Five simple steps to financial freedom for women
Women still face unique challenges when it comes to money – but can empower themselves to control their futures
Wonder Woman Wonder Woman didn’t need superpowers to put her finances in order. Equality is great – I’m all for it. But when it comes to financial planning, we need to realize that women face different and unique challenges.
Sure, all of us – men and women – have the same financial goals. We all want to save and invest wisely so that we don’t outlive our nest eggs; we plan so that we can finance a child’s education without sacrificing our dream of traveling to Antarctica in Shackleton’s footsteps. But if you’re a woman, it’s different when it comes to money. Too often, it’s not in a good way.
Step 1: Confront the reality of living longer with less money
The bottom line is that our lives vary significantly from those of our husbands, sons and brothers. Women live longer (72% of those who live to 90 are women), yet we earn less; 77 cents for every dollar that men earn. Odds are that our work lives will be interrupted by prolonged periods spent caring for others – young children, aging parents or both. That interrupts our career path and is one reason women are more likely to have jobs that offer more flexibility but lower salaries. Women are less likely to have a 401k plan; when we do, the assets tend to be about half those of male peers, according to a 2010 study from the Brookings Institution.
Some of this is inevitable, and it will be slow to change, as it has been for years. It’s irrational to decide against motherhood, for instance, because it’s going to prevent us from maximizing our income and retirement savings, to put it mildly. And few of us would opt for a shorter lifespan.
Step 2: Stop hiding from your money
There is, however, plenty that women can do and ways they can take control of their money. Women can be their own worst enemies when it comes to finances, says Alice Finn, a veteran financial adviser. She recently founded PowerHouse Assets, a firm whose goal is to provide women with what they most lack with respect to their finances: knowledge and self-confidence.
“Ironically, women can be better investors than men are – they’re less likely to succumb to the risky investment that a friend tries to pitch to them on a golf course,” says Finn. “But they’re less comfortable and less confident planning, and find it hard to take the first steps.”
Nor are things necessarily improving with each generation. A recent study by Fidelity showed that younger women are less likely than their older peers to play a significant role in making financial decisions for the family. Regardless of the specific findings of each such poll or survey, women consistently report that they feel poorly prepared to make sensible financial decisions.
Some steps to correct this imbalance are basic. If you’re married or in a long-term relationship, make sure that you become part of the planning process. Know where financial data is kept and what the account numbers and passwords are. Be part of discussions with any advisers or planners that your partner has hired.
Step 3: Hoarding won’t save you in your old age
Finn and other advisers who have worked with both men and women report finding women more wary and risk-averse. That can be counterproductive – you don’t want to be so uncomfortable with taking sensible risks; keeping your retirement savings in Treasury bonds, earning low interest, is not an effective retirement plan. I can almost promise that you’ll be in trouble by the time you hit 70-years-old.
Then there’s the “retail therapy” minefield. The concept, as distasteful as it might be, is still a buzzword because enough women still view shopping for a fabulous pair of shoes or this season’s must-own handbag as a way to cope with emotional stress. The problem? The psychic rewards are ephemeral. The credit card bills? Not so much.
Step 4: Put your money to work
There are some straightforward ideas, too. Even at home and raising kids, most of us can keep contributing to an IRA plan. Deal with the probability that you’ll live into your 80s – if not your 90s – by finding an affordable long-term care insurance policy; and if you think you might end up becoming a caregiver for your own aging parents, do the same for them if you want to keep working and earning.
Step 5: Ignore the naysayers
Nor do you have to put up with financial advisors who condescend to and patronize women. They still exist, but you don’t need to put up with the BS, and every year that passes brings with it more financial planners and other resources aimed specifically at the unique financial challenges facing women.
Keep hunting until you find the right support network. And remember, there is no such thing as a stupid question if you think that the answer will help you better manage your finances. After all, none of us – from the hedge fund master of the universe to the neighborhood cookie baker in her 70s – was born knowing the difference between a stock and a bond.