Six Ways Women Can Gain More Financial Security
These Money Moves Can Empower Women to Take Control of Their Financial FuturesKathy Longo, CFP®, CAP®, CDFA Tuesday, 19 April 2022
It’s no secret that women have come a long way in terms of gaining power and agency in society, and with that has come more financial security, too. What it means to be a woman now is a very different concept than what it meant to be a woman in the 1950s. And while this progress is definitely something we should celebrate, the updated concept of “the modern woman” comes with its own stifling definitions. Today’s women feel the pressure to juggle many different identities: the doting wife, the nurturing mother, the selfless caregiver, and the career woman.
In America, women are not only expected to meet demands from the past – maintaining the household and meeting their household responsibilities – but they are also expected to find professional success. With the immense pressure to perform in various areas, it’s no surprise that many women are finding themselves coming up short when it comes to their personal finances. Too often, women are taking a backseat approach to the financial matters that are directly impacting them - whether it’s because they’re busy and struggle to find the time, or they feel more comfortable leaving those choices to the men in their lives.
Regardless of the situation, it’s important for women to take charge of their finances and, in turn, their financial futures. Here are six money moves that can help women take the reins and gain more financial security.
1. Establish a rainy-day fund
When couples get married and begin saving for retirement together, they often overlook the fact that the wife is probably going to outlive her partner. If this happens and the savings are not sufficient to support the woman for her entire retirement, she may be forced to turn to her children, other family members, or friends for help.
In order to avoid this hardship, women should be putting money away toward their own retirement nest egg on a regular basis, in a tax-advantaged account if possible. If you’re a mother, this may be especially hard to do as it may be tempting to want to put your kids ahead of your own financial well-being. Or you might feel pressured to sacrifice your career for the betterment of your family. And while taking care of your family is important, it should not be at the cost of your own financial security.
The most prudent way to get a jump start on your savings is to begin saving when you’re young. The earlier you start investing, the more you can depend on the power of compounding to help you reach your financial goals, rather than be burdened with having to save more later in life. Additionally, when you’re young and free of big financial burdens such as homeownership or motherhood, you have a greater opportunity to save larger portions of your paycheck.
It’s also important to establish a rainy-day fund, also called an emergency fund. That way you’re able to cover the cost of anything unexpected without dipping into your savings. I recommend saving up to six months’ worth of expenses to have on hand in case of an emergency expense. Not only will a robust rainy-day fund give you peace of mind, but it will also protect any savings that you’ve accrued and keep you on track for financial security.
2. Be bold, take risks
Generally speaking, having more money to invest means having more opportunities for robust wealth accumulation. Due to the gender pay gap, women have a significant disadvantage from the outset. In addition, multiple studies also show that women tend to take fewer risks with their investments than men due to a lack of confidence in their abilities. While it may seem prudent to keep all your money in a simple savings account, doing so can be a major inhibitor when it comes to achieving true financial security. No matter how much you save, it won’t help as much as it would if you put those savings to work as investments. So, keep your rainy day fund in an easily-accessible savings account and put the rest of your money to work for you by investing it.
This may seem scary, and it might force you way out of your comfort zone, but there are ways to invest in risk-appropriate stocks that can help you grow your wealth without leaving too much out on the line. Talk to a professional advisor about your future goals and risk tolerance, then work with them to create an investment strategy that’s right for you.
3. Maintain a say in family finances
Inspired by old-fashioned understandings of a woman’s role at home, I still see too many women taking a hands-off approach when it comes to managing family finances. However, taking a back seat can lead to financial trouble for you later in life. Instead, try to look at family finances as a joint responsibility shared equally between you and your partner.
The best place to start is with a money conversation. Talking about money can be uncomfortable but establishing a safe space to have open and honest money conversations can be incredibly beneficial for the entire family. Talk with your partner about your future goals, dreams, and aspirations, and be sure to genuinely listen to theirs, too. Even if one of you is a stay-at-home parent and not bringing any income to the table, you should both have an equal say in financial decisions.
Set financial goals together and establish a plan that you both can be a part of to make those goals a reality. It may also be a good idea to plan regular check-ins to ensure that you’re both staying on the same page as life evolves.4.
4. Create a budget - and follow it
No matter who you are or where you are on your financial journey, one of the most crucial aspects of gaining financial security is establishing a budget and sticking to it. In the age of social media, the temptation to indulge is everywhere. However, expenses can add up quickly, and, before you know it, you can find yourself at the bottom of your bank account. While the occasional indulgence doesn’t hurt, and can in fact be good, you don’t want to compromise your long-term financial security.
Having a budget can help you hold yourself accountable and maintain control of your spending habits. Begin by establishing a savings goal and monthly expenses, and then plan your spending around the remaining balance. Be sure that your budget is realistic. Don’t cut yourself off from everything you enjoy or you’re less likely to stay true to your limits. Additionally, look for ways to cut spending costs without cutting out the things you like. If you love buying new clothes, look for fun and trendy thrift shops in your area. Or, if you like going out with friends for dinner, consider doing nights in which you invite everyone over and cook dinner together. Finding fun and creative ways to indulge, while also cutting costs, increases the likelihood that you stay within your means and stick to your budget.
5. Value yourself professionally
As stated previously, despite all the progress society has made, there’s still a significant pay gap between women and men in the workplace. This pay gap increases for women of color, and it grows alongside the level of education. Currently, non-college-educated white women are making 78 cents for every dollar a white man makes. However, while women with a bachelor’s degree typically earn double that of their co-workers with no college education, they’re only earning 74 cents on the dollar compared to their male counterparts. Latina women are paid 65 cents on the dollar, Black women are paid 62 cents on the dollar, and Native American women are paid just 60 cents for every dollar a white man makes. That’s a significant difference in income potential for women, and it has a serious impact on their ability to gain financial security.
While much of this income disparity can be attributed to the way society perceives women’s professional contributions or worth, some of the blame may lie on women, too. Women are less likely to value themselves adequately in terms of compensation, even those in high-power positions. They’re more reluctant to ask for a raise and more hesitant to hold firm when it comes to demanding what they think they’re worth. It’s important that you value yourself as an employee if you want to be valued by your employer.
When taking a job, be sure to research the average pay that others in your field and with similar qualifications receive for doing the same job. Take into consideration other employee benefits and location when coming up with your expected salary. If you’re already in a position that you like but feel that you’re not being fairly compensated, talk to your supervisor about a raise. Don’t wait for them to come to you. Make a strong case for yourself and negotiate wisely. Be sure to give weight to your work experience, your qualifications, and what others in equal positions to you are earning - including men. Don’t forget to remind your boss of your accomplishments and the value you bring to the table.
6. Remember that you don’t have to do it alone
Navigating the world of finances can be stressful, time-consuming, and complex. For those with a lot on their plates, it can seem nearly impossible to find the time or mental capacity to begin thinking about a financial future. Having experts in your corner that you trust, whether it’s a financially savvy friend or a professional financial advisor, can help ease the burden and guide you when the going gets tough.
If you would like more guidance on how to navigate the world of finances as a woman, check out the Flourish Financially with Kathy Longo podcast for multiple episodes with guidance on how to take control of your finances, your career, as well as how to set and maintain clear lines of communication around money with your family.
At Flourish Wealth Management, we pride ourselves on working with women to empower them with the tools they need to flourish financially. If you feel like you would benefit from talking with a professional at our firm, please reach out today.
About the Author
Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.