Navigating the intricacies of personal finance can often be daunting, but it's a journey that's worth embracing – and even more so for women who are affected by the gender gap and wage inequality. We believe that by understanding key concepts, mastering essential skills and harnessing the power of informed decision-making, every woman has the potential to create a life marked by financial freedom and confidence.
From budgeting and investing, to managing debt and planning for retirement, we're here to provide you with a step-by-step guideline, drawing insights from our interview with Talya Plaatjies, Founder at Fashionably Financial, to help women embrace their financial journey and secure their financial well-being.
1. Set Clear Financial Goals
The first step toward financial empowerment is to define clear and realistic financial goals. Whether short-term or long-term, these objectives serve as guiding stars on your financial journey. Consider milestones such as buying a home, funding education and planning for retirement. Additionally, acknowledge your risk tolerance and investment horizon – how long you have to save, and how much risk you’re then able to take on. Defining your financial goals and understanding your investment risk appetite will help shape your financial decisions.
2. Create an Emergency Fund
Women tend to have more time breaks in their career than men, often due to taking time off for maternity leave, which makes building a safety net vital. It’s also a solid plan B to help navigate unexpected financial challenges. Prioritise creating an emergency fund equivalent to 3-6 months' worth of living expenses. This fund should be easily accessible in a low-risk, liquid account like Franc’s Cash Fund. This will help you create a sturdy foundation to weather any financial storm.
3. Pay Off High-Interest Debt
Before embarking on your investment journey, focus on tackling high-interest debt. Clearing credit card balances and personal loans not only frees up funds for investing but also reduces financial stress. Understanding the difference between good debt and bad debt is a crucial step toward achieving a solid financial footing.
4. Understand Risk and Reward
Investing involves a delicate balance between risk and reward. Recognise that every investment comes with a certain level of risk, and often, higher returns are linked to higher risks. Diversification – spreading investments across different asset classes with different levels of risk – can help mitigate this and promote overall stability within your portfolio.
Spread your investments across various asset classes to reduce risk. By diversifying – investing in stocks, bonds, real estate, and more – you safeguard your portfolio against individual vulnerabilities and promote overall financial stability.
5. Educate Yourself
Knowledge is your most potent tool in the world of finance. Stay informed about financial markets, investment options, and economic trends. Dive into books, enrol in online courses and educational resources, and follow reputable financial news sources. Explore available resources, such as our comprehensive financial Academy, to equip yourself with the skills needed to make informed decisions.
6. Save for retirement
Women have a longer life expectancy than men, which means that they spend more years in retirement. While this is a positive aspect, it also necessitates careful financial planning to ensure that those extra years are financially secure and comfortable. Consistent contributions to your retirement savings in a retirement annuity or pension fund builds a substantial nest egg, crucial for supporting yourself during retirement.
7. Understand what fees you’re paying
Unfortunately advisory and investment fees are difficult to access and hard to understand. High fees can eat into your returns over the long term, impacting your financial growth. Make informed choices to optimise your investments. For those new to investing, low-cost index funds and exchange-traded funds (ETFs), like Franc’s Equity Fund, offer an accessible entry point. These investment vehicles provide broad market exposure at minimal costs, making them an excellent choice for investors.
8. Don't Time the Market
Attempting to predict market movements is often unreliable and risky. Instead of reacting to short-term market fluctuations, focus on adhering to a well-defined long-term investment strategy, like rand cost averaging.
9. Stay Committed and Patient
Investment success is a journey that requires commitment and patience. Avoid making impulsive decisions based on short-term market trends. Long-term dedication often yields the most fruitful results.
As you proceed on this journey, remember that your financial wellbeing is not only about the numbers on your balance sheet but also about the choices you make. Each financial decision is a step towards creating a life that is not defined by limitations but characterised by choices, dreams realised, and a sense of security that transcends economic uncertainties. Remember, every step taken toward financial empowerment is a step toward a brighter and more secure future.