A few years ago, Sharita, a single mother with three children, was homeless and living in a motel after being evicted.
“At the time, I was living paycheck-to-paycheck and had no savings, and my credit score plummeted because of the eviction and outstanding collections, credit, and medical debts,” explained Sharita in a Yahoo! News profile. “I knew that I could not give up because I had two children that deserved an address to call their own.”
Faced with unthinkable circumstances, Sharita began allocating a portion of her monthly earnings to savings, adhering to a basic budget, creating a process to rebuild her credit score, and slowly chip away at her debt. “I made up my mind to learn as much as I could about personal finance, credit, debt elimination, and saving,” said Sharita. “My children and I would go to the library as much as possible. I read personal development and finance books, and began to write out my own goals.”
With stories like Sharita’s, QCash believes there is no better time than Women’s History Month and this last Tuesday’s International Women’s Day to celebrate the challenges and victories for courageous women who set financial health goals and celebrate fulfillment in achieving them.
Empowering women throughout their financial health journey
Sharita is not alone when it comes to the challenges of financial literacy and education. Her courage to make that decision, however – to rise up, take drastic action, and persevere for a greater future – is cause to celebrate and take inspiration. Unfortunately, the truth is that according to MetLife’s 17th Annual Employee Benefits Trend Study in 2019, women were more likely than men to live paycheck-to-paycheck (44 percent vs. 55 percent, respectively) while feeling less confident about their finances compared to men (55 percent vs. 70 percent).
Despite the significant advances made in the last 40-plus years, disparities still exist between women and men. Even as the wage gap diminished in the years since 1980, women still earn just 84 percent of what men earn despite equality in the level of education, according to a 2020 Pew Research analysis. In fact, analysis from the United States Bureau of Statistics and Pew Research also found that 2019 marked the first year women were in the majority of the college-educated labor force. As of the first quarter of 2019, 29.5 million women in the labor force had at least a bachelor’s degree, matching the number of college-educated men in the workforce (29.3 million)
Interesting, considering that women still tend to be less participatory in their own financial lives overall, which can lead to challenges when regulating investing and savings habits down the line. Developing a more consistent and disciplined awareness of one’s own financial well-being isn’t just a simple shot of self-esteem; Women who have conditioned themselves to take a direct and active role in their financial health decisions and goal-setting will enable themselves to make the necessary adjustments required to meet those goals when the time comes.
Guiding and mentoring your credit union members in taking the steering wheel with confidence may seem overwhelming for them in the beginning. But taking those small, productive steps and helping them establish positive personal finance habits will take them a long way.
5 steps women can take to improve their personal financial health
It’s interesting that when discussion about women’s health arises – particularly during Women’s History Month, no less! – people seem to be more likely to default to mentioning PHYSICAL health; how caring for our physical and mental selves allow us to feel as close to optimal as possible. After all, with a projected beauty and personal care market volume of $87,987,000 in 2022 and growing to $99,474,000 in 2026 per Statista, much more cultural focus is paid to that area of our lives. However, a more nuanced and honest discussion may also include areas of personal finance and financial health, and economic inclusion within the system.
In fact, a joint study by BlogHer and Chase Slate in 2018 found 94 percent of respondents felt their well-being was directly linked to financial health. Fifty percent of women in the study said they experienced health issues due to the effects of financial stress. That said, 98 percent – that’s right, 98 percent – said they wanted to improve their financial health. They WANT to improve their financial situation, but what if they simply don’t know how, or don’t know where to start?
Your credit union members want to improve their financial well-being and money management habits. The fact is it doesn’t need to be difficult mentoring and guiding them on their financial wellness journey. Below are five steps to employ when guiding your members down the path to improved financial health:
Helping members learn about and understand credit scores
Having a member regularly check their credit score while getting back to financial health can be nerve-wracking. Knowing their credit, however, represents a good initial step to improving it. As credit specialist Tyler Gregory said, “If you don’t take care of your credit, your credit won’t take care of you.”
“You can survive with bad credit, but it’s not always easy and definitely not cheap,” says The Balance’s LaToya Irby. “Establishing a good credit score will help you save money and make your financial life much easier.”
Credit scores measure members’ creditworthiness by calculating the information within their credit report. It determines members’ qualification for loans, what kind of loans and how much they qualify for, and the member’s interest rate. In the final analysis, the member’s payment history will determine about 35 percent of their credit score.
A prime piece of advice for counseling members in this area is to let them know that missing credit card payments or paying less than the minimum requirement on the card can negatively affect members’ credit scores.
Paying off the minimum balance doesn’t mean they should max out their cards; the amount of credit the member spends each month also has a significant effect. A full third of credit scores are decided by the credit-to-debt ratio, or the amount they put on their card in comparison to their credit limit. A healthy credit-to-debt ratio falls roughly around 30 percent.
Have members give themselves regular credit report check-ups
It’s no different than going to the doctor or dentist at regularly scheduled times throughout the year. Advising your credit union members to check their credit report regularly is key to staying on top of their financial health goals.
A credit report lays out the history of all credit and loan accounts including on-time payments, duration accounts, and credit use. All of these factors influence a member’s credit score, so it’s important to make sure the report is accurate. Also, it’s advisable for the member to check for any incorrect information or fraudulent activities that can adversely affect their credit score.
Federal law allows the member three full credit reports each year – one from each of the three major credit reporting bureaus — Experian, Equifax, and TransUnion. Benefiting from any or all of these three bureau reports can help members take stock of their financial health goals.
Establish a rainy-day emergency fund
There are those unfortunate times in a member’s life that simply don’t go their way. Regularly setting aside money every month will come in handy when those not-so-fun times come around.
That doesn’t necessarily mean those members need to sacrifice hundreds of dollars every week. That emergency stash should cover three-to-six months of expenses. At this stage of a member’s financial recovery, the focus should be more about costs than income. The member should determine their key financial obligations including, for instance, medical insurance, a monthly car payment, and household bills.
Once that final tally becomes clear, make sure to contribute to an emergency fund every week until your goal amount is reached. That feeling of financial security not only helps you accomplish your objective but may enable a sense of accomplishment that adds fuel to your financial health journey.
Being honest about members’ spending habits
Being honest about where their money is going is key to members minimizing avoidable purchasing habits and redirecting those funds toward their savings or investment assets.
As they review their account statements every month, counsel them to look out for those sneaky transactions under $10 – that errant, overpriced latte at 3:00 in the afternoon, cab rides downtown, that convenient but oh-so-tasty Chinese takeout that one Wednesday night. Those are the kinds of purchases to consider when determining where to cut spending and converting those funds to savings or investment accounts.
Helping members set goals and holding themselves accountable
The first step when it comes to a member’s finances is setting goals. Being able to see those goals through to success, however, is the real challenge.
To create real incentive for members to successfully achieve their financial health goals means finding ways for them to hold themselves accountable. One method to hold themselves accountable is telling their goals to a friend, confidante, or relative. “People are far more likely to stick to savings plans when they announce them,” said TIAA president and CEO Thasunda Duckett. “Tell a trusted girlfriend about your plans, so that you have someone to cheer you on.”
From understanding their credit score to setting goals and holding them accountable, working with your members to outline a plan is key to empowering them to build healthy credit while creating a deeper, more meaningful long-term relationship with you and your credit union.
As for Sharita, you may ask? “The entire process was no walk in the park,” she said. “It look me several months to start to feel financially confident, but all the hard work was worth it. My children and I moved into our new home, and I even secured a government job.” Not only that, but Sharita actually left that government position to start her own company.
“I would tell other women in a similar position to never lose hope. They have the power to change their financial trajectories and build beautiful lives for themselves and their children. Change happens when you shift your mindset and start to believe in yourself. Once you begin to shift your mindset and modify your money behaviors, this will create a positive relationship with your finances.”