Women and Finances

Women often seek financial advice on a wide variety of topics. The catalyst for seeking professional advice often starts with a divorce, the loss of a spouse, or the desire to take charge of or learn more about personal finances. In almost all of these cases, the client has decided it’s time to increase her financial literacy.

Each woman has a choice to make. She can either choose to proactively (voluntary) build her financial awareness now, or choose to wait until she is forced (involuntary) into this situation due to a divorce or loss of a spouse. Of course, this is not true of every woman. Many live out their lives without any financial crisis. On the other hand, consider this:

• The average divorce rate across the country is 50%; in Maricopa County it’s 60%.
• The average age of widowhood is 56. Women currently in their mid-50’s can expect, on average, to live another 27 years.
• Women tend to marry older men. This creates a possibility that they might be on their own even longer.
• According to Barbara Stanley, author of “Prince Charming Isn’t Coming: How Women Get Smart about Money,” 7 out of 10 women never retire because they can’t afford it.
• By the time today’s women reach age 65, about 45% will be single, according to research conducted by the Center for Retirement Research at Boston College, as reported by Janet Washburn of the Naples Sun Times. To reduce this risk in your life, proper planning is vital. The earlier you start planning, the better.
• Women are out of the workforce for many more years than men, due to raising children or taking care of elderly parents.
• Women, on average, earn about 75 to 80% of the salaries of men. This means they have less to save for retirement.
• Because women are out of the workforce longer, and earn less, their retirement benefits are less. They earn smaller Social Security retirement and disability benefits. Company retirement accounts and pensions are smaller.
• In our society, many women end up moving to a new location when the man finds a job in a new location. She may forfeit some of her own retirement benefits because she wasn’t employed at her company enough years or the benefits aren’t portable.
• Many women whose husbands receive a pension do not realize that when the husband passes away, the pension might be reduced or go away altogether.
• Finally, many women are raised to think that a man is going to secure their financial future for them. Women of the Baby Boomer generation were simply not guided toward obtaining financial literacy.

Why wait until a crisis is upon you? To build your financial literacy, you’ll need to work at it. Studies show that women do have advantages over men when it comes to being financially savvy:

• Men wait longer to seek professional advice. Women tend to identify the benefits of using professional advisors before a man does.
• Men tend to overestimate their financial abilities, whereas women do not. This allows women to more accurately gauge the need for professional guidance.
• Men tend to repeat mistakes more often than women.
• Men tend to take more risks than women. Sometimes this works to their advantage, other times it creates a situation where it takes more energy and time to get back to a break-even point, or they may never get back on track. However, being too conservative may impede reaching personal goals. Not having a plan and understanding what it takes to stay on track is often a key weakness. If greed dominates a person’s investment philosophy, he or she may be taking unnecessary risks. If your plan shows that you are on track for various goals, why take the extra risk?

An educated client, or one who is determined to acquire more education, becomes a wiser client. Some learn more quickly than others, but all who stick with it are on the path to greater understanding. This, by no means, puts professional advisors out of a job. But it does enrich the client/advisor relationship by allowing both the client and the advisor to focus on strengths, overcome weaknesses, and build trust. The client becomes more aware of the various financial issues and understands that some issues can be handled at home, while others require the attention of a professional. It’s no different than using a family doctor. There are health issues one can handle without going to a doctor; other issues require professional attention and various tests and analyses. In many cases there are issues that go unaddressed until a periodic “checkup” is done and trends are observed.