It’s not easy being a woman in today’s society (or in yesteryear’s society either, for that matter). To be more specific, though, women have a few more critical financial roadblocks than men, particularly when it comes to saving.
What are these roadblocks and how can women overcome them? Let’s explore.
Living Longer Than Their Male Spouses
Women partnered with men need to face a dismal truth: men don’t usually live as long as women. Data shows that women live about 4.4 years longer, on average, than men, in part because they’re just better about getting medical care (though bear in mind, this is a generalization).
To overcome this roadblock, women need to double down on their savings, including those reserved for retirement.
“As you flush out your long-term goals, do not forget to take all the ‘free’ matching retirement money your company [may] give you,” said Madeline Barconi, head of financial planning at Breakwater Capital Group. “Try to get to a point where you are saving 15% of your paycheck towards retirement. Save at least 5% of your take home (after tax) paycheck in an emergency fund and once you get to a comfortable place with your account balance, invest that 5%. While you are at it, try to max out your Roth IRA contributions each year.”
Having Children and Caregiving in General
Even if you have a male spouse or partner who is invested in the wellbeing of your kids, mothers tend to bear the brunt of the caregiving load. It’s really smart to plan ahead of having kids for this impactful expense, which could also, sadly, set you back in your career.
“If you are thinking of having a child, make sure you look into getting a disability policy so you do not fall into the category of women that earn $16,000 less because of motherhood,” Barconi said. “Individual disability policies can protect you from lost income while on maternity leave with short term disability policies, but most have a pregnancy clause that says you must hold the policy for two years until you can take advantage of these benefits. Know what your company benefits are by speaking with your HR team.”
Barconi added that she could write an entire article on how to plan for the cost of raising a child to be around $245,000 from birth until 18 (not including college).
“Do not hide from these figures, engage them, plan for them, feel good about your ability to embrace them head on,” Barconi said. “Partner with an advisor that proactively brings these topics up so you can be more present for the life you want to create.”
And it’s not only kids that women are caring for; it’s also their parents as they age. Whatever it is you’re taking time off to manage, be it kids or elderly folks, your income and savings are sure to suffer if you’re not prepared.
“If you take two four-year gaps in your career, your retirement savings can be reduced by up to 35%,” said Lauren O’Brien, senior wealth advisor at XML Financial Group. This is why it’s so important to be incredibly aggressive in your retirement savings strategy while in the workforce.
The Gender Wage Gap
There is still a substantial gender wage gap between the sexes, and it’s not due to close anytime soon. “On average, women earn about $0.83 on the dollar compared to their male counterparts,” O’Brien said.
Though it’s not women’s fault that they make less than men, they should take steps to achieve equal pay.
“To address this issue, women should familiarize themselves with labor laws, proactively engage in wage negotiations and consider seeking professional assistance from trade unions or lawyers when needed,” said Sigita Kotlere, CEO at Nectaro.
Of course, society in general really needs to make some serious upgrades here, in particular by teaching women as girls that they’re worth more than what most workplaces offer them.
“We all should, collectively, aim to increase self-confidence of girls from a young age and encourage them to seek leadership skills and to become independent, entrepreneurial and know their value to be able to ask for what they deserve,” Kotlere said.
Lower Financial Literacy
According to countless reports, studies and experts, women are often less in the know when it comes to financial literacy and investing practices. This is a serious roadblock to savings.
“Disparities in investment and financial literacy are common among women, resulting in lost chances for accumulating wealth,” said Kotlere. “Due to societal norms and stereotypes women are often discouraged and therefore [abstain] from seeking high-paying professions or engaging in financially risky ventures.”
Why do women usually face higher financial illiteracy rates than men? It can come down to a combination of factors, “such as cultural expectations, societal norms, family responsibilities and the lack of role models,” Kotlere said. “To minimize this, I always passionately encourage all women to proactively seek financial education and resources. Financial literacy allows women to plan for their future, secure long-term financial well-being and, if necessary, plan their debt. Overall, it reduces vulnerability to financial hardships and promotes independence.”
The less financially literate you are, the more vulnerable you are to decision paralysis: when you hold off on making a decision because you don’t know which is the right one. This is a costly roadblock.
“Not making a decision is a decision,” said Vanessa N. Martinez, CEO and founder of Em-Powered Network. “By doing nothing, you are still on a financial journey, even if you aren’t taking an active role in the decision-making process. The path is simply blind and aimless.
“As daunting as it is to start your financial planning journey, knowing that you have gotten started by simply investing in your 401(k) at work, listing out all your income and expenses, or writing down your wealth goals, will make you feel a lot better,” Martinez said. “It’s all about taking the first step, and there is no perfect first step. (In fact, it is literally impossible to be perfect at finance in general!) Take the first step that you feel makes sense for you. Now make sure you have written down what the next step will be, even if you don’t follow through right away.”
The first step to get past this roadblock is knowing where you stand right this minute with your financial situation. This calls for aggressive budgeting.
“Build out a budget and look for the 50/30/20 rule: do you spend 50% on your needs (rent, utilities, food, healthcare, etc.), 30% on wants (gym membership, cable, eating out, etc.), and 20% to save and invest?” Martinez said. “If you don’t, where can you make some adjustments? If you have achieved this rule or, better yet, surpassed it, now you can be proud of yourself and move on to setting wealth goals for yourself to achieve over time. Break down your ultimate goals into smaller goals each year or quarter so you can monitor the progress. Set calendar reminders to check in on your progress and don’t forget to celebrate the small wins! Treating yourself to appropriately-sized rewards for meeting small goals creates an opportunity for reflection and motivation to keep working towards the big picture.”
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