Women control about $19 trillion of wealth, including earned and inherited assets, which accounts for more than three-quarters of our nationʼs ﬁnancial resources. The vast majority of women must handle their own ﬁnances at some point in their lives — as many as 85 percent of us. However, I have found that a fairly large number of women do not have the ﬁnancial savvy to manage their assets.
Life is unpredictable, so take responsibility for yourself. It is imperative that you have the knowledge and conﬁdence essential to handling your ﬁnancial affairs.
A Cautionary Tale
A number of years ago I heard a story about a professor who was injured in a fall that left him in a coma for months. He was married with several children and the couple lived very well, as he had inherited wealth. Throughout their marriage, he took care of all bills and his wife was simply handed household and personal money. She did not even know where he banked, much less what his ﬁnancial assets were. After his accident, she found his checkbook, contacted the bank and was able to pay pending bills.
After several months had passed, the professor was still not out of his coma. His university salary did not cover their ﬁnancial obligations and the bank account was nearly depleted. Bills were piling up, including the mortgage on their large home. She looked all over the house and could ﬁnd no records of other ﬁnancial assets. Frantic, she went to his locked desk, the only place she had not searched. She broke the lock. Inside one of the drawers she found his ﬁnancial records and breathed a sigh of relief. Then she opened the books. They were written in Sanskrit.
For many women, ﬁnancial matters might as well be in Sanskrit for all they mean to them.
Women are much less likely than men to make ﬁnancial planning a priority. If you are married or in another type of relationship, donʼt leave ﬁnancial issues solely in the hands of your partner. Take responsibility for yourself and master the skills needed for effective money management.
In this era, more than ever before, you need to secure your ﬁnancial well-being. Social security is uncertain and the pension is nearly extinct. To live well today and assure your future, make your money work for you.
Assuring Your Financial Future
As you make your ﬁnancial plans, consider these factors:
• Women outlive men by approximately seven years
• On average, women are out of the workforce for 12 years during their years of employment
• Women typically earn 23 percent less money than men
Letʼs look at each of these factors in a bit more detail.
Longer Life: Women must factor longer life expectancy in planning for retirement. The World Bank states that the average Americanʼs life expectancy is 78 years. However, if you reach 65, it is likely you will live another 20 years, according to the Social Security Administration. Women outlive men by seven years and, each generation lives longer than the last due to more advanced medical care and better nutrition.
The Caregiver: Women are in and out of the workforce for family reasons to a greater degree than men. Raising children can lead to time off from work. Also, with the increasing longevity of their aging parents, many women serve as caregivers and leave their jobs or, at a minimum, take extended leaves. Time spent away from working can mean hundreds of thousands of dollars in lost earnings, promotions, raises and beneﬁts over the course of a womanʼs career. Of course, this time off also reduces the amount of money she can contribute to a retirement plan.
Earnings Are Lower: Although womenʼs income has increased 63 percent in the past 30 years, she earns on average 26.6 percent less than the average man, according to the consulting firm Aon Hewitt. This income disparity and pressing immediate needs may lead many women to make savings a lower priority.
Overcoming These Factors
What must you do to overcome the factors listed above? If you havenʼt already done so, take a more active role in retirement planning. It is never too late. Start now to help assure your ﬁnancial future.
Learn the Financial Basics
There are many sources from which you can learn the basics of investing, like books, classes or investment clubs.
Some actions to take are:
• Start saving now — 10 percent of your income is a good goal. If this is not possible, choose a realistic percentage and pay yourself ﬁrst. The power of compound interest works in your favor.
• Educate yourself about ﬁnance.
• Set goals and break them into manageable steps.
Create, Implement, Review and Revise Your Financial Plan
If you do not have a ﬁnancial plan, develop one.
You may choose to do the planning and investing yourself. If so, many of the points in this article apply. There is a wealth of ﬁnancial material and advice online and in books and magazines.
Many women feel there is too much information and feel overwhelmed. As the process can be daunting, you might consider hiring a ﬁnancial adviser. If you decide to take this step, do your homework. Research investment advisers, interview several using a prepared list of questions, and ask for references. This process should help you to make an informed decision.
When you invest with an adviser, talk about risks, fees, past performance, and how a speciﬁc investment ﬁts into the overall strategy of your ﬁnancial plan. Review your accounts monthly and meet with the adviser a minimum of once a year and whenever your life circumstances change.
An adviser can help you make a plan, implement it and help keep you on track. However, keep in mind that you must have basic ﬁnancial knowledge to assure that you receive what you need from an adviser. Play your part in making it a productive relationship.
Knowledgeable women are empowered women. Develop strategies to grow your ﬁnancial wealth and the result should be ﬁnancial comfort, no w and in retirement.