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Financial Planning is Different for Women – So Why Shouldn’t We Have a Plan That Fits Us?

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Financial Planning is Different for Women – So Why Shouldn’t We Have a Plan That Fits Us?

 

What are your financial goals – your short-term, mid-term and long-term financial goals? It’s important for everyone to take the time to create a financial plan and assess their short-term and long-term financial goals. It can put some of your worries to rest and help you spend your life living. Financial plans aren’t just about the future; they’re about having a plan so you can enjoy the life you are living now. 

When it comes to a financial plan, you may not know that women have more challenges to consider than men. So, how do we as women work to close those financial gaps?

First, let’s celebrate some of the financial stride women have made:

  • Women control about 51 percent, or $14 trillion, of U.S. personal wealth. Trillion. 
  • By 2020, women are expected to hold two-thirds of U.S. wealth. 
  • Women are the primary source of income in 40 percent of households.
  • Women make up 48 percent of the country’s millionaires.

So, how do we work on moving toward financial empowerment? First, we have to be aware of the financial challenges that exist specifically for women, and once we know them, we can plan for them.

  • Challenge #1: Women typically earn less than men.
  • Challenge #2: Women are the majority of caregivers.
  • Challenge #3: Women live longer. 

First, current data shows that women earn 83 cents for every dollar men earn. You might be thinking how you are paid only 83 percent of what men earn in your current job position. And yes, you should be thinking about that. But what you might not be thinking about is how earning only 83 percent of what you should be earning will affect you in the long term. Women earning less than men throughout their careers affects the amount they are able to save for retirement, the amount of money their employers match in savings, and the Social Security benefits they are eligible after retirement. The pay gap between men and women leaves women more economically insecure at a vulnerable time in their lives. 

The second challenge women face is that even though gender roles have evolved, we still tend to be the caregivers in the family. Women are the compassionate and nurturing type – and that’s a good thing because 66 percent of the time, a woman is the caregiver for a child or family member. Caregiving affects us financially, so we have to plan for it, which will hopefully ease some of the financial strain of being a primary caregiver.

In order to ease financial strain, we need to look at what gap we need to make up for in our retirement savings. Caregiving affects everyone’s financial situation differently. It could be reducing your job to part time to be home more with your kids until they go to kindergarten. Or you stay home full time to care for a child with special needs. Or maybe later in life you choose to be the caregiver for an elderly parent. During that time, maybe you work part time or don’t work at all to account for the caregiving hours you are putting in. 

When taking time off from your career to become a caregiver, you lose out on earning an income during those years. Not only that, but the money you had saved will slowly become depleted to pay for household necessities since you no longer have an income to cover those expenses. But we can plan for this. Once you plan for those gaps, you can comfortably make the choice to be a caregiver. 

Our third challenge as women comes in during retirement because women live longer than men. Living longer is great – it just means we have more years in retirement and more years we need to plan for financially. According to the CDC, women live five years longer than men. Because we have these extra years to be alive, women will need more money in retirement than men.

Here are some actionable steps you can to make up for those gaps

#1: Start a budget. 

Twenty percent (20%) of your income should go toward saving and investing. This should be money to save for retirement AND money to build an emergency fund. Aim for three to six months of living expenses in an emergency fund you can easily access. 

#2: Save for retirement now. 

You are never too young to get started saving for retirement – and you do not need a lot to get started. It is our responsibility to spread the word to the younger generation to start saving because we can see what a major difference it can make. 

#3: Ask for a raise at work. 

Women are less likely to ask for a raise at work. Create a document for your boss at your annual review to show your accomplishments for the year to show your worth. Ask for that raise. We need to close the pay gap, and we need to speak up. 

#4: Protect yourself. 

Consider disability income insurance to protect your paycheck if you were to become disabled. Also, consider having a plan for long term care.  We talked about caregiving for an elderly parent – consider taking that concern off of your family for when you get older. 

#5: Advocate for yourself. 

Whether you’re single or married, make sure your financial professional is using a woman’s longevity as the basis for the plan. Otherwise, the plan will come up short – because as we know, women live longer. 

#6: Talk to a financial professional.

Find someone you trust and who will tell you the truth. A financial professional can help you identify gaps and plan for them. 

Any Questions?  My team and I can help.  

Cassie Rotman is a CFP®, MBA with Northwestern Mutual and is passionate about women owning their financial futures. Interested in chatting more? email her at Cassie.rotman@nm.com

 

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