A Woman’s Guide to Money Management

Women have unique needs when it comes to money. In this three-part series on women and money, black enterprise will tell you what you need to know when it comes to money management (part 1), investing (part 2), and tax and estate planning (part 3).

In this series, we’re driving home the point that gaining control of your finances means you’re laying a foundation for a stable future. The choices you make with your money today will determine the quality of life you live tomorrow. “It’s about equating savvy money management with expanding life choices. This is how women get empowered. Women need to see the connection between money and choices in their lives. And being on top of your money gives you the power to have choices,” says Manisha Thakor, chartered financial analyst and personal finance expert for women.

From learning about women who developed a money management plan or made tough financial choices while dealing with life challenges and life stages, to learning about the top five rules of investing for women, this series will feature resources and a list of next steps that will encourage you to develop your own financial action plan and build wealth that will last for generations to come.

Creating a financial plan should be on everyone’s to-do list. Financial planning is not solely for the rich, nor should it be left up to your significant other. It is important for everyone–especially women–to develop a financial plan. According to a recent study conducted by Prudential Financial, less than a quarter of women feel “very well” prepared to make important decisions about their financial futures. The Shriver Report, a study conducted by Maria Shriver and the Center of American Progress, found that in 2008, nearly 4 in 10 mothers, or 39.3%, were the primary wage earners in their family due to being single, a working parent, or because they earned as much or more as their spouse or partner. Don’t rely on the help of a spouse or wait until you make a certain amount of money to develop a financial plan. Starting this process wherever you are in life helps to prepare and secure you financially for whatever is to come. Whether you’re trying to pursue homeownership, build wealth, start a business, manage your household finances, or send kids to college, it is vital to have a plan of action in place.

PURSUING HOMEOWNERSHIP

Erika Taylor says that next time around, she’ll make sure that she and her partner are on the same page with finances. “You can find out a lot about a person by asking where they plan to be financially in the next five years or what their credit score is,” says the newly divorced Taylor, mother of a 3—year-old son, Braylon, residing in Farmington Hills, a Detroit suburb.

In April of 2006 Taylor and her husband purchased a $235,000 home. Taylor was the primary signor on the mortgage and moved in just months before their first child was born. They were finally living what she thought was the American dream, but in less than a year, they began having financial difficulty.
In February of 2007, Taylor’s husband was laid off and four months later, so was she. The lack of income put a strain on their finances. The couple separated later that year. Eventually, the foreclosure notices started coming. Neither had enough of a cushion to save their home and in 2009 they lost it to foreclosure just three years after they were married.

Despite a bumpy beginning, Taylor is determined to once again become a homeowner. She is steadily working to improve her credit score by making payments on time and in full. In addition, she has found ways to generate additional income. “I felt like I had lost everything, but going through the whole process made me realize the importance of having multiple streams of income aside from working your daily job,” she says. Now, Taylor works for an online university as an enrollment counselor making $65,000 a year, including bonuses. She rakes in an additional $500 to $2,000 per month by offering career and business development solutions and workshops through her business, Taylor Made Branding (www.taylormadebranding.com).

Here are some tips that can help you get back on track:

Rebuild credit. If your home was recently foreclosed but you wish to be a homeowner in the future, know that it could take anywhere from two to six years before a lender will offer a reasonable interest rate. In the meantime, it will be important for you to rebuild your credit. You can do this by paying all of your bills in full and on time. Also make an effort to pay down outstanding debt. In addition, a credit counselor can help you devise a financial management plan.

Educate yourself. Many divorced women find themselves in control of the household finances for the first time after their marriage ends. If this describes you, make a point to attend financial literacy workshops and read as many educational materials as you can.

Manage accounts. Don’t forget to remove your former spouse as the beneficiary on your life insurance forms and on your bank and retirement accounts. Also remove your name from joint bank and credit card accounts.

Rebuild savings. Divorce can be hard on the wallet. Make savings a priority. In time, Taylor plans to rebuild her savings, which was eaten by attorney’s fees. She estimates that by moving back in with her parents, she is saving more than $1,000 per month. She contributes $100 per month to her emergency fund, $50 biweekly to her son’s college fund, allocates 10% of her paycheck to her 401(k), and saves all the income from her side business. “Save more, spend less, and invest wisely,” advises Linda Leitz, CFP. Create a livable budget and realistic lifestyle. In addition, having dependents makes it vital for you to be properly insured. Make sure that you have adequate disability and life insurance.

Assemble a power team: “Divorce is emotional and a lot of women just want to get it over with,” says Barbara Stanny, author of Secrets of Six-Figure Women (Harper Business; $23.95). A good team will include a financial planner, attorney, and accountant, and they should give you sound advice and hold you accountable.

–LaToya M. Smith

FINANCIAL RECOVERY RESOURCES

How to Be the Family CFO (Greenleaf Book Group; $19.95), by Kim Snider, provides guidance on managing household finances by applying the basic rules of managing a successful business.

We Need to Talk: Money & Kids After Divorce (Bright Leitz Publishing; $13.95), by Linda Leitz, offers advice on financial recovery after divorce.

BUILDING WEALTH

Tiffani Murray was never the type to not have her finances in order. From the time she was a child, saving coins in an empty Tang container, she’s always understood the importance of frugality. As an adult, Murray practices sound money management principles to make her money work for her.
Single without children, Murray is taking advantage of this time to build wealth by creating multiple streams of income. In addition to her full-time job as a technology manager in talent acquisition for a consumer products company, the 32-year-old owns two Web-based businesses and has a variety of “side hustles,” as she calls them. Among them is a book series called Stuck on Stupid (www.StuckOnStupidBooks.com), which came about after a bad break up, and Flagler Hill (www.FlaglerHill.com), a Website dedicated to discussing African American relationships. The Websites generate income through online advertisement and the sale of content to other Websites. Murray is also a freelance writer and event planner. Combined, she makes an annual income of $125,000 to $150,000, about 25% of which comes from the “hustles.” Murray makes a point to track expenses and adhere to a budget. Over the past five years, the Atlanta resident was able to save up to six-figures. She credits prudence for her financial success. “I can be sort of a penny-pincher. I enjoy a certain lifestyle, but I also know what I’m spending my money on,” she says. Another key part of Murray’s plan is having a team of experts in place. “It’s important to surround yourself with people who are knowledgeable.”

Here are some tips that can help you build wealth:

Track finances. Keep a record of your income and how much of it you spend. Also seek the help of a financial professional. If paying for regular sessions with a financial planner is not in your budget, you can go for one visit to help you get on the right track. “If you don’t have a lot of money, some financial planners will not charge you a lot in the very beginning. Even if you just go one time to get direction on the first thing you need to do, it’s worth it because you’ll have a blueprint,” says Cheryl Broussard, registered investment adviser and author of Starting Over: Fast Cash and Getting Back on Financial Track (Cheryl Broussard; $19.97).

Resist the urge to overindulge. The top roadblock to wealth building for

single women is overspending. “Because single women don’t have anyone else they need to take care of, they tend to overspend. We need to stop that in the beginning and change our mindset to align with wealth building instead of instant gratification,” says Broussard. Once you’ve tracked your finances and see where your money is going, cut back on unnecessary expenses. Just because you can afford something doesn’t mean you should buy it.

Add multiple streams of income. Find ways to profit from a hobby or something you’re passionate about. Also consider a part-time job. “I try to have other means of income because you never know with corporate America. You never know when things could change.” says Murray.

Set up automatic savings. Having a set amount of money deposited into your savings account each payday is one of the best ways to save because you won’t have to think about it. It’s important to start saving as soon as possible. “The money you save early on is by far the most powerful money you will ever save because it has the most time to grow and compound,” says Manisha Thakor, a chartered financial analyst, or CFA, and personal finance expert for women.

Start investing now. Educate yourself about investing and get started as soon as possible. This is one of the best ways to make your money grow.

–Sheiresa McRae and Shenelle Wallace

WEALTH BUILDING RESOURCES

Mint (www.mint.com) is a free online budgeting tool that will help you keep track of income and expenses.
ShareBuilder (www.sharebuilder.com) features inexpensive online investing and guidance for novice and experienced investors.

MANAGING FINANCES

Planning is Tangela Walker-Craft’s specialty. The married mother of one has been steadfast in keeping household debt to a minimum. For example, when the Crafts purchased their home in 1993, the Lakeland, Florida, couple was determined not to be consumed by a hefty mortgage. Instead of buying a home for the $110,000 the couple qualified for, they wisely purchased a home for $20,000 less to give themselves a cushion. Over the years, the 39-year-old and her husband Ernest, 40, have built an exceptional payment history and have been able to use that to their advantage by refinancing to pay off their auto loans or to get a better rate.

In 2002, the Crafts began to shore up their finances for a new addition to the family. Walker-Craft, a former teacher, was able to leave her job to take care of their daughter, Emari, now 8 years old. Though she was already careful with financial planning, having one income forced her to become even more prudent. The family began living well below their means, often shopping off-season for clothes and household items. Each month, they calculate monthly expenses versus monthly income. They create a checklist of bills that must be paid and include a cushion for unforeseen expenses.

Walker-Craft also used her time away from the classroom to pursue a side business. In late 2005, while caring for her toddler, she founded Simply Necessary Inc., which produces Walker-Craft’s invention, the Go Pillow, a multifunctional product that can serve as a breastfeeding cover-up for moms.

Here are some tips that can help you and your family manage household finances:

Prepare for the unexpected. Unforeseen events can often derail long-term financial goals. Build your emergency cushion. The Crafts have an emergency fund that covers six months of expenses. Also keep a checklist of long-term goals to make sure you are on track. “Before you figure out where you’re going, you have to know where you been,” says Sharon Harvey Rosenberg, author of The Frugal Duchess: How to Live Well and Save Money (DPL Press; $14.95). “It helps to have a full, complete background of the family finances and a list of what you’d like to accomplish in the future.”

Bring your children in on the finances. Don’t shield children from the family’s financial picture. With age-appropriate lessons, take the time to teach them about debt, credit cards, and savings. This way, if your family has a financial goal, the children will be more inclined to contribute.

Have adequate life and disability insurance. It’s important to have enough life insurance in the event of the untimely death of you, your spouse, or both. The insurance calculator at Bank Rate (www.bankrate.com) can give you an idea of how much life insurance you’ll need. Also have short- and long-term disability plans in place. The Life and Health Insurance Foundation for Education (www. life happens.org) has a disability insurance needs calculator.

Work with your spouse.

Adding a partner and child to the mix can make financial planning more complicated if all parties are not in agreement. In order for the planning of family finances to go smoothly, make sure that you and your spouse are on the same page about how money should be handled as a family. “You have to be able to communicate with your partner to make things successful,” says Michelle Oliver, president of The Oliver Financial Group, a Henrico, Virginia-based financial services firm.

–Renita Burns

MONEY MANAGEMENT RESOURCES

A Purse of Your Own: An Easy Guide to Financial Security, (Fireside; $15) by Debra Owens offers advice on establishing financial independence.

Get Financially Naked: How to Talk Money with Your Honey, (Adams Media; $12.95) by Manisha Thakor and Sharon Kedar, provides guidance on discussing finances with your spouse or significant other.

RECOVERING FROM THE LOSS OF A SPOUSE

Franka Baly is a thriving entrepreneur. The 41-year-old Houston resident owns ReEmergence L.L.C., a graphic design studio she opened in 2000 that assists small businesses with developing Websites and marketing material, and is co-owner of Infuze Hair Studio. In 2009, revenues were more than $160,000. In addition to being an entrepreneur, Baly is the mother of 6-year-old twin boys–and she’s also a recent widow.

Baly’s husband of 16 years died in a car accident in May 2008 at the age of 42. This tragic incident pushed Baly to refocus her time and energy on rebuilding a stable future for her and her boys. Prior to the death of her husband, Baly had a full-time job at AIG and worked occasionally on ReEmergence. After getting laid off in 2002, she continued working part time on her business while still living comfortably in a two-income household. Following the birth of the twins, Baly and her husband developed conservative spending habits, only spending when it was necessary. They both had life insurance, retirement plans, saving accounts, and a few investments set up for their future.

Both Baly and her husband were responsible for the family’s finances. “Our pastor encouraged us to sit down and pay the bills together, so we would be able to communicate and really see our financial situation,” said Baly. “We couldn’t hide anything from each other that way.” By performing the simple task of bookkeeping with her husband, Baly was able to access the accounts and did not have to scramble at the last minute to find the paperwork needed to prepare for her husband’s funeral.

After her husband’s death, Baly immediately had a will created. She also made sure to take care of her physical health. “I became real nervous about something happening to me, and my boys losing another parent and not being taken care of financially,” she explained. Baly also contacted a financial adviser. “If you don’t have a plan then you will tend to make a lot of mistakes. I learned that from having a business.”

Here are some tips that can help you bounce back after the loss of a loved one:

Get financial records in order. Many widows scramble at the last minute looking for financial documents in order to finalize the funeral plans. Many also lack knowledge about their household finances. Candace Bahr, founder of Bahr Investment Group and co-founder of the Women’s Institute for Financial Education (www.wife.org), recommends getting more involved when it come to your finances. Review income tax forms, 401(k) statements, investment portfolios, credit card bills, and pension plans and become familiar with them. Many women do not realize they do not qualify for spousal benefits from their husband’s pension plan’s until it too late.

Hire a financial adviser. Sound financial advice is crucial at a time when emotions are likely to be high. “Find someone who has very good knowledge of the industry and several years of experience,” recommends Fola Odejimi, a certified financial planner with The ODYSSEY Group L.L.C., a financial planning firm in Phoenix. Work by referrals and check the credentials of the adviser, making sure they cater to your specific financial needs. But don’t wait for a tragedy to seek a financial adviser, have a financial road map already in place.

Protect yourself from becoming easy prey. Have someone accompany you to meetings that require you to make financial decisions so that you don’t get taken advantage of. Do not make any quick decision when it comes to money. Baly’s support system came from her adviser, family, close friends, and her church family. She also briefly joined a support group for her and her boys.

–Jermine Benton

RESOURCES FOR WIDOWS

Financial Strategies for Today’s Widow (Fireside; $14), by David Latko, provides financial guidance for widows.

Grief Net (www.griefnet.org) offers online support and resources for those who have lost a loved one.

CHOOSING BETWEEN RETIREMENT AND COLLEGE SAVINGS

Paying for college can be daunting–especially if you’re a single parent. With average tuition costs at a four-year private college nearing $30,000 per year, having a plan is vital. No one is aware of these challenges more than Judy Gardner, a mother of two teenage sons: Cameron, 18, and Kevin, 14. Cameron is a freshman pre-engineering student at Washtenaw Community College in Ann Arbor, Michigan, and Kevin will start college in another three years. Gardner, a 46-year-old divorcée, is committed to providing a solid financial future for them and for herself. She is also committed to making sure they have a solid education.

Although Gardner hasn’t saved for their college tuition, opting instead to focus on her retirement savings, she has assisted with researching scholarships and grants. “I thought it would be wiser to save for retirement and look for loans for their education. I search online, talk to teachers regarding scholarships, and attend financial aid seminars to get information,” says Gardner.

If you’re a single mom working to prepare for college costs, here are a few tips:

Take inventory and set goals. Compare your income with your total expenses per month. Factor in the immediate needs and priorities of yourself and your children.

“Write your responses to the inventory in a grid or financial planning software,” says Sherry Bryant, CEO of Sherry Bryant & Associates, an accounting and business management firm. “This will help you see how much work needs to be done. Set written and attainable goals of where you want to be financially in one month, six months, one year, and two years,” says Bryant.

Build a safety net. Being a single mom with children makes it even more important for you to have a cash cushion in the event of an emergency. Develop a part-time business around a skill or hobby, secure a part-time job or work extra hours on your current job. Implement a savings plan for you and your family. It can be as little as $25 to $50 a month as long as it is consistent. Initially, this will be an emergency fund. Once you’ve built up a six-month reserve, the additional savings should go toward investing in retirement and college education.
“Discipline does not take away from the quality and enjoyment of life. It gives you self-reliance and freedom for you and your children,” says Susan Bradley, founder of the Sudden Money Institute.

Establish an education fund. After you’ve gotten a handle on retirement savings, sock away money in a 529 savings plan for tax-free education. In addition, like Gardner, make an effort to research available scholarships, grants, and other sources of financial aid. The book Getting Financial Aid 2010 (College Board; $21.95) is a good place to start.

Set financial priorities. Many pitfalls greet single moms. They include not properly accounting for expenses throughout the month, lack of savings, lack of goal setting, and putting children’s college financing before their own retirement. It is important to enlist the help of a financial planner or a friend or relative who manages finances well to hold you accountable.

Don’t neglect your health. Protect your health–you can’t work without it. Financial concerns and raising children alone can lead to depression. “Depression around money issues often causes single mothers to fall prey to emotional spending as a means of feeling better,” says Valerie Coleman Morris, personal finance expert. “Question your spending motives. Budget as if your life and your children’s depend on it–because it does.

–Leslie E. Royal

RESOURCES FOR SINGLE MOTHERS

FinAid (www.finaid.org) lists tools for college financing such as loan and scholarship information and a college cost calculator.

Single Mom Financial Help (www.singlemomfinancialhelp.com) gives tips on budgeting, money management, and credit and debt advice.

The Everything Guide to Personal Finance for Single Mothers by Susan Reynolds and Robert Bexton (Adams Media; $14.95) assists single mothers with setting financial goals, assessing financial health, and conquering debt.

Further Reading
A Woman’s Guide to Managing Money

A Woman’s Guide to Investing—Part II

A Woman’s Guide to Wealth Preservation

This article originally appeared in the February 2010 issue of Black Enterprise magazine.