Women are often so busy with life that they often fail to prioritize their financial future.
How so? Women saved on average $3,146, while men saved $7,007, according to New York Life’s 2023 Wealth Watch survey.
In 2021, the U.S. Census Bureau reported that women working full-time, year-round were paid 84% of what men were paid. In other words, the typical woman working full-time would have needed to work an extra 10 weeks to make what the typical man working full-time made.
There are complex reasons women earn less than men and accumulate less in a retirement savings. Factors include caregiving for children and elderly parents, divorce, gender pay gaps and lack of financial literacy. Unfortunately, the outcome may result in less financial stability in the senior years. Additionally, since women tend to live longer than men, there’s a greater chance that they’ll outlive their savings.
When a family has children or elderly parents, the woman often steps back from her career to focus on her family’s needs. She may work fewer hours, reducing the amount contributed to her retirement account or savings. While she may remain focused and productive during this period, her employer may perceive that she lacks commitment, passing her over for promotions and raises.
Divorce occurs in almost half the marriages in the U.S. Financially, women typically feel greater impact, especially if they are older than 50. They may not be prepared to enter the workforce, feel overwhelmed with managing their monthly expenses, and need to address their underfunded retirement savings.
By sharing responsibility and being involved in the household finances while married, it will be easier to maintain your standard in the event of a divorce.
Be proactive
If you find yourself in a job in which the gender pay gap is apparent, meet with your manager to learn about the pay structure and compensation philosophy of the organization. Do not focus on what your colleagues earn; but ask how your salary was set and what objectives you can achieve to increase your compensation.
Women lag men in financial literacy, which impacts their ability to make sound financial decisions. Surround yourself with financially literate people. Discuss finances with others and learn from resources that are available to you. Review your statements and ask questions if you do not understand what you are learning. Never be afraid to be your own advocate.
To empower yourself, learn to be accountable for your finances and plan for your retirement. Begin by analyzing your monthly cash flow and living within a monthly budget. Budgeting will help you prioritize your spending, earmark money to save for the future, and plan for your short- and long-term goals. The objective of a budget is to ensure you are meeting your basic needs—and some wants—without spending more money than you receive as income.
Manage credit and debt
Credit is borrowing money to purchase goods and services with the promise that you will pay the money back by a specific date. When you are applying for credit, understand the terms, interest rate, and prepayment penalties.
When you apply for a credit card, a loan, or insurance, a file is created. This file is managed by credit reporting companies such as Experian, TransUnion, and Equifax. The information collected and compiled over your lifetime by the credit reporting agencies is called a credit report.
If your credit history is poor—perhaps because you are not making your loan payments on time or at all—it can take up to seven years for the data to be removed from your credit report. Some negative credit issues, such as bankruptcy, can last ten years on your credit report.
Lease versus buying
Before you lease a car, understand the difference between a lease and a purchase. Usually, a leased vehicle will usually have lower monthly payments than if you purchase a car with a loan.
Unfortunately, you will need to refinance the debt or pay off the outstanding balance if you want to keep the car when the contract has reached full term.
Additionally, you will be penalized if you terminate your lease early, exceed the allotted annual mileage (usually 12,000 miles per year), or damage the vehicle through excessive wear and tear.
Save for retirement
Even if the amount seems insignificant, plan on saving monthly in a retirement or savings account. Delaying saving for retirement often means that you will be working well into your later years.
There is not a simple solution if you are in this situation. If you are over fifty and have not established a retirement account or have one that is dangerously underfunded, take the time now to meet with a financial advisor to implement a retirement savings strategy. If you wait too long to fund your retirement, you may have ignited a fire that you will never be able to extinguish.
Pay attention to investments
The objective of a quarterly investment statement is to help you understand how your investments are allocated and if they are increasing or decreasing in value. It is a tool to help you manage and maintain your portfolio. Do you need to sell a mutual fund that has lost value? Will you be paying income tax on capital gains on a taxable account? Are your investments losing value when the stock market is up? Review your statements when you receive them. If something does not seem right, do not be afraid to do a bit of research or ask your advisor questions until you feel satisfied with the answer.
Insure yourself
Review your (and if you are married, your spouse’s) insurance policies with your insurance agent to determine if the coverage is sufficient. Do not assume that, just because you are paying for insurance, you are adequately insured.
Confirm with your insurance agent or financial adviser that your health, life, home, and auto insurance protect you and your assets.
Review tax returns
Filing tax returns and paying taxes is not anyone’s favorite task. Gathering data to submit to the tax preparer is a chore and waiting for the results can be laden with anxiety.
When your tax preparer calls and provides your update, make sure you spend time reviewing the data. What is your household income? Does the information on the tax returns look accurate? If reading your tax returns is completely foreign to you, ask the tax preparer to explain the information you are reviewing.
You may not prepare your state and federal tax returns, but you will sign the documents and are accountable for accurately reporting the information to the tax reporting agencies.
Optimize negotiating skills
Effective communication and negotiating skills are beneficial when seeking a raise, a promotion, and when buying a home or a new vehicle. However, women are often intimidated by the prospect of having to express their thoughts to others, especially about money. By practicing and fine tuning these skills, you will reap the benefits many times over your lifetime.
Being more engaged with and communicative about finances will not only increase your confidence, but it will also empower you to maintain control of your financial future, which is especially important as women continue to live longer than men.
Before committing to financial decisions that could negatively affect you in the long term, evaluate your current financial position.
Carefully think about how any decisions will affect your financial future. Place your needs first and learn to say no when it is in your best interest.
Remember that in retirement, in addition to relying on Social Security, most people will need other income sources to maintain their standard of living. Do not be afraid to make your financial future a priority. You will be glad that you did when you retire.
Teri Parker CFP® is a vice president for the Riverside office of CAPTRUST Financial Advisors and has practiced in the field of financial planning and investment management since 2000. Contact her at Teri.parker@captrust.com.