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| Uncommon Sense | Why so many women cant save
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Its training, habits and old attitudes -- not genetics -- that keep us from controlling our cash flow. Its time we understood that saving is not dieting.
By MP Dunleavey
Editor's note: Columnist MP Dunleavey and eight other women have come together online to strip away the myths surrounding money, lay bare their assets and liberate themselves from debt. Follow the quest for financial fabulousness of these "Women in Red" every second Monday in Dunleavey's column on MSN Money.
Every single member of the Women in Red wishes she had more money saved.
Even for those of us who are setting aside some money each month, it never seems like enough. And far too often, our meager savings get swallowed up by some emergency or obligation.
And, of course, there's the inevitable retail casualty (but we needed those new jeans, yes, we did).
Thing is: We're all struggling to work with the 60% Solution -- which includes setting aside 20% of your gross income for life's inevitabilities and 10% for fun. So, in theory, unexpected expenses should be covered, with money left over for true, blue, can't-touch-that savings.
So what's the problem?
We are not alone
I hate studies that deliver bad news about women's financial state -- like recent research on bankruptcy -- but here's some insight on women and savings.
A recent Consumer Federation of America survey found that: - Not only do most (71%) women worry about their finances
- And nearly half (49%) say they lose sleep over it
- But, unexpected expenses were the biggest cause of financial angst.
Because:
- The median cost of these sudden expenses was $400, with total emergency expenditures running about $2,000 a year.
- Yet, 42% of women have less than $500 in savings.
- Younger women, ages 24 to 35, were worst off, with 55% admitting they had less than $500 in emergency savings.
- Two-thirds of all non-savers don't even having a savings account.
Why women dont save
The scientific conclusion I've reached, after observing the Women in Red for a year now, is that savers are made, not born.
Anna, for example, was trained by her cost-conscious parents from an early age to save for whatever was most important and not spend on the junk in between.
More 'Women in Red' on MSN Money
Alas, this is not the case for most of the rest of us. Saving is an acquired habit many of us are still struggling to acquire. And when I looked around the group I identified three classic anti-saving attitudes that prevent the savings habit from taking hold.
1. How can I save when I can barely pay my bills? The mother of all savings saboteurs, this one is also the hardest to get over, as Brice knows. A freelancer with an income that might be $6,000 one month and zilch the next, Brice, 38, juggles her bills in one hand and her erratic paychecks in the other. There never seems to be anything left over for savings.
Even people with steady paychecks know this feeling. But despite all financial pressure to the contrary, it is possible to save -- if you take two important steps:
- First, find ways to reduce your monthly overhead. Brice took on a lot of extra work this year in order to pay off $7,000 in debt (Go Brice!). She also reduced her rent by $500 by moving to a cheaper apartment.
- Second, she needed a savings strategy.
So we mapped out a strategy where she would save first by taking a small step and putting 5% into her IRA and 5% into her emergency fund. Let's do the numbers:
| Brice's monthly budget | | Category | | | Amount | Pct. | | Gross income | | | $5,000 | 100% | | | | | | | Committed expenses* | | | $2,933 | 59% | | Rent | | $1,725 | - | | Taxes | | $200 | - | | Phone (cell/land) | | $165 | - | | Utilities | | $75 | - | | Gym | | $140 | - | | Health care | | $340 | - | | Commuting | | $40 | - | | Groceries | | $248 | - | | Fun money | | | $500 | 10% | | Irregular Expenses | | | $500 | 10% | | Debt repayment | | | $300 | 6% | | Long-term saving | | | $250 | 5% | | Retirement saving | | | $250 | 5% | | | | | | | Budgeted expenses | | | $4,733 | 95% | | Remainder | | | $267 | 5% |
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(* For the curious, clothing costs are generally covered either Irregular or Fun Money categories, depending on how necessary (or frivolous) a particular purchase happens to be.)
Brice's committed expenses are a little less than 60% of her gross this month (thanks, in large part, to a tiny tax bill and the deductibility of the freelance life). So even after setting aside 5% each for retirement and long-term savings, and saving 10% for both fun and irregular expenses, she will have $300 for debt repayment (and $267 left over that she can put toward irregular expenses, additional savings or taking a bigger bite out of her debt).
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