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Women and Money: Why It's Important to Take Control of Your Finances

Key Points
  • For women, financial independence isn't just a matter of strength; it's a matter of necessity.

  • Longevity plus wage and opportunity discrimination mean women need to work harder, save more and be in charge of their finances.

  • From retirement to investing to financial management, there are steps women—and everyone—can take to better control their financial lives.

Dear Readers,

March is a significant month for women. First, the entire month is declared Women's History Month, this year honoring women who fight against all forms of discrimination faced by women and girls. On top of that, Thursday, March 8, is designated International Women's Day. The 2018 focus is on increasing gender parity, with a rallying theme of #PressforProgress. Both themes represent weighty and extremely important issues that go hand-in-hand in continuing the progress women—and all of us—are making toward the goal of gender equality.   

As you can imagine, these themes go right to the heart of one of my personal passions—financial independence for women. I've long been a champion of women taking control of their finances as a means of being individually strong, as well as being strong partners and strong members of their communities. But it's more than a matter of strength. For women, financial independence is a matter of necessity.

Statistically we live longer than men so we need to take care of ourselves. Plus, we continue to be faced with pay discrimination. According to a 2016 report from the Bureau of Labor statistics, median weekly earnings for full-time salaried women are just 82 percent of what men earn. On top of that, we're often faced with discrimination in terms of advancement opportunities. All of which means we have to work harder, save more, and be our own advocates.

So I'd like to use this March focus on women to encourage women everywhere to take charge of their finances as an important step in negotiating a better situation for themselves. To me, financial independence is empowering. By taking charge of your finances, you're taking charge of your life. Here are some ideas on how to do just that.

1) Make retirement a top priority

Women are known to put others’ needs first, but when it comes to retirement, you have to think of yourself. Take charge of your own financial future by taking full advantage of a company retirement plan. Contribute at least up to the company match, more if possible. Don't have a company plan? Open an IRA. The point is to save as much as you can as soon as you can.

Start in your twenties and you can comfortably save about 10-15 percent of your annual salary (including any contributions from your employer) and you may not have to increase that percentage for the rest of your working years. Start later and that percentage goes up precipitously. For instance, if you wait until age 40, you'd have to sock away a minimum of 25 percent of your annual salary. That may sound like a lot, but realize that retirement can be long. Many financial planners recommend that you anticipate living until 90-plus in retirement planning calculations. You need to be prepared.

2) Don't just save—invest

Part of that preparation is learning to make the most of your money, and that means investing. Your first thought may be that you don't want to take the risk, and market ups and downs are definitely a reality. But being too cautious can also put you at a disadvantage.

Especially for something with a longer time horizon such as retirement, you ideally want a diversified portfolio that's positioned for growth. This means having a portion of your money invested in the stock market and accepting the associated risk. While that can sound daunting, it doesn't have to be because you don't have to go it completely alone.

3) Team up with an advisor

When it comes to investing and managing your money, having a support team can be a great confidence booster. Even if you're just starting out—and especially as your assets grow—consider working with an advisor. I think of a financial advisor sort of like 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. And working with an advisor 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.

Of course, how much you want to work with an advisor is up to you—a one-time consultation, periodic check-ins, or full-time asset management. Just make sure you understand how and how much your advisor is paid. Costs matter.

4) Have a financial plan

To really get on top of your finances, you may want to work with a Certified Financial Planner (CFP) professional to develop a comprehensive financial plan. A 2012 Schwab study on women's confidence in managing their finances indicated that women with a written financial plan were significantly more confident than women without one.

I'm a huge advocate of having a financial plan because it goes beyond just saving and investing, and helps you look 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—most importantly—how they all work together. Plus it gives you a roadmap to follow and a plan of action.

Press for progress

Financial independence isn't just about how much money you have. It's also about having the confidence to make decisions and standing up for yourself. The truth is that female or male, single or married, all of us need to be in control of our financial lives. But women especially need be encouraged to take greater charge. By doing so, we can more effectively be part of the progress, not only for ourselves but for future generations of women and men as we press for greater equality and opportunity for everyone.

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Important Disclosures

Investing involves risk, including possible loss of principal.

Diversification strategies do not ensure a profit and do not protect against losses in declining markets.

(0318-8H8K)

 

The information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager. 

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