by Ellen Blake
Some people still think of finances as a man’s world, but guess what? They are wrong. If you’re a woman who is not comfortable making important decisions about money, whether it’s because up until this point you’ve avoided doing so, or because your significant other controls the finances, now is the time to educate yourself. Considering women live about 7 years longer than men, the probability of your having to manage your own wealth at some point is high.
Are You a Women that is Comfortable Talking About Money?
Why is it that many women are not comfortable talking about money? Regardless of what stage of life you are in, starting your career, getting married, buying a home, raising kids, starting a business, approaching retirement or already retired, learning basic money management skills helps you to be more confident handling assets now or in later years. Understanding what you have in terms of family income, savings and expenses is important to help you feel more in control and optimistic about your financial future. The death of a spouse and divorce are life-changing situations and often unexpected; making sure your financial house is in order before tragedy strikes is critical to allow time to deal with the emotions without adding financial stress to the mix.
Women and Money: Strategies for Financial Health
Here are some essential strategies related to women and money to keep in mind for financial health.
Know Your Money
Many women are not able to accurately describe how they spend their money and may be overspending without realizing, particularly on household items. Keep a record of your spending for a period of time to help create a budget that works within your means.
Discuss Finances in Your Home
Communication with your significant other is critical. Financial issues and priorities should be discussed openly. The number one cause of discord among couples is money.
Communicate With Other Women
It is good for women to talk to other women about money. Find friends with whom you are comfortable discussing the unique challenges women face in a safe environment.
Prioritize Your Investments
Smart money managers understand active participation is necessary because priorities change over time depending on the phase of life. An important first step is to set up an emergency fund. The next step is to consider what major purchases you plan to make in the next few years. Once the emergency fund and money for short term needs are set aside, remaining funds can be earmarked for long term investing.
Accept a Little Risk
Women tend to be more averse to risk than men, which is both good and bad. Females tend to be more sensible and less likely to chase “Get Rich Quick” schemes. However, risk aversion may prevent women from taking “calculated” risks and promote overly conservative investment strategies. Investments by nature are somewhat risky, but hopefully increased confidence and skills will help best determine which risks make sense.
Work with a Knowledgeable and Experienced Professional
Find a financial advisor with whom you feel comfortable. Some important questions to ask when interviewing a financial advisor include:
- What licenses, credentials and other certifications do you have?
- How do you charge for your services and how much?
- Do you have references?
- What services does your firm provide?
- What types of clients do you specialize in?
- What is your investment philosophy?
- How tax efficient is your investment style?
The Bottom Line
When it comes to planning for the future, everyone needs a financial strategy, however it is even more critical for women who may find themselves alone at some point without education or skills in money management. Women have traditionally given control of financial decisions to their spouses, in part due to the time commitment and stress of taking primary responsibility for children and aging parents. We know women and men often don’t have the same relationship to money and believe it is time to level the playing field.
FAQs About Women and Money Management
Here are some frequently asked questions (FAQs) related to women and money management:
Why is financial literacy important for women?
Financial literacy is important for women because it empowers them to make informed financial decisions, achieve their goals, and secure their financial futures. It allows women to navigate life changes, invest wisely, and be financially independent.
Are women naturally less inclined towards finance and money matters?
No, financial capability is not determined by gender. Any perceived differences in interest or inclination are more likely due to societal and cultural influences rather than inherent qualities.
How can women overcome the discomfort of discussing money?
Women who are uncomfortable discussing money can overcome their discomfort by seeking education and resources on financial matters, joining supportive communities, and engaging in open conversations about money with friends, family, or financial advisors.
What are some common financial challenges that women face?
Common challenges include the gender pay gap, interrupted careers due to caregiving responsibilities, longer life expectancy leading to increased retirement costs, and limited representation in high-paying industries.
How can women achieve financial independence?
Financial independence can be achieved through budgeting, saving, investing, and pursuing opportunities for career advancement. Education, building a strong professional network, and seeking financial advice are also helpful.
What steps can women take to start investing?
Starting to invest involves understanding investment options, setting clear goals, and assessing risk tolerance. Women can begin with low-risk investments like index funds, educate themselves about investing principles, and consider seeking advice from financial experts.
How can women plan for retirement effectively?
Planning for retirement involves setting clear retirement goals, estimating future expenses, contributing to retirement accounts (like 401(k)s or IRAs), and regularly reviewing and adjusting the plan as circumstances change.
What resources are available for women to improve their financial literacy?
Various online resources, books, workshops, and financial education programs are available to help women improve their financial literacy. Local community centers, online courses, and financial institutions often offer educational resources.
How can women ensure their financial well-being during major life transitions?
During life transitions such as marriage, divorce, career changes, or starting a family, women should plan ahead, seek legal and financial advice if necessary, and ensure they have a support system in place.
Each individual’s financial situation is unique, so it’s important for women to tailor their financial strategies to their personal goals and circumstances. Consulting with financial professionals and seeking advice from trusted sources can provide valuable guidance along the way.
