Breaking the Cycle: The Worst Financial Habits for Women and How to Overcome Them

Managing personal finances can be challenging for everyone, but women are more prone to developing specific financial habits due to societal expectations, historical norms, and unique life circumstances.

Breaking free from these patterns is essential for achieving financial independence and long-term success.

Here are some of the worst financial habits women tend to develop based on what I have witnessed as a financial advisor and some tips on how to overcome them.

1. Avoiding Financial Conversations

Many women shy away from conversations about money with partners, financial advisors, or even their peers. This hesitation often stems from the belief that talking about money is rude or uncomfortable, but staying silent can lead to missed opportunities for growth and stability.

Solution:

- Start small: Make it a habit to talk about finances in casual settings, such as with friends or colleagues, so it feels less intimidating.

- Educate yourself: Empower yourself by reading about personal finance or attending workshops so you feel more confident in your financial decisions. My book 'She Can Prosper' is a great place to start!

2. Not Investing Early or Often Enough

Women tend to be more conservative with their money than men, often prioritising savings accounts over riskier but higher-reward investments. While saving is critical, failing to invest early can lead to missed opportunities for wealth growth.

Solution:

- Take the first step: Even small, low-risk investments can grow significantly over time.

Learn about compound interest. Understanding the power of compound interest can make investing less risky and more rewarding over the long term.

3. Letting Others Control Their Finances

Historically, women have been more likely to defer major financial decisions to spouses or other family members. While this dynamic is shifting, it still exists, and it can leave women vulnerable if they find themselves suddenly in charge of their own financial well-being after a major life event, such as divorce or the death of a spouse.

Solution:

- Take ownership: Even if you share finances with a partner, ensure you actively participate in financial decision-making.

- Get organised: Understand all aspects of your financial picture—income, savings, investments, debts—so you're prepared to take control at any moment.

4. Not Prioritising Retirement Savings

Women often focus on short-term financial goals such as saving for holidays or special events and neglect long-term savings, especially for retirement. Because women generally live longer than men, not saving enough for retirement can lead to financial struggles in later years.

Solution:

- Automate savings: Set up automatic contributions to your retirement accounts so you're consistently building your nest egg without having to think about it.

- Take advantage of employer matches: If your employer offers to match contributions to your pension, ensure you're contributing enough to get the full benefit—this is essentially free money for your retirement.

- If you are self employed or have a limited company there are tax benefits to pension saving so discuss this with your accountant.

5. Overspending to Maintain Appearances

The pressure to keep up appearances, whether through clothes, beauty products, flash cars or other lifestyle choices can lead women to overspend on non-essential items. Social media often amplifies this pressure, making it challenging to resist unnecessary purchases that drain savings and prevent meaningful financial progress.

Solution:

- Set a budget: Create a monthly budget that allows for some discretionary spending but prevents overspending.

- Practice mindful spending: Before making a purchase, consider whether it aligns with your financial goals or is just a temporary emotional fix.

6. Failing to Negotiate Salary and Benefits

Women are statistically less likely to negotiate their salaries than men, often because they fear seeming too demanding or aggressive. This hesitancy can cost women thousands of pounds over their careers.

Solution:

- Know your worth: Research salary benchmarks for your role and industry so you can make a strong case for what you deserve.

- Practice negotiation: Role-play salary negotiations with a friend or mentor to build confidence before entering these conversations.

7. Not Having an Emergency Fund

Women are more likely to take career breaks, especially for caregiving roles, which can leave them financially vulnerable if unexpected expenses arise. Any unexpected cost, like a car repair, can lead to debt or financial instability without an emergency fund.

Solution:

- Set a goal: Aim to have at least 3-6 months' worth of living expenses saved in a separate account for emergencies.

- Contribute consistently: Even small monthly contributions can add up over time, providing you with a financial cushion when life throws curveballs.

Overcoming these financial habits requires intentional action and a willingness to step outside one's comfort zone. By actively making financial decisions, investing wisely, and planning for the future, women can build wealth and achieve financial independence.

It's never too late to break old habits and develop a healthier relationship with money!