Financial abusive behaviour can take many different forms such as controlling a family member’s money, stopping them from being financially independent or earning their own money.
Speaking on the podcast of Nest Egg’s sister title Wellness Daily, the founder and financial adviser at On Your Own Two Feet and author of two books on financial planning for women, Helen Baker, discussed her tips and tricks to avoid financial abuse.
How common is this form of abuse?
According to Women and Money, 15.7 per cent of women have experienced financial abuse, with the most common form of abuse happening to the elderly. This is costing the economy $15.6 billion a year.
Sexually transmitted debt
Ms Baker believes new couples often end up in what she calls “sexually transmitted debt” where one member of the partnership takes control.
“If you rush in and put your finances together, if the other person hasn’t sorted out their financial situation, you can also put yourself into a position of vulnerability there where they could create debts that you become accountable for as well. Classic cases are, someone loses their job or gets sick and can’t work, they don’t have income protection,” said Ms Baker.
Five foundations to avoid financial abuse
1) Have an emergency fund – This is to protect yourself in case of loss of employment or if you need money in a hurry in case something significant happens.
2) Have a spending and investment plan – Spend less than you earn and borrow less than you can afford so you don’t get in over your head and start pushing money away from investments.
3) Insurance – Have insurance in place to protect your income.
4) Super – Everyone needs to have one, so grow your super.
5) Will and power of attorney – Make sure you have a will and your power of attorney in place to protect yourself.
“It’s a bit like when you build a house, you put a lot of money into the concrete and the slab, the metal, and then if something blows, the rest doesn’t come falling down,” said Ms Baker.
Cameron Micallef is a journalist at Nest Egg, writing primarily about personal wealth and economic markets.
Prior to this, Cameron worked for Australian Associated Press. He graduated from the University of Wollongong with a double degree in communications and commerce.