Financial Management Tips for Women in Tech Part 2: Improving Your Financial Wellbeing

This article is part two of a two-part series for women in tech focused on maximizing your earnings potential and improving your financial wellbeing.

In our last article, we shared why maximizing your earnings potential is essential for accumulating wealth and increasing your net worth over time. Yet financial independence doesn’t just hinge on growing your income. It also requires healthy financial habits and smart decision-making. In this article, we’re sharing our tips for how women in tech can best manage your finances to improve your financial wellbeing.

Women in tech, consider these tips for improving your financial wellbeing:

#1: Set Financial Goals

Women in tech are naturally goal oriented. After all, for most people a successful career path means knowing what you want and going after it. However, even the most goal-oriented professionals may not think about setting financial goals.

According to research from Charles Schwab, 72% of U.S. households don’t have a formal financial plan. That means most people may not know what they want for their personal finances or how to achieve it.

Indeed, financial wellbeing isn’t just about enjoying life today, although that’s part of it. It’s also about feeling secure in your future and knowing one day you can achieve financial independence. Thus, when it comes to improving your financial wellbeing, the first step is setting near- and long-term goals.

Put simply, a financial goal is something you want to achieve with your money. Examples of financial goals may include:

• Create an emergency fund
• Pay off student debt
• Buy your first home
• Travel the world

Once you know what you’re working towards, you can create a plan to make it happen.

#2: Create a Spending Plan

As your income rises, it’s natural to increase your spending in tandem—a concept known as lifestyle inflation or lifestyle creep. Unfortunately, lifestyle inflation can become problematic when your spending gets in the way your financial independence.

For many women in tech, improving your financial wellbeing starts with creating a spending plan. That doesn’t mean you need to have a formal budget and track every dollar you spend. However, you should be aware of where you’re spending your hard-earned money and why.

One way to keep lifestyle inflation in check is to spend more intentionally. When you align your spending with your values and goals, you’re less likely to make frivolous purchases or decisions that impede your financial progress. You may even start to feel better about your money in general, which can help you build momentum towards other goals.

#3: Pay Down High-Interest Debt

The American Association of University Women  reports that women hold roughly two-thirds of all student debt in the United States. Meanwhile, the average woman with student loans has $31,276 in student debt.

Of course, not all women in tech have student loan debt. But if you do, paying high-interest loans down first can significantly improve your financial wellbeing. In many cases, the cost of carrying a balance on your loans month to month can far outweigh the benefit of putting your money to work elsewhere.

Similarly, be sure to pay down credit card debt as efficiently as possible. According to WalletHub’s Credit Card Landscape Report, the average credit card interest rate is 19.13% for new offers and 15.13% for existing accounts. With interest rates on the rise, the cost of carrying a credit card balance may only get higher.

#4: Build a Cash Fund

If you don’t have high-interest debt, the next step towards improving your financial wellbeing is to focus on building a cash fund. For women in tech, having cash on hand is important for at least two reasons.

First, a cash fund can protect you against financial setbacks like temporary unemployment or a large, unplanned expenditure. For this reason, many financial experts recommend having enough cash to cover at least three to six months’ worth of living expenses. However, in industries like tech where your income may be more volatile, you may want to save more.

At the same time, having a cash fund can be beneficial if stock options are a significant part of your overall compensation. Should you decide to exercise your options, you’ll need enough cash on hand to purchase shares of company stock at the exercise price.

However, you’ll also want to ensure you have enough cash leftover to cover living expenses and other near-term financial needs. This can help you avoid selling your shares prematurely, which can have major tax consequences.

#5: Maximize Retirement Benefits and Tax-Deferred Accounts

A big part of improving your financial wellbeing is securing your financial future—whether you plan to keep working or not. For women in tech, having the financial resources to make work optional or change careers down the road may be just as important as retiring altogether.

One of the most effective ways to build your resources is to save and invest your money in tax-deferred accounts. Often, these types of accounts are designated for retirement funds. However, you may also be able to take advantage of your health savings account (HSA) to save for the future.

If your employer offers retirement benefits, be sure to take advantage of any incentives they offer employees—especially if they match contributions. This is basically free money that you’re leaving on the table if you don’t participate.

Another option is to contribute to a traditional or Roth individual retirement account (IRA). In 2022, the maximum contribution limit to an IRA is $6,000 for anyone under age 50.

Keep in mind that Roth and traditional IRAs have different features and eligibility requirements. You may want to consult a financial professional to determine which account makes most sense for you.

Lastly, an HSA can be a great place to save and invest extra cash if you have a qualifying high-deductible health plan. HSAs can be an attractive option due to their three layers of tax benefits.

First, contributions to an HSA are tax-deductible. Second, you can invest your money within an HSA, and any gains are tax-free. And third, withdrawals are tax-free so long as you use them for qualifying expenses. Plus, your HSA funds are yours for life, so you can use it indefinitely to fund relevant medical and healthcare needs.

#6: When It Comes to Improving Your Financial Wellbeing, Don’t Forget to Manage Your Risks

Finally, improving your financial wellbeing includes protecting your assets as you grow them. One of the most obvious ways to protect yourself against unexpected financial setbacks is insurance.

While you likely have basic coverage like health, auto, and homeowner’s insurance, your insurance needs may change over time. Therefore, it’s important to reevaluate your policies and coverage as your personal and financial circumstances evolve.

For example, disability and life insurance can help ensure you and your loved ones are provided for financially in the event of incapacity or death. In addition, as your net worth increases, you may want to consider personal umbrella insurance to protect your assets from potentially devastating legal claims.

An estate plan can also help protect you, your loved ones, and your assets. Whether you’re single or have a family, women in tech can benefit from having a few basic estate planning documents in place.

• A will or revocable living trust. While both of these documents designate how you want to distribute your assets after death, only a living trust bypasses probate court.
• Healthcare proxy/durable power of attorney. These documents appoint someone you trust to make medical decisions on your behalf if you can’t make them yourself. This is especially important if you’re not married.
• Financial power of attorney. Similarly, a financial power of attorney appoints someone to make financial decisions on your behalf if you become incapacitated.

You may need to put additional plans in place depending on your personal circumstances. The bottom line is proper risk management can go a long way towards improving your financial wellbeing.

Improving Your Financial Wellbeing Doesn’t Need to Be a Solo Effort

Women in tech may find these tips overwhelming at first, especially if you’re focused on establishing yourself in your career and life. First, it’s important to remember that financial planning is a journey. Consistency and progress are more important than perfection.

In addition, you don’t have to go it alone. SageMint Wealth has a passion for supporting, women, the LGBTQ+ community, and individuals in the technology space. Our team will work with you to identify your financial goals and develop a plan to achieve them. We also have licensed estate planning attorneys in-house who are here to help.

If you’d like to speak with a member of our team about improving your financial wellbeing, please contact us. We’d love to hear from you.