You’ve heard it all before: Women earn less money, take more time out of the workforce, and tend to outlive their male counterparts. Women and men also tend to have psychological differences as well, which can show up in their financial lives. Men tend to be financial daredevils who like risk while women are cautious and want security. To rephrase the title of a bestseller, “men buy shares from Mars and women have a savings account on Venus.” There’s been a lot written about why women don’t engage more directly with their finances: we underestimate our financial ability; we’ve historically relied on men; and, for the most part, we haven’t had strong female financial role models. Whatever the reason may be, women need to be more actively involved financially. The question, as always, is how.
On the surface, the landscape of personal finance is a man’s world. Male faces dominate our currency. Men largely control Wall Street and the firms that hold and invest our money. When you see a commercial about financial advising, it’s almost always a man giving the advice. But James Brown was right when he sang, “This is a man’s world. But it wouldn’t be nothing, nothing, without a woman or a girl.” Ladies, if you think that finance isn’t your thing, you’ve got to change your perspective, since it’s likely you will at some point be the sole money manager in your household due to being single, divorced, or widowed.
I mean no disrespect to men, but there’s a financial revolution coming, and women will dominate it. Jean Chatzky, a financial editor for NBC’s Today, predicts that women will control 75 percent of discretionary spending around the world by 2029. By 2030, 66 percent of America’s wealth will be held by women. “Yet to take all this additional wealth and simply plunk it into the financial playbook that men have used for decades doesn’t work because we are different,” Chatzky writes in her new book, Women with Money.
Frankly, it’s time for women to give a damn. Taking a Scarlett O’Hara approach toward your financial future (“Tomorrow is another day…”) is unwise. Some women still refuse to work with a financial advisor or discuss money matters with their loved ones. In 2015, Fidelity surveyed 1,542 women with employer-sponsored retirement plans and found that 8 in 10 women said they avoid financial conversations because they are “too personal” or “uncomfortable”. It was found that women are more likely to talk with their significant other about health issues and sex rather than salary or investment ideas.
From the age of 65 on, most American women are single. That means they don’t have someone to share the cost of daily living expenses or to help with retirement savings. Additionally, study after study shows that after losing a partner due to death or divorce, women’s standard of living generally drops.
Do you see the issues we are facing as women? Let’s talk about a few solutions to these problems.
There is a very important question that every woman should ask: What do you want from your money? Not knowing the answer to this question is why smart women (and men) do stupid things with their money. You must keep your emotions in check. Sometimes, the way you feel currently may not help you to make the long-term financial decisions that are necessary.
Women need to make retirement a top priority. As women, we often put the needs of others ahead of our own, but when it comes to retirement savings, we need to start thinking about ourselves. Make sure you contribute to your 401(k) or another employer plan at least up to the company match and know your options outside of those plans. Don’t just save your money, invest! We need to start making the most of our money. For something with such a long time horizon as retirement, you need a diversified stock portfolio that’s positioned for growth. This means bigger risks will have to be taken, but these decisions don’t have to be made on your own.
Team up with an advisor that you can trust. Think of them as a personal trainer, someone to guide you and keep you going when you might otherwise be tempted to call it quits. An advisor can help you look at the big picture, focus on retirement planning and build a well-diversified portfolio. Working with someone who understands you and your goals can be a major source of peace of mind. So, think about the type of person you’d be most comfortable with. A lot of women prefer to work with a female advisor. But gender aside, look for someone with whom you can communicate easily. If you decide to go with an advisor, make sure your advisor is fee-based (not paid on commission) and is a fiduciary. A fiduciary is legally and morally obligated to do with your money what they would do with their own money if they were in your situation.
Consider getting a financial plan put together. I’m a huge advocate for having a financial plan because it goes beyond saving and investing and looks holistically at all the interrelated parts of your financial life. It reviews your income, expenses, investments, retirement planning, insurance coverage, income tax liability, estate planning needs and desires and-most importantly-how they all work together. Plus, it gives you a roadmap to follow.
Finally, be an advocate. Female or male, single or married, all of us need to be actively involved in our financial lives. But many women especially need to be encouraged to take greater charge. As you get on top of your finances, share your experiences. Talk to other women. Expand the financial conversation. Together, we can buck the stereotypes and become the CEOs of our own financial lives.
If you don't have a financial advisor, I'm happy to help answer any of your questions. You can reach me at jburton@yourlifeafterwork.com or 800-928-4001.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see our Disclosure page for the full disclaimer.
