Women's Financial Planning: The Unique Challenges Women Face and How to Overcome Them | INVESTEDMOM
According to the American College of Financial Services, only 18% of women between the ages of 60 and 75 successfully passed a quiz regarding financial literacy and retirement. Men took the same quiz, and 35% passed it. Historically, women have depended on men to reach their financial goals and handle their financial assets. Fortunately, it doesn't have to remain this way, and women can feel empowered when they take control of their financial future.
Rather than relying on a man, women can achieve financial confidence and reach financial independence. With the appropriate tools and guidance from a financial advisor, such as Invested Mom, women can learn everything about finances, including investing and preparing for retirement. While investing is a task completed by men traditionally, women can learn about it and successfully grow their investment portfolio.
Unfortunately, financial planning for women is different and challenging for various reasons. Not only are there gender pay gaps, but relying on their male counterparts can leave women struggling to reach their financial goals. On top of that, many women take on additional responsibilities throughout their daily lives, including maintaining a home and raising children. To help you achieve a better financial future, we have gathered everything there is to know to help you reach your financial planning goals.
Challenges Women Face in Finance
Women experience varying financial challenges, from statistically making less money than their male counterparts to historically relying on their partner to take care of all of the finances. Let's explore these challenges in more detail.
Gender Pay Gap
According to the United States Census Bureau, educated women earn 74 cents for every dollar a man makes. Despite having the same level of education or experience, women struggle to attain the pay they deserve for completing a job. The gender pay gap has improved over the years, but even now, both men and women get paid differently. This negatively contributes to women reaching their financial independence. Rather than completing a successful financial planning process, women face the challenge of earning less than men, making it easier to contribute the same amount men do to their retirement accounts.
Relying On a Partner to Prepare for Retirement
Women tend to have a longer lifespan than men. For this reason, it isn't easy to rely on a man to reach the financial stability needed during retirement. Unfortunately, though, men make more money than women, and at times, women are left with no choice but to rely on their partner to create a financial plan. These challenges make it difficult for most women to participate in their retirement contributions.
When the unexpected happens, such as the death of their partners, women must determine whether there is enough money in their retirement savings to support them. They might need to fully understand their financial situation to create a financial plan instead of enjoying retirement or grieving the death of their loved one. Women can easily avoid this issue if they take control of their financial decisions and begin planning for retirement savings as soon as possible.
Responsibilities Outside of Work
Most women have other responsibilities outside of their work. From keeping the house clean to ensuring that children are cared for, life leaves women with little time to develop a financial plan. Other women have reached a point in their life where they are taking care of their aging parents. The personal situation that women face daily makes it difficult to start saving, especially when investment management and retirement plans intimidate them.
On top of having responsibilities outside of work, women also have professional goals they are trying to achieve. Whether they want equal benefits or are fighting to reduce the gender pay gap, women have responsibilities that they tackle daily, preventing them from reaching the financial stability they deserve.
Divorce
According to Merrill, A Bank of America Company, a divorce causes a women's household income to drop by 41%. Men, on the other hand, experience a drop of only 23%. Depending on every situation, women might have to consider getting a job and starting to save for retirement after the divorce. If a woman has financial literacy before a divorce, the financial burden becomes less heavy after such an unexpected event.
Avoiding Financial Responsibility
American women tend to rely on their partners and expect them to develop a financial plan, but this doesn't have to be the case for you. Rather than facing unexpected life challenges alone and without an emergency fund or an understanding of financial planning, women can reach their financial goals independently and prepare to combat any issues they may run into.
Without an investment strategy, women give up the opportunity to maximize their income. Budgeting for retirement becomes more accessible with a proper understanding of long-term goals and investments.
How To Overcome These Challenges
While there are plenty of challenges that women face as they plan for retirement, there are solutions and steps that they can take to overcome these challenges. There is something everyone can do as they take advantage of the financial opportunities in their lives: taking steps to earn a higher income or making changes in daily life to save money.
Research Your Income
As a working woman, you are likely not paid equally in the workforce. The first step to overcome this is to feel confident in your job abilities and advocate for yourself. Explain to your employer that you deserve fair pay and display confidence as you explain why your income is unfair.
Negotiating a raise is always a great strategy. You must first analyze your job and determine your workload to do it effectively. Find out exactly how much you contribute to the business and see if there is a way in which you can place your workload into money figures. Explain how much money you are making for the company and your skillset. Remember that you are an asset and entitled to fair compensation.
Employer Investment Accounts
Some employers offer investment accounts, such as a 401-K. Please take advantage of these investment accounts, as employers will usually match your contributions and make it easier to grow your retirement accounts. These investment accounts also reduce your taxable income, translating to free money directly into your savings account.
Start Investment Management
Whether saving for retirement through an employer or not, you can always open a retirement or investment account and grow your money without relying on anyone. Reach out to some of your best financial advisors to receive investment strategies that will maximize your returns. Whether you invest in the stock market or open a CD account, financial advisors help you stay on track with your financial planning goals.
Remember to invest in diversified portfolios to make the most of your investments. There are also plenty of options to choose from that have low fees and require minimal effort. Talk to your financial advisors for the best guidance on starting your investment account.
Follow a Monthly Budget
Following a monthly budget allows you to track your income and compare it to expenses accurately. Budgeting also helps you achieve your financial goals, enabling you to save as much money as possible. When you analyze your income and spending, you can determine what expenses you can cut back on and instead throw that money into investments.
Budgeting also allows you to identify and compare your fixed and variable expenses. Fixed expenses are bills that don't change every month, while variable expenses are continuously evolving. You want to analyze variable expenses to identify where you have a more significant opportunity to save additional money. One type of variable expense is eating out. A great way to make a positive change within your monthly expenses is to reduce or eliminate eating out and instead cook at home a few times a week. Budgeting can help you achieve your financial goals effectively by staying on track with your spending.
If you struggle with budgeting, you can always create a money diary to help you stay on top of your expenses. A money diary lets you track your daily expenses and income and can quickly help you understand where you spend the most. You can find money diary templates online or also find plenty of money diary apps that you can download to help you achieve your financial planning goals.
Create a Savings Account
Remember to create a savings account. You must prepare for the unexpected and have an emergency fund to rely on. Whether your car needs new tires or your house flooded, a savings account is critical, and you should allow yourself to reach for that money when you need it.
Saving money is difficult at first, but with the right strategies, anyone can develop a savings plan that they can effectively follow. The first step towards creating a savings account is to set a realistic goal. After analyzing your budget, determine how much you are comfortable saving each month. Once you successfully save that amount each month, you can increase the amount slightly as you watch your money grow. To help you achieve your savings goals, you can also set up automatic monthly transfers from your checking amount into your savings account.
You Don't Have To Plan Alone
Creating an investment portfolio or starting a financial plan can be completed with support from others. Many financial advisors are ready to help you take on this new stage in your life and help you reach the wealth management skills you desire. Give yourself the gift of financial independence and freedom as you achieve your investing goals with the help of financial advisors. You will reach wealth quicker than expected and gain valuable skills when you work with a financial advisor to help you achieve financial literacy.
Many female financial advisors understand the difficulties women face when planning financially, and they can help you get through the process. Find a certified financial planner to help you create a budget you can follow effectively, or get help from a financial advisor ready to provide you with the best investment strategy to grow all your assets.
No matter the challenge, Invested Mom is here for you and ready to help prepare you to tackle all the challenges you face surrounding your finances. Sign up for Invested Mom's new course to help you understand how to successfully plan your finances and get you on the right path to maximize your savings today.
Meet the Author:
Inge was born and raised in Cape Town, South Africa, and moved to Canada in 2010 looking for a better life. She always had an entrepreneurial spirit and started her first side hustle when she was 9 years old – selling fudge at school during lunch breaks.
It wasn’t until much later that she realized that saving isn’t enough to get ahead. She was always very interested in real estate, but saving up for a down payment was grueling and slow, and the demands of life kept getting in the way.
She started investing in herself and upgrading her skills while learning how to invest. She quickly became debt free and compounded her money at a staggering rate.
It wasn’t until she became a coach that she realized how significant an impact she can make in people’s lives by sharing her journey, learnings, and processes.
So here she is, advocating for everyone who is invested and wants to build their wealth, especially the mommas!