Investing can be an overwhelming process. Due to circumstances beyond their control, women face additional challenges and hurdles when it comes to growing their money. As a wealth planner, I have identified several areas of concern that may impact a woman’s financial health. Don’t worry, I’ve also included solutions and tips to help even the playing field and mitigate risks.
From time spent raising children, helping elderly parents or tending to sick family members, women assume the role of caregiver in the home 70% of the time. In fact, women on average spend 12 years out of the workforce caring for their families. The pandemic forced a disproportionate number of women to resign from their positions due to virtual schooling and lack of day care. Besides taking a physical and emotional toll, caregiving hits women financially as well. Years out of the work force can leave an otherwise robust bank or retirement account lagging. Fortunately, there are things women can do to counteract this lost time in the workforce:
- Understand the Coronavirus Aid, Relief, and Economic Security (CARES) act and Family Leave and Medical Act (FMLA) laws. These pieces of legislation may allow you to take some time to care for your children who are home from school or a parent that needs your help.
- Adjust your spending and spend intentionally. With less income possibly coming in, are there ways to cut back to make the offset?
- Regardless of your circumstances, continue to make saving a priority. Focus more on the act than the amount. Every small bit helps.
- Plan for time out of the work force by saving in an IRA account or setting money aside for a rainy day.
- Stay involved by keeping up your network of friends, colleagues and business organizations.
2. Women Still Earn Less
Despite strives in equality, the gender wage gap is still alive. In 2020, women on average earned only 82 cents on the dollar for performing the exact same job as their male counterparts. This is due to no attributable reason other than gender. The pay gap is even wider for women of color. In addition, women also tend to dominate certain careers that are often lower in salary, such as childcare workers and home health aides.
Every year, Vanguard releases a study on “How America Saves”. In 2020, they reported the average male has twice the retirement savings than the average female. It makes sense – the less women are earning, the less likely we are to save or to have wiggle room in the budget to save. Due to these pay gaps, women on average lose some $900,000 over a 40-year career, according to a recent estimate.
To compound this disparity, Women ask for raises as often as men but don’t get them. In one study, women who asked for a raise received one 15% of the time, while men were awarded raises 20% of the time.
To counteract this disproportionate gap:
- Women need to save a greater percentage of their income. Having money automatically taken out of your paycheck cuts back on the guess work.
- Negotiate! Negotiate! Negotiate! It’s important to know your worth and take your time doing research to ensure that you are being paid a fair wage for an employee with your qualifications.
- Encourage your place of employment to conduct a gender disparity study to examine biases that may be at your company.
3. Women Live longer
Having a longer life expectancy seems like a good problem to have … but it can put pressure on retirement savings. Women on average live five years longer than men, which mean they must plan for five additional years of retirement spending. I was astounded to learn 80% of women are single or widowed at the time of their death. How do you prepare for the increased costs, support and care as you age?
- Plan for it. Research the cost of care so you won’t be surprised in the future.
- Consider long-term care insurance. Get the coverage when you are younger and hopefully before you have any health issues.
- The lack of confidence can leave some women investing less aggressively. Arm yourself with the knowledge to invest boldly if necessary.
4. Control the controllables
While we can’t control the rising costs of products or record-breaking inflation, we can spend and save mindfully. To do so, I suggest you break your budget down using the 50/30/20 method as a guideline:
- 50% of your budget is devoted to your basic needs such as housing, groceries and utilities.
- 30% of your budget funds things you enjoy but could do without, such as trips to the nail salon and your Netflix account.
- 20% of your budget is dedicated to your savings, including paying down debt and building your nest egg.
Due to these headwinds, women have less margin of error when it comes to investing in their future. While all of this may seem overwhelming, don’t worry, it’s not all doom and gloom. With thoughtful planning and calculated changes – such as saving more to make up for any earnings shortfall, negotiating your salary and making sure you have the proper allocation in your portfolio – you can plan for the impact of these trends.
About the author:
As a wealth advisor for Buckingham Strategic Wealth, Katie takes pride in helping individuals navigate the challenges of balancing daily expenses with their savings goals. Seeing the impact that it has on their lives is what keeps her coming back for more. She finds joy in collaborating with her team to truly understand how she can help clients in any unique situation; the problems that keep them up at night and the goals that they have set for themselves. Thinking critically to help clients find the solutions to these complex issues is the part of the job that is most rewarding to her.
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