Women have come a long way over the past century, but many still face challenges when it comes to finances. Read these tips on planning for a more financially sound future.

In previous generations, many women didn’t learn how to write a cheque until they became widows. Men weren’t just the primary wage-earners, they also handled the financial matters as well. And when the circumstances changed, it could be difficult to keep up.

We’ve come a long way over the past century, but women today still face many challenges when it comes to finances. Despite the fact that more women are in the workforce, they still aren’t earning the equivalent of their male counterparts. According to some estimates, this dollar-per-dollar difference can amount to as much as half a million dollars over a lifetime of working. Women are also more likely to be in low-paying jobs or working part time where they have no collective bargaining power.

In addition, other factors also aren’t working in our favour: women are more likely to take time off to raise children and care for aging parents, meaning they are losing wages as well as benefits and pension income. Women also live longer than men, and are at higher risk for disabling ailments like depression and musculoskeletal disorders. Worse yet, women are more affected by divorce and single parenthood than men — especially in families that adhere to traditional gender roles. (See carp.ca for details.)

The bottom line: despite these risks to their financial insecurity, most women will find themselves being the sole manager of the household finances at some time during their lifetimes. A little financial savvy now can make a big difference for your future financial security.

Whether you’re reviewing your own finances or helping your parents, here are some things you can do to help ensure a financially-sound future.

Learn the basic skills. Many people still don’t know how to balance a cheque book, create a budget, use online banking or how to invest. Even if it’s the job of one partner to manage the money, the other should know how to perform these basic skills in the event of an emergency.

If you’re looking for a little help in this area, there are a variety of resources — both offline and online — including financial literacy centres, personal finance websites and blogs, courses at local colleges and workshops or seminars in the community.

Understand and organize important documentation. Many people don’t think about important documents like insurance policies and financial statements until they need them under duress. Do you know what insurance you have, what it does or does not cover and who is the beneficiary of any policies? Do you know where your significant other’s will is, and what it contains? Are you aware of any pensions or benefits? You’ll want to know this information long before you need it.

Know what’s coming in. Even if your finances are separate in a common-law relationship, it’s important to have an idea of what the financial “big picture” looks like — including income and spending. Consider what is coming in and from which sources (e.g. employment income, drawing on retirement savings, etc). What is the status of savings accounts and investments, and what assets should you include in your considerations?

In light of the current economic downturn, experts warn that now is the time for everyone to review their financial plans to make sure they’re still on track.

…And going out. The economy has many people re-thinking their habits, and knowing how much is going out towards debt and expenses is a big piece of the puzzle. Make sure you know what bills need to be paid (e.g. utilities, insurance, etc), when do they get paid (first of the month, etc.) and how they are paid (cheque, automatic debit, etc.)

Also, what debts do both partners have? What are the interest rates and payment schedules, and what plan is in place to pay down those debts? In a common-law relationship where finances are kept separate, what happens if one spouse can’t make the payments?

Budget together. Research suggests that women are better at creating and sticking to budgets than men, so here’s one area where the ladies can particularly help out. Budgets work better when both partners are involved in their creation and implementation. It sometimes happens that one partner is the spender while the other is a thrift, so it’s important to acknowledge these differences and work together for a cohesive plan.

Once you’ve got an idea of what is going in and out, it’s time to refine those numbers and plan for expenses, whether they’re recurring ones like groceries or one-time expenses like a new roof.

It sounds like common sense, but it never hurts to review your spending and make sure everyone is working together towards the same financial goals.

Set aside emergency cash. Even before the recession hit, financial experts were singing the praises of establishing an emergency fund. It’s not part of your retirement savings, but instead is an easily accessible stash of cash to see you through dire situations like a job loss, critical illness or accident. You won’t be forced to cash out investments at a penalty, or sell stocks at a loss.

How much should it be? Experts vary on their estimates, depending on your assets versus debts, expenses, risk tolerance, insurance coverage, health and what you plan to use the funds for (like unforeseen repairs). Many financial gurus recommend starting with six months of expenses and continuing to build this reserve throughout your lifetime.

Have some funds in your name. While there have been cases of one spouse wiping out the other’s accounts and leaving them without resources, the real worry is not being able to pay the bills if your partner is indisposed. It’s important for both spouses to have access to cash (emergency funds or otherwise) in case something happens.

Discuss contingency plans. Having available resources goes hand-in-hand with having a plan to spend them. If you have an emergency fund, decide as a couple when and how the money should be used. For instance, is the fund for expenses only or can it be used to cover a sudden car or home repair? When is it okay or not okay to use the funds?

If you don’t have an emergency fund or need to go beyond it, consider what other resources you can tap like credit cards, lines of credit or investments that can be cashed in.

Work with your style. What about investment? When it comes to differences between the sexes, the research is controversial — some studies suggest that women are more conservative investors than men and take fewer risks. However, critics say it’s not about sex — it’s about an individual’s risk tolerance, knowledge and investment style.

When it comes to investing, two heads can be better than one when different styles work together. Investing doesn’t have to be the “job” of one partner or another — both can work together or have their own separate plans. If women aren’t currently involved, they can learn about investment vehicles and strategies by working with their spouse and a financial planner.

Ask some tough questions. Too many people leave important decisions about their future (like where they will live) until something bad happens. No one wants to think about death or divorce, but it’s important to plan for these possibilities. For instance, if your spouse moved into a long-term care facility, would you move to an apartment close by? If your partner passes away, would you continue to keep up the home? And if you’re common-law, can you continue to live in the home you shared?

Ultimately, a wise goal to aim for is “no surprises”: no secret debts, no hidden information, no surprise bills and no struggles to make ends meet in an emergency. If necessary, seek the help of a financial advisor or debt counsellor to make sure your plans are financially viable now and for years to come.

Sources: UK Reuters, The Wall Street Journal, Yahoo Finance

Photo ©iStockphoto.com/ MorganLane studios

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