Take that new car, for example. Figure out exactly how much you can afford to pay by taking your annual net salary (roughly $65,000 for someone earning $100,000 per year), then allocating 10% for your car note, or $542 per month. The total cost of the car, including insurance and fuel, should take up no more than 12% to 15% of your income, Young says.
Use resources such as Kelley Blue Book or Edmunds, both of which feature calculators for figuring out what you can afford to pay (down payment, interest, fees, and monthly payments) for new and used cars. “Break your numbers down and do the online research and you’ll go into the dealership knowing exactly what you can afford, and what you want,” says Young. “When you get face-to-face with a salesperson, you’ll come from a place of power and be able to negotiate on your behalf much more effectively.”
Use your natural decision–making and problem–solving skills to your advantage. Stacey Tisdale, financial journalist and co-author of The True Cost of Happiness: The Real Story Behind Managing Your Money (Wiley; $24.95), says historical male and female roles contribute to those negative financial statistics. Through self-empowerment and education she says women can learn how to be more confident in just about any financial situation. “We have to embrace our strengths, connect with who we are, and bring those attributes into the financial aspect of our lives,” says Tisdale.
Start by parlaying your problem-solving skills into a smarter investment plan. Increasing current retirement plan contribution levels by just a few percentage points, for example, will result in a larger nest egg. “Even the individual who is living paycheck to paycheck can gain ground by increasing contributions by 1%,” Young says. For someone earning $50,000 annually the additional $500 yearly investment will translate into about $14,000 within 15 years, according to Young, and nearly $37,000 within 25 years. “That’s a pretty significant chunk.”
When in doubt, consider the financial advice that you’d give your children—even if you don’t have any. “Think about the most important things you’d want to teach your children about money,” says Tisdale, “and then walk your own walk by using that advice in your own life.” For example, what would you say to a daughter who was earning less money than her male counterparts?
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