Financial Planning for Women. Is it different?
No…and also yes.
The financial industry is still firmly dominated by male advisors, so as a female financial advisor, I’m often asked how financial planning for women is different.
How are the needs of my clients who are women different from their male counterparts?
The short answer is that the tools and work of creating and monitoring a financial plan are the same for all clients – but the experience of our women clients is likely to be vastly different.
Why is that, and how do we meet clients where they are in their financial journey?
Challenges Women Face in Financial Planning
The financial world has long been known as a male-dominated arena where women continually face significant challenges in their pursuit for success and financial equality.
Diverse obstacles such as the gender pay gap, underrepresentation in leadership roles, and the ever-present glass ceiling prevent many talented and driven women from achieving their full potential within the industry.
Additionally, societal expectations and ingrained biases often create roadblocks to advancement, with women regularly being expected to put family and caregiving responsibilities before professional growth.
Moreover, a lack of female mentorship and networking opportunities further exacerbates these issues, making it increasingly difficult for women to break into and flourish within the financial field. As society becomes more progressive and organizations evolve their practices, driving positive change for women in the financial world remains a crucial endeavor.
US Wage Gap
The wage gap and wealth gap between women and men has narrowed over time, but as recently as March 2022, women still make only 82 cents for a dollar earned by men overall.
This “uncontrolled” pay gap does not account for the type of work performed.
In good news, though, is that the “controlled” pay gap, where pay for the same job performed is compared, the gap has nearly disappeared. Women earn 99 cents for every dollar men earn in the same position (source: Society for Human Resource Management).
A look at the gendered wealth gap is more bleak for women.
Due to historical pay gaps, delayed career trajectories, and employment interruptions (for caring for children, or aging parents, for example), women enter retirement with 74% of the wealth that men have accumulated.
The issue of pay discrimination among women is one of their primary concerns.
Longer life expectancies
This gap is compounded by the fact that women tend to, on average, live longer than men, so their retirement savings would be stretched even thinner over a longer period of time.
Because they are likely to outlive their male counterparts, they are more likely to need to pay for care in their old age that they may have provided themselves for their partner. Women who were divorced may have an even larger disparity to deal with.
Socialized roles
While this is less common than in previous decades, many women are still unaccustomed to working with money and are less confident in setting and tackling more strategic goals for their wealth.
In a married couple, financial “work” often falls on traditional gender roles. So it can make sense to divvy up the household chores and have one person “in charge” of handling tasks like paying bills and filing taxes.
However, it is crucial for both partners to understand their entire financial picture AND to be understood by their financial advisor.
We cringe when we hear from women out in the world “oh well, our advisor is really my husband’s advisor, I don’t really have a relationship with them.”
We also pride ourselves on seeking input and collaboration from both partners in a couple. If we aren’t addressing their needs on the whole, then we haven’t done our job.
Strategies for Financial Independence
While some personal measures of the wealth gap indicate the gap is getting wider, other indications show the reverse trend.
As more women-owned businesses are established and grow in value, and more women take their seats in corporate boardrooms, the playing field seems to be more level between men and women for attaining wealth.
Cultural shifts and more intergenerational wealth being passed on to women than before also play a part in this apparent trend (Forbes, 2022).
Evaluate Your Spending and Create a Budget
Evaluating your spending and creating a budget can be crucial to achieving financial stability and success. Understanding where your money is going, discovering any bad spending habits, and prioritizing your financial goals is essential.
By taking the time to analyze your expenses, you will have the opportunity to make informed decisions on how to allocate your funds efficiently.
In addition, developing a realistic and manageable monthly budget will help you avoid debt and provide you with the peace of mind that comes from knowing you are in control of your financial future.
Igniting this change in your life may require discipline and determination, but the rewards of financial security and the freedom to pursue your dreams are undeniably worth the effort.
Start Saving, Establishing Emergency Funds, and Building Credit
The importance of financial stability cannot be overstressed in today’s world. Regardless of your current financial situation, taking proactive steps like starting to save, establishing an emergency fund, and building credit is crucial to secure your financial future.
Savings act as a safety net, allowing you to tackle unexpected expenses without drowning in debt.
On the other hand, emergency funds help safeguard your financial assets in the event of unforeseen life hardships like job loss or medical emergencies.
Moreover, a solid credit history not only enables you to easily obtain loans for significant milestones (such as buying a house or car) but also aids in negotiating lower interest rates on borrowed money.
A well-rounded financial plan encompassing savings, building an investment portfolio (including retirement accounts), establishing an emergency fund, and credit building will pave the way for a worry-free, stable, and rewarding financial journey.
Savers vs. Investors
Women often see themselves as savers but not investors.
More likely to perceive risk or lack of security, they can be more likely than men to put money away, but they are less likely to take on longer-term, bigger-picture investment strategy confidently.
Once our female clients better understand our goals and process as financial planners, they become more confident and at ease with playing an active role in their investment decisions.
Enroll in your employer’s retirement savings plan
Enrolling in your employer’s retirement savings plan is a smart move that can set you on the path to a comfortable future.
These retirement accounts are specifically designed to help you steadily accumulate wealth over the years so that you can enjoy the rewards of your hard work when you retire.
Not only do these retirement accounts offer tax advantages using pre tax dollars, but they also often include employer matching contributions, which essentially equates to free money being added to your retirement fund.
Moreover, participating in your employer’s retirement plan promotes financial discipline by encouraging automatic payroll deductions, allowing you to effortlessly allocate a portion of your income towards a nest egg.
Investing in your employer’s retirement savings plan reflects a mindset focused on long-term financial goals success and stability. Take steps towards enrolling in your employer’s retirement plan to begin paving the way to a bright and secure future.
How to Find a Financial Advisor
Women tend to interact with a financial advisor differently than men clients traditionally have.
They want less jargon, and they want their values and purpose to be part of the financial planning process. Women want their money to work for them, and sometimes that means they want to make an impact – whether that’s through their investment choices, retirement planning, or charitable giving.
Nothing could make us happier than seeing clients taking agency in their financial lives. We are here to help you meet the challenges.
As a fiduciary financial advisor, we aim to get all clients to their financial goals through our financial planning process in an optimized manner that speaks to their values. So bring us your dreams and fears, and we will provide clarity and peace of mind for the journey.