Financial independence is a hot topic these days, especially for women, but what does it really mean? Financial independence for women is something that could have a different meaning for each of us, but how should we define it, in order to gauge whether or not we have actually reached this vague status?
As a financial expert I believe financial independence means being able to support oneself, having your own income, and to be able to sustain a decent quality of life or standard of living without needing financial support from anyone else. Not only does this mean having a sufficient income source, it also means being knowledgeable and able to manage personal finances – from bills and debt payments to savings commitments to investing and everything in between.
Many married women are financially dependent on their spouse, and many single women are financially dependent on either credit, or their parents/family/friends, or all of the above. Why is this more of an issue for women than it is for men? The answer is simple – women generally do not make as much money as men do – even for the same work!
In Canada, as in many countries, there is a gender wage gap in favor of males. According to the Statistics Canada Labour Force Survey, in 2012 women’s weekly earnings were equal to 82.3% of men’s weekly earnings in full-time employment (averaged over all fields). For all employment including part-time, women’s weekly earnings averaged only 75.3% of men’s wages.
Reportedly in 2008 dual-earning relationships, 65% of women worked roughly the same amount of hours as did their spouse, but only 27% of them received equal weekly earnings and 57% received less earnings than their partners.
When women put in equal hours, they are often paid less than men — this is due to less women working in higher paid fields like science and technology, as well as some sexist wage gaps still existing within the same positions. And since women are the ones bearing children and giving birth, they often work less hours outside of the home than men due to pregnancy and parenting. Working less hours outside of the home, combined with earning less for those hours than men do, causes women more likely to be financially dependent, on men, debt or others in order to get by.
The consequences of being financially dependent can be damaging to relationships, self-esteem, and overall happiness, on top of the financial disaster should the safety net fail. For example, according to the National Marriage Project (US), a woman’s standard of living can drop up to 27% after divorce, while a man’s standard may rise by 10%.
Financial independence often will allow a woman to follow her own dreams in life, have a higher level of self-respect, and attract more respect from others. An independent women has personal safety in knowing that through her own abilities she can survive without depending on others. Priceless!
Here are a few steps to financial independence:
Maintain Earning Ability
• If you are currently employed, think about what you can do to improve your employee value and earning potential, and work toward that goal constantly. Stay abreast of new skills and technologies in your field, take on new responsibilities, and never become complacent of your work and your salary.
• While out of the workforce for parental leave, stay employable by updating your skills and renewing any of your required licenses and certifications. Stay connected with your industry community through networking and reading related publications.
• Or start a new career or consider opening your own business that you are passionate about. Begin with going back to school or taking some night courses. Volunteer or intern within your desired field to get your foot in the door.
• Find a mentor. Find someone in your previous, current or new field of employment to help guide you with making the best decisions to success in re-entering the workforce, or advancing your career. She/he may know the most desired courses to have under your belt, the best companies to apply for a starter job, and be able to give you a good reference to the right people to get your career going. Keeping in mind a good mentor is NOT a YES person, they are there to help you grow and yes, growing can be painful – but worth every second of it.
• If it has been a long time since you last applied for work, consider hiring a professional interview coach and/or resume writer. It could be worth the investment to save yourself time job hunting and get a good, well-paying position. Again, not a YES person, get a professional.
Take Financial Ownership
Get knowledgeable about personal finance – be involved with household money management, financial planning and investment decisions.
• understand your rights and your responsibilities when it comes to money and debt
• know what accounts and debts you have
• know your and your partner’s credit report and/or credit rating
contact the credit bureaus TransUnion Canada and Equifax Canada for your credit report
• know how to file your income tax return and what your family’s return looks like
• know your regular expenses and financial/investment commitments
Reduce debt and increase savings, as a safeguard for the future. If you are creating debt while ignoring your savings, you are putting a financial burden on your future. In the event of divorce or other unforeseen income loss you would be in serious trouble. So take that stress off your shoulders by spending responsibly now – getting your finances in a safe place that doesn’t rely on future income to save the day. If you need help with managing your debt and becoming debt free, consider contacting a licensed credit counsellor.
For guidance on taking ownership of your personal finances, join our Maven Mentor community. Our Mavens are women who have become secure with their money relationship, are experts in their field, and are looking to provide inspiration and knowledge to other women.
Written by the mentor group