The Single Life:

Start Out Right

Chapter 2
Money Smart Women
Janet Bodnar

Topics in this unit

Generational distinctions for Millenials

Gender distinctions in single life women/men
Themes for the course ERA & Recovery is Key!
Five important steps to take while single
Money Smart Single Women Teri vs. Toni

Good Habits Last a Lifetime

Its critical to lay a strong foundation while
you are just striking out on your own in
your 20s.
The basic principles of smart money
management are just as applicable if your
30 -something, 40 something, or 50
something.

Millennials the KEY Generation

Millennial women and men in the US have

more at stake than ever when it comes to
taking control of their finances, managing
money with confidence, and in practicing
philanthropy.
Younger generations are our future. The
time is NOW to begin your road to
independence and to being confident.

Managing Money on Your Own

According to Oppenheimer Funds, at some

point in their lives, 90% women in the
United States will be managing money on
their own because theyve been divorced or
widowed or have never married. (Source:
Oppenheimer Funds).

Supporting Facts

Never Married: Of American women who

are ages 25 to 29, about 42% have never
married.
Divorce: About 40% of first marriages end
in divorce, according to the U.S. Census.
Widowhood: The median age of
widowhood for women in a first marriage is
just over 58 years.

Thinking Single
Even if youre married or in a relationship,
you need to think single to maintain your
financial independence, so that if anything
happens to a spouse or partner you wont
face financial disaster as well as personal
tragedy.
The sooner you start, the better off youll be
Early, Regularly and Aggressively

Themes for the class

ERA Early, Regularly and
Aggressively
Recovery is KEY!

Five Steps to Financial Independence

Following are some key steps to becoming

financially independent and confident.
1. Pay off debt
2. Clean credit
3. Cash cushion cash is key
4. Savings retirement, etc.
5. Insurance

1. Pay Off Your Debt

The statistics:

In 2004 about 76% of college students in the United

States had credit cards, according to a study by Nellie
Mae, a top originator of student loans, and the average
credit card balance was more then $2,100.
In addition, a survey by Oppenheimer Funds found that
47 percent of single Gen X women, age 21 to 34, had
credit card debt, compared with 35 percent of single
men. The typical Gen X woman with credit card debt
had an outstanding balance of $2,300 which is the
equivalent of four weeks of take-home pay.

1. Pay Off Your Debt (cont.)

The statistics (continued)
Significantly more single young women said that they
live from paycheck to paycheck than do single men.
And 30% of all bankruptcy petitions are filed by single
women, compared with 26 % by single men.
How do you pay off your debt:
Stop using your credit card
Pay off your bills
Tackle your most expensive debt first
Dont carry a balance from month to month

2. Write Your Credit History on a

Clean Slate

Its particularly important for young women and men to

build a credit record in their own name that will last a
lifetime and be unaffected by their marital status.

Ironically, the best way to get credit is to incur debt, so that

card issuers can gauge how reliable you are when it comes
to repaying. But that doesnt mean youre out of luck it
youre starting fresh.

Credit Cards and Your Credit

A few tips to keep in mind:

Some major banks have programs to help you establish

good credit by making you a loan that you repay before
getting the money.
Dont shop for several cards at the same time. Credit
issuers checking your credit report will see the other
inquiries and assume the worst - that youll get all the
cards and use the entire credit limit.
If issuers think you have to many cards, theyll be less
confident that youll be able to pay your debts.
Being rejected for a credit card can hurt your chances
of being accepted for one in the future.

Getting Credit

One of the fastest ways to get credit is to apply for

a secured card that requires you to make a savings
deposit equal to your credit line
This is a good option for college students. Putting
up some of your own money in order to get the
card makes the point that credit has a cost, and it
protects them if they get into trouble

FICO Scores and Utilization Ratios

FICO is the acronym for Fair Isaac Corporation, a

publicly-traded corporation (under the symbol "FIC")
that created the best-known and most widely used
credit score model in the United States.
The FICO score is calculated statistically, with
information from a consumer's credit files. The FICO
score is primarily used in credit decisions made by
banks and other providers of secured and unsecured
credit. Banks and other institutions using such scores
as a factor in their lending decisions may deny credit,
charge higher interest rates, demand more collateral,
or require extensive income and asset verification if the
applicant's FICO credit score is low.

Utilization Ratios

Utilization ratios is a ratio of your available

credit.
When lenders decide to extend credit they
look at your utilization ratio ie, how much
you have been extended verses how much
you have used.

Digging Out of Debt

Stop using your credit cards- even if, to

avoid temptation, you have to cut them up
(plastic surgery) or do something drastic
like putting them on ice in the freezer.
Henceforth, pay cash.

Pay off your bills- using whatever strategy

makes you feel that youre making progress.

Digging Out of Debt

Tackle your most expensive debt firstFinancially, that makes the most sense.

Dont carry a balance from month to monthOnly use your cards again when you make
up your mind to pay the bill off each month

Getting Help with Debt

Bodnar recommends several agencies that

assists people with credit and debt issues.
Please refer to page 24 of text book for
details on supporting agencies.

The Consumer Credit Counseling Service

http://www.cccsatl.org/
National Foundation for Credit Counseling
http://www.nfcc.org/

3. Plump Your Cash Cushion

You should have enough cash tucked away to

cover 3 to 6 months worth of living expenses
Only 38% of Americans actually keep that much
savings on hand, according to a survey by
Lutheran Brotherhood.
Young adults are especially short of cash, with
just 30% of them reporting they have a cushion
that would last at least 3 months.
In fact, it has been determined that in our country
now, we have a negative savings rate.

3. Plump Your Cash Cushion

Even if you can not stockpile 3 to 6 months worth

of cash start small with 1 month. As your income
rises, increase your cash reserve a little adds up
to a lot over time (remember ERA).
A cash reserve should be your first priority.
Note: As you build up your cash cushion a
reasonable question would be where do you put it?
You have two good options for parking your cash
reserve: a savings account at a bank or credit
union, or money-market mutual fund.

4. Open a Retirement Account

Saving for retirement and other lifes transistions
is especially important for women because they
tend to move in and out of the work force even as
they have to plan for a longer life span. Because
of these transitions, they are have less income
from entitlement programs.
Ironically, it was determined by an Oppenheimer
Funds survey, fully half of the single Gen X
women said that at this point in their lives, money
is for spending and not for saving. Three of four
said it was important to look successful and 54
percent said they were more likely to accumulate
30 pairs of shoes than to accumulate $30,000 in
retirement savings.

4. Open a Retirement Account

Very few people, no matter what their

income or age, have the self-discipline to
sock away money on their own. Perhaps an
easy way to do it successfully is to have
someone do it for you, off the top of your
paycheck, so that your money doesnt burn
a hole in your pocketbook.

4. Open a Retirement Account

Put as much money as you can in your

retirement account such as your IRA
individual retirement account.
Take advantage of any employer sponsored
retirement accounts as usually your
contributions are matched (up to a certain
amount) by the employer.

5. Buy Peace-of-Mind Insurance

Health Insurance
Nearly

1 in 3 young adults between the ages of

18 and 24 has no health insurance- the highest
proportion of any age group, according to the
U.S. census Bureau.
If you are a recent college graduate, you might
be able to take advantage of a COBRA plan.
See page 36 for additional details and check
with your current insurance to determine if this
will help you bridge the gap when you
graduate.

5. Buy Peace-of-Mind Insurance

Health Savings Accounts:

Something to consider put $ into an account or
have it withdrawn up to a certain amount in
pre-tax dollars to pay for medical expenses
such as co-pays, drug co-pays, etc. Sometimes
will take it right out of your checking account
before taxes are taken out.

5. Buy Peace of Mind Insurance

Disability Insurance
You

would be wise to supplement an employerpaid policy with disability insurance youve

purchased on your own, bringing total coverage
to 80% or 90% of take-home pay.
Generally, the young you are the more you
need disability insurance.

5. Buy Peace-of-Mind Insurance

Renters Insurance
You

own more than you think, and you can

protect it from fire or theft with inexpensive
renters insurance.
Coverage generally costs only a couple of
hundred dollars per year

Ten Tricks to Add to Your Savings Routine

1.
2.

3.
4.

Start an automatic savings or investment plan

Have your paycheck deposited directly to your
savings account rather than your checking
account.
Limit yourself to just one ATM withdrawal a
week
When you make a credit card purchase subtract
the amount immediately from your checking
account

Ten Tricks to Add to Your

Savings Routine
5. When you subtract a check from your account,
round up the amount to the next dollar
6. Cant decide between two items in the store? Give
yourself a 24-hour cooling-off period before
you buy either
7. If you tend to misplace credit card receipts or
forget to record debits, buy yourself a couple of
eye-catching storage bins or baskets into which
you can toss the receipts.

Ten Tricks to Add to Your

Savings Account
8. Get a fun savings bank into which you can toss
spare change, and watch your money grow
9. Each time you pass up the temptation to buy a
latte or a new pair of shoes, take the money
you would have spent and put it in a cash jar
10. Once you finish paying off a loan or credit
card balance, keep writing the check but send
it directly to a savings or investment account

Teri vs. Toni

The Little Things Add Up
Teri At age 25 - $2,000 per year into IRA and
does so for 10 years. She saves a total of $20,000.

Toni at age 35 -- $2,000 per year into IRA and

doesnt stop for 30 years for a total of $60,000 in
contributions.

Who has more money at age 65?

Teri vs Toni

Teri will have more money at age 65.

Teri --- $556,000 vs

Toni -- $329,000

Why? The time value of money

Laying the Foundation for Philanthropy

Just as you begin to lay the foundation for

smart money skills in your 20s, it is at this
point in your life when you begin to
develop your philanthropy skills.

WHY NOW IN THE 21st Century

As we begin the 21st century, women in the

US are in unprecedented wealth and
economic power. Today, women control
more wealth whether individual, family,
shared, or inherited wealth. As their wealth
increases, women are becoming more
knowledgeable about their own financial
resources and responsibilities

WHY NOW IN THE 21st Century

Women make up 53% of the workforce and

are increasingly moving into higher-paying
professional careers.
Women make up 1.6 million of the top
wealth holders in the US with a combined
net worth of almost $2.2. trillion
Women generated $2.1 trillion in earnings
in 1999

WHY NOW IN THE 21st Century

Perhaps the most striking of all, because women

live longer than men, women will end up in charge
of much of the $41 trillion to $136 trillion
expected transfer of wealth from generation to
generation over the next fifty years.
For those women in their 20s this is you!
And for men in their 20s this is good
information to know for yourself, your mothers,
sisters, daughters, etc.

Dont Stop Now!

Figure out how much debt you are carrying month

to month and look at ways to pay it off
Get a free copy of your credit report and take steps
to improve your credit status
Start or beef up your savings for emergencies and
retirement
Purchase health and disability insurance coverage
or reconsider the adequacy of what you have

Dont Stop Now!

Look into buying a home of your own if

you havent already done so and youre
reasonably settled
Make a will or revisit a previously written
one. Does it reflect your current situation?
Begin to lay the foundation for philanthropy
in your life

THE BOTTOM LINE

Themes for the course

Start EARLY!
Do it REGURLARY!
Do it AGGRESSIVELY!

Recovery is KEY!