 403(b).
But what do these 401(k) and 403(b) actually mean?:
401(k) plan
- It is a tax deferment plan where you can save and invest for your retirement.
- One of the important features of this plan is the employer match. It’s the amount your employer is contributing. The matching is done up to a certain percentage of your contribution.
- From the year 2019, you can contribute $19,000 per year for this plan. If you are above 50 years of age then you will be able to contribute an extra $6000 per year. Therefore, your maximum contribution can be up to $25,000 per year.
- You can start withdrawing once you are the age of 59 ½ and this will be added to your income. As a result, you have to pay taxes on this amount.
- Still, if you want to withdraw the accumulated amount before the age of 59 ½ , then you have to pay 10% of the withdrawn amount as penalty along with the applicable taxes.
What will happen if you don’t withdraw the money at all?
In 401k plan, you need to withdraw a certain amount before attaining the age of 70 ½, which is termed as “required minimum distributions (RMD)”. So, if you don’t withdraw this amount, i.e., RMD, then the amount which you are not withdrawing will be taxed at 50%.
403b plan
- If you are one of the distinct employees of government organizations, public schools, non-profit organizations, etc. then you are eligible for this plan.
- It is also known as a tax-sheltered annuity plan.
- This plan has got some awesome tax benefits like the ability to contribute the pretax amounts and to pay taxes on the distribution when you will retire. As a result, you end up paying lower taxes.
Buy MUNIS
Government bodies release bonds in the market when they need money. These bonds are usually known as Municipal bonds or MUNIS, in short.
You can make a smart move in your investment by opting for MUNIS as it’s a safer option relatively. You may be asking, “why?”
The reason is you can get a Federal income tax exemption and it has got a much higher return than other investments. And talking about the risks, very rare instances are there, where municipalities have gone bankrupt.
Be TIPS (Treasury Inflation Protected Securities) Savvy
I think you have guessed the concept behind it by understanding the literal meaning.
Yes, you have got it right!
It provides you with the protection against inflation and pays you interest twice a year at a fixed rate.
Based on the consumer price index, your principal amount increases during inflation and decreases once it recedes.
After maturity, you get the modified principal or the initial one, whichever is greater. In the same way, it affects the rate of interest too.
Buy Corporate Bonds
The corporate bonds are issued by the companies of our country. The terms for these bonds usually range from less than 5 years to more than 12 years.
According to Bank of America Merrill Lynch, these corporate bonds account for approximately 33% of yield income in our country. You might earn a comparatively higher amount as investing on these bonds comes with a huge risk.
A corporate bond’s reliability is revealed from the ratings it has got. If a bond is the most reliable and has got a comparatively lower risk, then it is rated AAA.
This could be one of your smart moves in investment options as these high rated corporate bonds can yield a decent income for you and help you to save more.
But how will you buy the corporate bonds?
If a company is issuing a fresh corporate bond, then it’s sold through the primary market or the first market. The price of these freshly issued bonds is same for everyone. But, buying these bonds are a bit difficult.
For buying the bonds in the primary market, you need to approach the banks, brokerage firms which are dealing with the issuance of the same. Because in this scenario the small investors won’t be able to help you that much.
After the process of initial offering is completed, you can buy corporate bonds through the secondary market. It is usually termed as exchange-traded fund (ETF). For this, you have to approach through exchanges like Amex, NYSE, etc.
After going through all the above-mentioned investment tips, don’t you think that the investment tips are same for all, irrespective of any gender? I think, yes it is!
Then why is the “best investment options for women” often searched on search engines? The investment options should not be based on any specific gender!
If understanding money is important to a man, then it must be for a woman too. It has equal importance. There are ample reasons for which we believe understanding money should be equally important to you.
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A special thank you to Valentina from bestdebtconsolidation.org for writing this post!