Financial planning for women can come with unique circumstances that need to be considered when establishing a financial plan. While goals are always personalized to each family or individual, women often find themselves as the caregiver of a family and that can have a big impact on their financial independence when compared to their male counterpart. While we always emphasize the importance of establishing and maintaining a financial plan, with women it can become essential that we factor in the various challenges they may face and how to best redirect those into opportunities.
Establish and maintain a monthly budget.
This is good practice for everyone, but for women who are statistically going to earn 20% less1 than their male counterpart for the same occupation but pay identical costs for consumer goods, need to be cognizant that they are not taking on bad debt by living outside of their means. When we think about good debt vs. bad debt, an example of bad debt is building up credit card debt with high interest rates. This can quickly become a tidal wave to your financial success. Establishing a budget will help you rethink the necessity of some purchases that we may want more than we need. And if you find yourself with too much bad debt already, it is never too late to start paying down that debt or refinance, if possible.
Don’t forget to save.
Women often find themselves out of the work force for a period or working a reduced schedule while focusing on their family. This means retirement plan contributions may be less, or even nonexistent. With women generally having a longer life span then men2, it is imperative that they continue to save even during those years to fund retirement. If your work schedule still allows you to be eligible for your company retirement plan, continue to contribute to the plan even if you must lower your contribution. Companies that offer a percentage match often will only provide that to active participants. While a company match contribution into your retirement plan may not increase your monthly paycheck, it is part of your overall compensation package and should be considered very valuable. If you are not eligible for a company retirement plan but you or your spouse has earned income, you can make an annual IRA contribution every year up to $6,000 if you are under age 50. An additional $1,000 is allowed as a catch-up provision for people over age 50. With women having to fund a longer retirement than men, the focus on savings can not be overlooked. It is important to enter retirement with the financial confidence that you can live your desired lifestyle without feeling financially crunched.
Protect yourself from the unexpected with insurance.
While insurance is a topic that is not pleasant to think about, the lack thereof can have a major impact on a family or individual if appropriate insurance is not in place. Consider how you would pay the bills if half or all of your household income was suddenly gone or greatly reduced. Often employers will provide a life insurance benefit that is 2x times your salary or a disability benefit that will pay you 60% of your current salary. Those benefits are often not enough for a family to maintain their quality of life. Also, if you are the caregiver of your family, don’t assume you don’t have insurance needs just because you are not working outside of the home. Raising a family is a full-time job, and it is important to consider how your family would be impacted if you were not able to do that job. Would you have to pay for child care, or would the remaining spouse have to reduce their work schedule to take care of their family? Evaluating your insurance needs and backfilling with the appropriate policies will give you peace of mind that you and your family is protected.
While women and men can have different financial planning needs for various reasons, what brings us all together is that we want to have a secure future and enjoy our life with our family and friends and not feel burdened by financial issues. Holistic financial planning should be done based on your individual or family’s financial goals and revisited at least on an annual basis to ensure you are on track to meet your goals and to understand how those goals may evolve over time.