Did you know that recent research suggests women are more likely to be behind the eight ball when it comes to financial planning, as compared to their male counterparts? Historically speaking, women tend to live longer than men, and they might be out of the workforce for a period of time in their lives (typically to raise a family), so it is important that women are given the tools and strategies to take control of their financial planning. Here are some of the financial obstacles that women face and how to overcome them, so they have the ability to plan for a successful financial future.
Historically speaking, many women will take a deliberate break from the workforce for a period of time (typically to raise a family), which means that they stop saving for their own retirement. Many times Social Security and pension credits are not taken into consideration for the time a woman is out of the workforce, leading to a drop in the amount of money she can collect from those sources. Therefore, if women know they are stepping out of the workforce for an extended period of time, they might want to contribute additional money into their 401(k) or employer-sponsored plan while they are working, or do their best to sock away some extra savings while they have an income stream coming in, so they won’t have to play catch-up further down the road.
Financial Obstacle for Women #2 – On average, women only earn 79 cents for every dollar a man earns.
While times have certainly changed and women now have more opportunities than ever before, data shows that women are still not making the same amount of money that their male counterparts are. If a divorce or unexpected death happens, women then become the primary breadwinner, and if they were making less than their spouse, this could affect their future finances. While it’s not fair, women do need to be aware of this earnings disparity, and do what they can NOW to save for the future.
Financial Obstacle for Women #3 – Many women lack the confidence to invest.
As a group, women tend to hide their money at places like the bank or choose not to make decisions on money because A) they don’t want to be taken advantage of or B) they don’t want to take risk. The problem with this is that they end up losing the opportunity to earn a lot of money. Women need to find someone they trust, begin talking to people who are experts in this area, or feel compelled to do their own research, so they develop the confidence to invest smarter and put their money to work. Money simply doesn’t grow fast enough at the bank to be able to earn you enough for retirement.
So what are the solutions women should take to ensure they have a successful retirement plan in place?
- Save more
A good “rule of thumb” is to always try and save at least 10-15%. If your company offers a 401(K) match, then being able to save 10-15% is even easier. If you are a woman, and given the obstacles we discussed, you want to become disciplined in your career to save more and to save earlier. And whatever you do – avoid the temptation to stop saving!
- Invest their savings
Don’t simply leave your money in the bank – it needs to be invested in a place where it will grow (better than the inflation rate and typically in stocks).
- Prepare for the unexpected
While you never want to think about it, divorce, death, illness, and the loss of a job are all things that can affect your future financial outlook. While you have the ability, sock away as much money as you can, and know that the best kept plans might not turn out the way you expected.
While women have made great strides in our county, the data suggests that there is still opportunity for them to take control of their financial future. By saving more and saving earlier, learning about smart investment options, planning for the unexpected, and developing an achievable financial plan for the future, women can feel empowered to make the financial decisions that will lead to a happy and secure retirement.
