Growing up, I was fortunate to have had a financial role model in my mom, who taught me, from the time I was very young, how important it is for a woman to take control of her finances. In the evenings, when we headed to bed, I remember watching my mother retreat to the den, where she stayed up late to organize files, pay bills, and try to make sense of the piles of documents that financial and insurance companies kept sending her. And, while my mother’s salary never matched my father’s, she believed it was important to work outside the home and always made sure she earned an income of her own.
My mother played a crucial role in helping to build a strong financial safety net for our family. Fortunately, we were spared any life-altering events that many female clients I’ve worked for over the years have had to come to terms with. There was no divorce, no early spousal death, and no major illness or job loss. Had there been, I know my mother would have been devastated; but I also believe she would have been financially prepared.
We’re familiar with the statistics but they are worth repeating. Women in the U.S., on average, live about five years longer than their male counterparts, making it imperative for us to consider how to stretch retirement savings that much longer. Our ability to save, however, is hampered by the gender wage gap. In the U.S., for every dollar on average that a man makes, a woman makes just 79 cents (with the gap far more significant for women of color). Salaries for women peak much earlier than they do for men: around age 44 vs. 55. While there are many complex reasons for these differences – including career choice, gender discrimination, negotiation skills, etc. – a major one is taking breaks during one’s career to care for young children and/or elderly loved ones. According to a study in 2014 by a Princeton researcher, daughters are twice as more likely to assume caregiver responsibilities for their aging parents than sons. Women’s financial lives can also be negatively impacted by divorce. Though divorce rates in the U.S. have been decreasing, it is estimated that 41% of all first marriages end in divorce.
So what can women do to ensure they are putting themselves in the best financial position possible? Here are a few important tips:
Know your numbers – Even if you have the most loving, financially proficient partner who takes responsibility for your household’s financial decisions, it’s essential to maintain a minimum baseline understanding. Know where your accounts are kept, what’s on your tax return, where to locate files, and what your household cash flow is. If you’re nearing retirement, get savvy on any Social Security and Medicare options that may impact you and your potentially longer life expectancy.
Focus on income, not just spending – While it’s a great idea to budget and find areas where you can reduce excessive spending, be sure to also focus on growing your income. As one of my colleagues put it, “There’s only so much you can cut back on spending; but income is limitless.” Take a negotiation course; evaluate the skills you need to take your career to the next level; find a professional mentor and sponsor.
Plan for career breaks – The challenges of work-life balance are real. Whether you have or plan to have children or want to assist elderly loved ones, consider saving separately for this transition period and setting yourself up at work, so you’re in a good position to negotiate a leave or to request flexibility.
Find the right financial advisor and other professionals – It’s not enough to find advisors you trust. More important than this is to make sure you feel comfortable enough to ask the questions you need whenever you need them. In addition, consider partnering with professionals who make client education a cornerstone of their practice. This allows you to continue to hone your own baseline knowledge, so you can be a more informed consumer rather than taking someone’s advice at face value.
Indeed, regardless of one’s gender or other background, it’s a good idea to be prepared for life’s curveballs and take care of your finances. But women often have unique circumstances that may make this even more important. I am grateful to have learned this lesson early on and to now be in a career where I can help other women to be their own financial advocates.
At Modera, our advisors are here to guide you with every aspect of your financial life – and through every event that affects you. To find out how we can help you with all your financial goals, please contact us.
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