As we witness unprecedented social unrest related to the treatment of Blacks and other minorities in the United States, we should remember how disadvantaged women have been throughout history. In particular, women face unique challenges as they plan their financial lives. Let’s explore these challenges and consider ways to overcome them. You realize how important financial planning is for women.
Women Face Obstacles
The deck has always been stacked against women. Too often, even though they have the same qualifications and do the same work as men, they are paid less. This gender wag- gap persists despite the passage of several pieces of federal legislation which were designed to level the playing field.
In addition, women work fewer years than their male counterparts. They enter the workforce late, drop out, re-enter and finish (i.e. retire) earlier, because they are caring for others, usually their children and parents, but sometimes their grandchildren and grandparents. Women spend 6.1 years of their adult life caring for others.
Women do have one advantage over men. They live longer. But even that works against them. Because they live longer, they need more money for retirement. In addition, they are more likely to need some form of medical care in their senior years, need it longer than men do and need money to pay for it.
As will discuss below, financial planning for women provides a path to overcome these challenges.
Money – The Taboo Topic
In American culture, money is a topic that most women prefer to avoid. Women generally grow up learning very little about money from their parents, because the topic is very rarely discussed.
Our schools and universities do a very poor job of providing any meaningful form of financial literacy. Our religious institutions place little emphasis on the role of money, other than references to tithing.
Somewhere along the way, women learn that, while money is necessary and can be spent, it is not to be discussed. It is considered impolite, inappropriate or insensitive to talk about money. Studies indicate women would rather discuss their own death than money.
Yet, we know money and financial planning are vitally important for women.
Knowledge is Power
The first step in overcoming these challenges is to become informed. Women need to learn about money. They need to understand it just as much as they need to understand other important topics, such as female health and nutrition.
Fortunately, there have never been more resources available to help women learn about financial planning. There are numerous excellent books on the topic, several written specifically for women. These books can be read in hard copy, on an e-reader or listened to in audio form. There are also many websites and podcasts that offer information about financial planning for women. Women can attend seminars in their community, webinars on the internet and classes at their local community college. There are also investing groups that women can join locally or through the internet. If you cannot find one, start your own.
Don’t leave your future to chance. Contact our team at Springwater Wealth today to learn how we can help you develop a financial plan for your peace of mind.
Delegate to a Pro
If you are not interested in learning about financial planning for women or don’t have the time for it, you can hire a financial advisor who can help you. The financial services industry is vast and complex and, consequently, finding an advisor can be confusing. So, let’s briefly review what to look for.
You should work with an advisor who has professional credentials. The gold standards are Certified Financial Planner™ (CFP®), Chartered Financial Analyst® (CFA®), and Chartered Financial Consultant® (ChFC®). Advisors who hold these designations had to meet rigorous educational, experience and ethics requirements.
Your advisor should be compensated by fees, and not by commissions. Look for a “fee only” advisor. Compensation should be stated up front, fully transparent and reasonable.
Independent advisors are more likely to provide objective advice than those working for large institutions which sell financial products. So, look for an advisor working in a registered investment advisor (RIA). Avoid banks, credit unions, insurance companies and brokerage houses.
A fiduciary is someone who is required to act in your best interest. That’s what you want. Advisors can be held to the fiduciary standard by law and/or by credential. When you interview advisors, make sure they are fiduciaries.
Finally, select an advisor who is experienced. There is no substitute for riding through multiple cycles in the stock market.
Develop a Plan
Once you feel well-informed or well-served by a qualified advisor, it’s time to develop a plan. The core components of a comprehensive financial plan for women are budgeting, risk management (i.e. insurance), tax planning, retirement and income planning, investment management, education planning, and estate planning.
Your plan needs to address each of these areas. Do what you can today in each area and then set goals for things that will take time. For example, you can put in place an estate plan immediately. But you will need to set a goal to save for retirement some years from now.
Now that you have your plan, be careful to avoid mistakes. There are plenty of pitfalls and here are a few.
You need a budget. Figure out what you need to live, how much you need to save, and what you pay in taxes. Make sure your income is greater than all of those things and you will be fine. Avoid taking on debt (e.g. credit cards) to live beyond your means.
Set up an emergency fund. You will need this to pay for unexpected repairs, a change in jobs or to get through a global pandemic.
Women often invest less than men. They also tend to be more conservative investors than men. There are various theories about this and there’s even some debate about how true it is. The point is that you need to invest early and enough to reach your goals. You also need to find the right level of investment risk for you and you need to be a disciplined investor.
In summary, financial planning for women is about education, planning and action.