Do you have a financial safety net? Spoiler alert…it’s more than just about saving. Here’s how you can build yours.
The concept of a financial safety net extends beyond simply saving money for unexpected events. It involves setting up a full system to shield you from life’s surprises while giving you the power to chase your goals. For women in particular, building this foundation is key to gaining long-term freedom and stability.
Whether you’re just starting out in your career, going through a big life change, or planning for retirement, a well-built financial safety net is the core of your financial health. Let’s look at how to make one that fits your specific needs.
Begin with an Emergency Fund
The cornerstone of financial security starts with a robust emergency fund. Six weeks of living expenses — as opposed to the traditional advice to save three to six months’ worth — is a perfectly adequate emergency savings goal.
Your exact savings goal will depend on the specific aspects of your life. Are you the only one bringing in money for your household? Is your job at risk? Do you have health issues? Any of these might point to saving at the upper end of the suggested range—or even more.
You should keep your emergency fund easy to access, but not so close that you dip into it for everyday costs. High-yield savings accounts strike the right balance—they offer better returns than regular savings accounts while keeping your money ready for when you need it.
Start with a small doable target like $1,000, then work up to covering a month’s expenses, and keep going from there. You’ll be surprised how even small regular deposits can grow.
Insurance: The Protection Layer Many People Forget
Insurance may not be the most thrilling subject, but it plays a crucial role in safeguarding your finances. Without the right coverage, one bad event could erase years of careful saving and planning.
Begin with a review of your current insurance policies. Many women don’t have enough coverage or pay for protection they don’t need. Check your health insurance to make sure it covers your specific health needs. Consider disability insurance, which safeguards your income if you are unable to work and is especially important if you work for yourself or earn the majority of your income at home.
Life insurance becomes crucial if others rely on your income. Term life insurance often provides the cheapest way to get substantial coverage during your peak earning years and when you have the most financial responsibilities.
Don’t overlook property insurance. Whether you rent or own, making sure your home and belongings have proper insurance prevents a disaster from turning into a financial nightmare.
Retirement Planning Is Self-Care
Thinking about retirement isn’t just looking ahead—it’s taking care of your future self. For women, saving for retirement can be extra challenging, thanks to things like taking breaks from work to care for children and living longer.
If your job offers a 401(k) with matching contributions, try to put in at least enough to get the full match—it’s free money. If you can’t get a work plan, start an IRA yourself. Both traditional and Roth IRAs give tax benefits that can boost your savings over time.
Think about boosting your retirement savings by 1% every year, or when you get a pay raise. This slow-but-steady method makes the change easy to handle while improving your long-term financial security for retirement.
Women nearing retirement who feel they’re lagging in savings should keep in mind that catch-up contributions let those over 50 put extra money into retirement accounts. Using these options can help fill possible gaps in your retirement plans.
Set Up Several Income Sources
Depending on a single income source is becoming riskier in today’s ever-changing economy. Setting up multiple ways to earn money provides you with both extra cash and better protection if one source shrinks or disappears.
Begin by figuring out what skills you can sell and what you like doing. Can you do freelance work in your field? Could you teach an online class? Do you have a creative hobby that could potentially earn money through sites like Etsy or print-on-demand services?
Small side jobs can turn into big money-makers over time. The trick is to start with something you can handle that won’t wear you out, then put some of the money you earn back into helping that income source grow.
For people with money to invest, stocks that pay dividends can create income that needs little work once you’ve done the initial research and made the investment.
Be Smart About Tackling Debt
Debt comes in many forms. Knowing which debts to focus your efforts on paying off will help you build a financial safety net faster.
Credit card balances and other high-interest debts should be your top concern. These debts often have interest rates that are much higher than any returns you could get from investments, making them a money pit that can hurt your other financial efforts.
Think about rolling high-interest debts into options with lower interest rates when you can. Balance transfer offers or personal loans may give you some extra time to make real progress on paying off your debt.
While tackling high-interest debt head-on, keep up minimum payments on lower-interest debts such as mortgages or student loans. After you clear the costly debt, you can choose to accelerate payments on other debts or invest that money, based on interest rates and your financial goals.
Building Your Money Support Team
Setting up a financial safety net isn’t just about cash—it’s also about getting the right know-how and help on your side.
Consider teaming up with a financial professional who understands the unique financial challenges women face. Many advisors now offer their services by the hour or per project, making expert guidance more within reach.
Don’t overlook the importance of a financial community (like HerMoney!). You can join formal women’s investment groups (like HerMoney’s investing club, InvestingFixx!) or have casual money talks with friends you trust. Sharing knowledge and experiences can provide you with practical insights and moral support as you navigate your financial path.
Safeguard Your Credit Score
Your credit score opens doors to everything from renting apartments to getting home loans. It’s a crucial part of your financial safety net. Good credit gives you options in both smooth and rough times.
Begin by checking your credit report to spot and fix any mistakes. Set up auto-pay for at least the minimum amount due on all your accounts. This helps you avoid late payments, which can hurt your score.
Try to keep your credit card balance under 30% of your credit limit. If you need to, you can ask for higher credit limits or pay off your card several times a month to keep your balance low even when you’re spending a lot.
When you apply for new credit, be smart about it and don’t do it too often. Applying for many cards in a short time can hurt your credit score for a while, but keeping old accounts open shows lenders you’re reliable.
Estate Planning Is Important for Everyone
Many women don’t bother with estate planning because they think it’s for rich people. But having a basic estate plan is a key part of a solid financial safety net, no matter how much money you have.
A will ensures that your belongings go where you want them to and allows you to choose guardians for your children. If you don’t have one, state laws determine these significant matters, which may not align with your personal preferences.
Think about setting up a power of attorney. This names someone to handle your money if you can’t. Also, look into advance healthcare directives. These spell out what medical care you want if you can’t tell doctors yourself.
Keep these documents up to date, especially after big life changes like getting married, divorced, or having kids. Put them somewhere safe, but make sure people you trust know where to find them when they need to.
Moving Forward with Confidence
Creating a strong financial safety net is an ongoing process, not an end goal. Begin by prioritizing the aspects most crucial to your circumstances. As you gain more financial confidence, you’ll feel more capable of making decisions based on real wants instead of anxiety or need.
Keep in mind that financial security isn’t just about saving money—it’s about setting up systems that support your well-being through life’s ups and downs. By building your financial safety net, you’re not shielding yourself from possible hard times; you’re giving yourself the freedom to chase after your most rewarding life.
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