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Women have more debt: Here’s how to pay it off and break the cycle

These tips from experts can help you lower your debt

To Her Credit offers targeted advice about personal finance based on unique challenges faced by women. It is authored by women with different financial backgrounds, dedicated to encouraging empowerment through financial literacy.

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There are many factors that contribute to why women have more debt than men. The gender pay gap, harmful stereotypes like “women’s work”, maternity leave, higher loan repayment terms and the discrimination that exists within personal finance have created the perfect storm of financially inhibiting women (in particular, women of color). And with that, comes more debt.

Looking at the gender pay gap, for example, women, overall, make only 82 cents per $1 a white man makes, according to a study from the National Partnership for Women & Families. In addition, Black women typically make 63 cents, Native American women 60 cents and Latinas only 55 cents for each dollar that white, non-Hispanic men make. These statistics, alone, make it harder for women to pay down debt.

Add in student debt as another factor, and the repayment abilities dwindle even further. Women graduate owing almost $22,000 in student debt, compared to $18,880 owed by men. And “having less family wealth to rely on explains why Black women and Latinas need to borrow to finance their education,” according to an updated 2020 report by the American Association of University Women (AAUW).

All of these issues women face create an almost impassable mountain of debt, but there are ways to get to the other side. These solid strategies from experts can help you get out – and stay out – of debt.

See related: Managing student loan debt

It’s never too late to educate

“I’ve found that women are less likely to have been talked to about finances in their family. Their male siblings may have been spoken to by their father but oftentimes they’re overlooked because they’re female,” said Steffa Mantilla, certified financial education instructor and owner of the blog Money Tamer.

This isn’t surprising when you learn 30% of parents believe they spend more time talking to their sons about money, compared to 16% who say they discuss the topic with their daughters, according to T. Rowe Price’s 11th Annual Parents, Kids & Money Survey.

It’s essential that women educate themselves on all things personal finance, Mantilla said, and she recommended starting with learning about budgeting and working up to investing.

See related: Financial bias starts early: How to talk to your daughter about finances

To learn how to budget, Mantilla suggested taking advantage of free internet resources, but cautioned that it’s key to use a site written by someone who is credentialed in personal finance, rather than someone with no teaching or money background.

Budgeting is the easiest financial concept to learn and is the foundation for solid financial knowledge, according to Mantilla. “Once you understand how to budget, you can work on other goals like paying down debt or saving money,” she said.

When you’re ready to start learning about investing, Mantilla recommended using a fee-only financial planner.

Fee-only advisors don’t earn commissions on selling products; you pay them a flat fee based on what you want to do, whether it’s setting up an IRA or simply meeting for a financial checkup. Mantilla suggested interviewing a couple of advisors and going with the one that’s the best fit.

In addition, she cautioned that you should find one who is open to teaching and advising instead of just trying to sell you financial products. To get started, look for a fee-only advisor on the NAPFA website.

Be accountable

When working to get out of debt, there is no surer step to success than being accountable, according to Vickie Pierre, researcher and writer at US Insurance Agents. Accountability, Pierre explained, means you’re committing to a process, setting boundaries and tracking your progress.

So, what does that look like? Pierre said you should begin by tracking every single dollar you spend. Go back three months into your budget and list out all of your expenditures – by category. “Believe me, once you see how often you’re eating out…you’ll make immediate changes,” she said.

Next, Pierre advised, determine your must-haves and needs (i.e., bills and debts) as well as your wants and create a budget where you first allocate all of your necessary expenses. She also emphasized that you must create a space for savings – even if it’s just a few bucks a week.

See related: How to break your expenses into the ‘big four’ categories

Using a financial planning calculator, she said, can help you project the savings you need to plan for long-term goals like investments and retirement.

“Speaking as an educated woman of color who was once in thousands of dollars of debt, I simply grew tired of feeling like a statistic.” Pierre said. “Knowing that I had a degree and a good career, it frustrated me to think I didn’t have a handle on this area of my life.”

Pierre said that just being out of debt and having financial freedom is motivation enough for her to stay the course and hopefully inspire others.

Cut costs where you can

Cutting costs is one of the first things you should be looking to do when you want to repay debt, said George Birrell, CPA and founder of Tax Hub.

We often accrue unnecessary costs we don’t notice, and if you can cut those out, you can start to put more money towards debt repayment, something Pierre touched on.

Once you’ve managed to cut those costs, Birrell said, consider negotiating your interest rate with your lender because if you can lower it, that could significantly help you pay off your debt.

“Paying off debt isn’t easy, otherwise everyone would have done it by now,” he said. “It takes a lot of hard work, planning and discipline. Just keep trying where you can, and eventually you’ll get there.”

Pay off credit card debt

Ben Reynolds, CEO and founder of Sure Dividend, recommended paying off your credit cards with the highest interest rates first.

Alternatively, he said you might want to concentrate on paying off the lowest balance because after you pay that one off, you can use the money to work on the next lowest one. 

Whatever your plan is, he cautioned, make sure you’re able to pay at least the minimum balance on each one before you start focusing on paying them off.

See related: Poll: 51% of U.S. adults accrued more debt during the COVID-19 outbreak

Keep informed about your student loan debt

Many student loan borrowers are not aware of the status of their student loan debt and fail to take advantage of government programs like income-based repayment programs or the Public Service Loan Forgiveness Program, according to Charlie Scanlon, founder of creditscore.law.

There are also forgiveness programs available in individual states for loan reduction or forgiveness, he noted, and the majority of these state programs are focused on offering benefits to workers in particular career areas – such as healthcare or teaching. Others offer loan forgiveness for working in certain economically disadvantaged geographic regions.

Since student loan payment suspension has been extended through September 30, 2021, “now is a good time for…borrowers to examine their student loans and explore programs that might reduce payments or result in debt being forgiven,” Scanlon said.

See related: My unpaid student loans fell off my credit report. Do I still have to pay?

Negotiate a salary increase

Making more money is an obvious but sometimes unattainable way to pay down debt. While it may be easier said than done, negotiating a salary increase is a worthwhile endeavor.

Allie Fleder, COO of SimplyWise, said it’s important that when negotiating salary increases to consider not only your current lifestyle needs but also what you need in terms of your retirement savings plan.

Women are also more likely than men to work part-time, Fleder pointed out, which makes them ineligible for participation in retirement savings plans. And women are more likely than men to pause their careers for caregiving duties – both caring for children and, later in life, caring for aging family members.

For those who are able to return to work, they typically find it hard to make up the lost time in their earnings and savings. A salary increase can go a long way toward building financial security as well as paying off debt, Fleder said.

Salary negotiations can be especially tricky for women, but there are resources available if you’re unsure where to start. The AAUW offers salary negotiation workshops, for example, where you can learn to successfully advocate for yourself and help close the gender wage gap.

Know your worth

April Lewis-Parks, director of education and communications at Consolidated Credit, said it’s no secret that there are financial disparities between men and women.

One way women can keep debt at bay is by earning an income that matches their education, she said. Because women are more likely to obtain higher education, it’s essential they know their earning power and that they present that when seeking employment.

And because women tend not to tout their own worth, it might help to keep a career log with examples and testimonials (from school and previous work) about successes they’ve had they can highlight for a potential employer to establish what an asset they are.

See related: Sexism in job hunting: How to get what you’re worth

Bottom line

Despite the gender pay gap and a long history of women being left out of things related to personal finance, there are plenty of ways women can catch up and pay off debt.

And while women shouldn’t have to “catch up” in the first place, it’s imperative women stop blaming themselves for their financial hardships. So many women become stressed over debt and blame themselves for getting into it. Instead, you must adjust your mindset so that you won’t lose motivation. Being in debt is not the end of the world and you can break the cycle if you make a commitment.

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