7 Financial Planning Tips for Women
* This article was originally published on Jan. 23, 2019. It has been updated for 2021.
Ever heard of the “pink tax”? It’s a tactic some companies use to charge feminine-presenting individuals — and others who appreciate all things in rose-colored hues — a premium for “pink” versions of products or services. But razors, pens, and other items colored pink and labeled “made for women” do not apply here.
At Financial Planning Fort Collins, we know that you don’t have to be born female to be a woman. At the same time, we appreciate the fact that some aspects of financial planning are unique to women, whether born female or femme-presenting.
When it comes to your financial plan, our approach is specific and unique to your individual needs. But that doesn’t negate the fact that women do need to keep a few things in mind when planning their financial futures — and I’m not talking about “pink” financial plans. Let’s explore some of those factors.
Women tend to live long lives. The average life expectancy for people in the U.S. is 78.69 years — so their money needs to last. For example, based on that average life expectancy, a person planning to retire at 65 will need funds to last nearly 14 years — but that money needs to last a 65-year-old woman retiring today much longer.
According to the U.S. Social Security Administration, a woman turning age 65 today can expect to live, on average, until age 86.6. That’s a 21.6-year retirement — and I’ve only touched on averages. Early retirees, as well as centenarian outliers, could be looking at 40-plus-year or even longer retirements!
“Homemaker” and “caregiver” stereotypes for women are changing. Still, women may take time away from work to have children, raise their families, or be primary caregivers for family members or loved ones.
The pandemic made this especially clear as many women cut back their working hours to take on caregiving, teaching, and other roles outside of the workplace. While this demographic includes successful “highly educated, high-income women,” it was especially true for young women, who were hit particularly hard by the pandemic recession, causing them to fall behind economically.
And although the U.S. fertility rate is at a more than 40-year low, according to the national Family Caregiver Alliance, “An estimated 66% of caregivers are female.” This time away from work — whether planned or unplanned — can pose unique financial challenges for women.
Even in 2021, many women suffer from the gender pay gap — earning $0.82 for every $1 men earn — and, therefore, often end up with less money to save and less saved for retirement.
These facts alone make it clear that women have some special considerations to make when it comes to their financial planning, and these seven tips may help.
7 financial planning tips for women
1. Save. When considering the possibility of a longer lifespan giving way to an extended retirement — as well as the higher costs associated with both — the earlier you start saving, the better.
Starting to save at the beginning of your career tends to be the best time because of the potential for years of growth. That’s the beauty of compound interest! But no matter where you’re at in life, there’s no time like the present to save for the future. In fact, many retirement accounts and plans allow investors aged 50 and better to make extra “catch-up” contributions to their accounts. Put simply, chances are the more you save for retirement, the more you’ll have in retirement.
2. Plan. If you plan — or foresee a potential future need — to leave work to start or nurture your family, care for a loved one, practice self-care, travel, focus on a passion project, or for another reason, include it in your financial plan.
While it’s impossible to plan for the unknown, keep in mind that Social Security “calculates your average indexed monthly earnings during the 35 years in which you earned the most” when determining your benefit, if eligible. In addition, plan for the potential of that longer-than-average lifespan to better guide your savings goals.
3. Benefit and insure. If your employer offers benefits, take them! They can be great vehicles to start or add to retirement savings. This is especially true for employees who receive employer matches in their qualified retirement accounts, but it doesn’t end there.
Consider employer-offered insurance options as well, which can act as buffers to incurring out-of-pocket expenses. Think of the difference health insurance can make in the event of a medical emergency or what disability insurance could do for a person unable to work.
If your employer does not offer such perks, opportunities may exist for enrolling in an individual retirement arrangement (IRA) or purchasing individual insurance plans. By protecting yourself in advance, you’re also protecting your finances and, in turn, your future.
4. Control. We can’t control everything that happens in life — but we can prepare for the worst and hope for the best. With that in mind, focus on controlling financial aspects you can control and try not to waste precious time and energy on what you can’t.
5. Pass it on. Whether you inspire friends, colleagues, neighbors, family, or someone else with your savings skills, don’t stop there. After all, knowledge is best shared.
6. Share responsibilities. On a similar note, if you have a spouse or significant other, don’t take it upon yourself — or put it on your partner — to manage your finances. Instead, make financial planning something you do together. The unfortunate truth is that one spouse will likely outlive the other, and understanding joint finances can reduce burden on the living spouse when the other passes.
6 a. Don’t share responsibilities. Getting your financial house in order doesn’t have to be a team effort if your partner isn’t interested in proactively planning with you. You and your partner may be adjusting to managing parts of your finances together — like starting a joint checking account for shared expenses. This is an important first step to managing finances together but you may notice that your partner isn’t motivated to create a holistic financial plan yet.
That doesn’t mean you have to wait for them to become motivated. You can take on these responsibilities yourself, or work with your financial planners, so you can feel confident in your financial life. You may even see that your partner gains motivation to participate after seeing you become more confident in your financial plan.
7. Pay yourself first — and put yourself first. Some women tend to put others’ needs before their own, whether those others are dependents, friends, spouses, employers, or family members. Paying yourself first — including making saving a priority by funding those accounts first — can help you amplify your savings.
Plus, putting yourself first means you stay true to your financial plan, reaching toward the life goals you set. This doesn’t mean you can’t or shouldn’t help others — just that you come first, according to plan.
With so much to think of, it’s important to remember that you don’t have to be wealthy to create a financial plan. Everyone has to start somewhere, and we’re here to help! So, when life throws you a curveball or you’re ready to add a new goal to your financial planning app, let us know. We can help you determine your next steps and encourage you along the way to achieving that goal — or knocking that curveball out of the park.
While planning for the future is important for everyone, women have special considerations to make. And we know you’re looking to make the most of your financial future. So leverage your very own financial planning team, and we’ll do our best to help you avoid the challenges that could hold you back from getting and staying on track toward your goals.
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