Leisl L. Cording, CFP®
Senior Vice President & Financial Advisor
Women face particular challenges when it comes to financial planning, investments and saving for the future. Lesser earning power thanks to the gender pay gap, less tendency to take charge and take risks in financial investments, a greater tendency to leave the workforce to care for children and ill or aging family members all combine to reduce the amount of wealth that women amass over a lifetime as compared to their male counterparts.
In fact, a recent survey by The WealthiHer Network showed that, on average, a 60-year-old woman has just one-third the retirement savings of a man the same age. That’s especially troublesome considering that women tend to live longer than men, making their needs for retirement savings even greater.
The good news is, most of the factors that will affect your financial future are well within your control. Here’s some key financial advice to help women (and anyone, really) to make the most of their finances at every age.
In Your 20’s – Set the Foundation for Your Future
- Build financial knowledge and the confidence to use it. One of the biggest challenges that women face when it comes to finances is a lack of confidence in taking charge of their long-term financial planning. Starting off on the right foot by building basic financial knowledge and putting themselves in the driver’s seat from day one can make a huge difference in ensuring they can make the most of all the future financial decisions to come.
- Work hard and have a plan. Most of us have the most freedom to do as we please that we’ll have in our entire lives during our twenties, before the responsibilities of home and family begin to encroach on our time. This is particularly true for women, who still take on a greater share of child rearing and household chores than their male counterparts. So use this time wisely – work hard to build your income as well as your career opportunities. And take the time now to think seriously about your major goals for the future. Write them down, create a timeline for yourself, and get clear about what it will take to get there. Then, execute on that plan.
- Live below your means so you can pay down debt and build up savings – while still building credit by using it wisely. Use the income from all that hard work mentioned above to pay off debt like student loans as soon as possible. Don’t run up credit card debt, but do open credit accounts and use them wisely, paying charges off quickly and on time so that you can build up the healthy credit score needed for future large purchases, like your first home. At the same time, contribute at least 10% of pre-tax income to a retirement account. If your employer offers a matching contribution, be sure to contribute enough to maximize that match.
- Build an emergency fund so that you can weather the inevitable rough seas of life without getting blown off course from your long-term goals. Typically that means having between 3-6 months of spending saved in an easily accessible savings account should you need it.
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In Your 30’s – Build Toward Your Goals
A lot happens in our thirties – your career will begin to build steam, you may get married and you might also have children. In the midst of all these large life events it’s important to continue with all the habits put into place in your twenties, while adding in these other important steps to the mix:
- Continue to save at least 10% of your income for retirement, making sure to increase your contribution as your earnings increase. And, keep on stashing cash in your emergency fund.
- If you get married, ensure an equal partnership in managing finances by maintaining good communication about your long-term goals and ongoing involvement in all major financial decisions.
- If you have children, start a college fund for them. Many people wonder if it’s worth saving for college – it is, and you will be glad you did when the time comes (often faster than you could have imagined) for your “little one” to leave the nest and start their own lives off on strong footing. (And hopefully without any parental loans required.)
- Create a living will. It may feel odd or uncomfortable to think about creating a will while you’re still so young, but it’s a necessity once you begin to amass assets and start a family.
- Meet with a financial advisor to ensure you’re making the optimal financial choices for your current situation and future goals. Those that have a written financial plan, tend to be more likely to execute on financial strategies to achieve their financial goals.
In Your 40’s – Stay the Course (And Course-Correct When Necessary)
- Continue to stay focused on living within – if not below – your means. Earnings often increase during your forties and it’s easy to let that extra income go toward a few too many splurges that, in the long run, could put quite a dent in your ability to build wealth. Stay focused on your long-term goals and remain committed to maximizing savings and eliminating debt.
- Continue to save for your children’s college education, and also consider the impact of potentially having to care for aging parents - but don’t put saving for your own retirement on the backburner. For women in their forties, the role of caregiver is often intense, as they continue to raise their children while also sometimes finding themselves providing care for aging parents.
- Get comfortable with calculated risk and partner with a financial advisor to optimize and accelerate your ability to build wealth during your prime earning years. Women tend to be more cautious in their investments, which is a good thing overall. But avoiding any of the risk that comes along with the types of investments that bring the highest yield could result in seriously stunted growth in wealth.
In Your 50’s and Beyond – Formulate and Execute an Exit Strategy and Enjoy The Fruits of Your Labors
This is when all the hard work, careful planning and strategic investments of the last few decades begin to pay off. It’s also the time when a strong relationship with a financial planner is most essential. He or she will help you to:
- Evaluate whether your goals for retirement have changed, and whether your current financial strategy will still be sufficient for you to meet them.
- Adjust your investment allocations to decrease risk and preserve wealth for retirement.
- Form your exit strategy from work or a succession plan for your business, creating a timeline for when you can retire based on your current financial situation and how long your current retirement savings would last you.
- Consider downsizing your home to reduce resources and expenses required for upkeep.
- Review your will and update as necessary based on any changes in your personal life or financial situation to ensure that your estate is passed on to your loved ones as you would like.
As I mentioned earlier, there are many challenges women face when it comes to finances, however taking these steps throughout your life, can have a profound impact on the wealth you can build. This will help you work towards achieving your financial goals so you can live fearlessly. At Weiss, Hale and Zahansky, we want everyone to do just that!
Authored by Vice President, Associate Financial Advisor Leisl L. Cording, CFP®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259, 860-928-2341. http://www.whzwealth.com. © 2021 Commonwealth Financial Network®