“When I look at my savings account, I don’t see dollars and cents, I see freedom.”
Independence, self-determination, self-rule, autonomy...it’s the freedom your hard earned money gives you but it can disappear as fast as you earn it. Here’s why:
Life Span:
We’re living longer than men (on average 5+ years longer). New research indicates that by age 85, women will outnumber men 2 to 1. As a result we will be on our own and will have to endure higher health and retirement costs.
Going Through a Transition (Divorce, Loss of Spouse):
Divorce compels women to take more active role in managing the finances for their family. Close to 60% of divorcees and widows wish they were more involved in their financial decisions with 56% discovering hidden debt and/or inadequate savings.
Employment:
According to a recent report issued by Merrill Lynch and Age Wave, the existing wage gap, and work interruptions resulting from family care affect a woman’s potential earnings over a lifetime. We will spend 44% of our lives out of the workforce in comparison to 22% of men. Even when we return to work, we are in catch up mode because of missed promotions and opportunities.
Confidence:
- We lack the confidence to take risks on investing. Recent surveys have found we are comfortable with budgeting and paying bills, however, when it comes to more complex financial decisions our fear of losing money and a general lack of knowledge are core reasons for not taking more control.
As much as this may sound like a picture of doom, these are the facts and this is our reality. Regardless of your marital status or age, the sooner you take control of our finances the better off you will be. Here’s how to get started:
1. Educate yourself.
You can’t get ahead if you don’t understand the basics. There are free, easy ways to learn how to make good investment decisions. These sites have great courses taught through well-known universities: edX.com, Coursera, and Udemy.
2. Save, save, save.
You should assume that you’re going to live a long life! Financial planners use 90+ years of age in their calculations so sock away as much as you can now. Take advantage of your employer’s 401K and Health Savings Account plans. A little can go a long way over a period of time. A general guideline for saving a portion of your annual salary is about 10-15% in your 20/30’s and at least 25% in your 40’s.
3. Invest, invest, and invest.
In order to build your wealth over time, you have to invest. Saving money shouldn’t be your only strategy as inflation can diminish your savings over time. Think for the long game. Buying and selling stocks might give you a short-term gain, but it’s the waiting over time that builds your wealth. Women tend to be cautious investors and have low risk appetites that can turn into a disadvantage. Taking a healthy level of risk can work out well when coupled with a diversified portfolio that is positioned for growth.
4. Don’t shy away from using a financial advisor.
You don’t have to have tons of money to talk to one. Working with an advisor will help establish a game plan that can be adjusted as you earn more and your priorities change. You are not wed to them if you don’t wish to be as there are various options on how you can work together. Do your homework and determine what will suit your needs the best.
A good advisor will have excellent listening skills, and be able to ask the right questions to understand your needs and financial objectives. Good chemistry & communication skills along with confidence in their technical prowess are key. And to alleviate the angst of hunting for the right person, don’t forget to ask for referrals from trusted friends and colleagues.
5. Create your financial roadmap.
Establishing your yellow brick road to financial freedom should be a no brainer. Creating a financial plan that reflects your goals and establishes targets and milestones will give you greater comfort and importantly greater confidence in proactively managing your affairs.
Go ahead and achieve the financial freedom you’ve earned and deserve!