Women have more financial advantages and inherent traits for savings and smart investing than they realize. These advantages can be shaped and practiced in a way that allows women to grow their financial confidence and competence.
The Corporate Advantage – Bring It Home
A recent study by Nordea, Scandinavia’s largest bank, found that investments in women-led firms with a female CEO or diverse board of directors (men and women) performed far better than a major global index of 11,000 companies over the past eight years. Another study by Credit Suisse had similar findings 1.
While not universal in all studies, there is evidence that women have a positive impact on corporate decision-making and that in many cases yield better performance and higher valuations of these companies.
If women can have a positive effect on corporate and investment decisions, cannot the qualities of patience, holistic/contextual thinking, less propensity for active trading, and a long-term outlook be applied in household financial matters and investment/retirement portfolios?
I think they can. Women should give themselves the opportunity to make real financial progress. Even if that progress is incremental, it will be worth the effort.
Money Becomes Simple If You Choose the Right Habits
The great thing about money is that positive small steps and habits yield financial clarity, financial breathing room, and eventually wealth and choice for you, your family, and your grandchildren.
Initially, write down your financial goals and expected result for the action you are about to take.
Might you make mistakes? Yes, and occasionally so does super-investor Warren Buffet. But as they say in the military, if something goes wrong, or you become disoriented and confused, create an “after action report.”
When you encounter a temporary setback, write down what happened and revisit your early planning and make an informed course correction. This can be a form of “financial journaling.” Here you document lessons learned (the good and the not-so-good), the questions you have, and where to seek answers.
The Wage Gap
The wage gap is narrowing, so claim your place and grow your income. In 2015, women earned 83 percent of what men earned, according to a Pew Research Center analysis of median hourly earnings of both full and part-time U.S. workers 2.
Women are growing in attainment of higher education and skills training and breaking down occupational and professional barriers. Open the doors that have been locked to prior generations and walk through open ones. For some, consider starting a small business—using the learnings from a salaried or part-time job where you will acquire skills and test your ideas while receiving a paycheck.
The Little Things That Seed Both Wealth and Well-being
Squeeze value out of each dollar, but prioritize your retirement contributions at least monthly. Extra seed money always can be captured from your tax refund or a portion of your raises or bonuses.
Pick at consumer debt and shrink the interest you pay to a bank or credit card company. Set a goal to turn that consumer debt interest into savable and investable capital for your future goals and dreams. Then instead of paying out interest, you will be paid a return.
Arm yourself with the Five Female Financial Facts:
1. Social Security
Put the time into the program and give yourself that eight percent raise. Social Security is based on earnings made in one’s lifetime. Women often leave the workforce for an average of twelve years to care for children or relatives. This reduces Social Security benefits upon retirement3. So, to make up for part of that gap, do not claim Social Security too early. Early retirement is at age sixty-two, but full retirement age is 66-67 and if you claim early, your monthly SSA retirement benefit is permanently discounted. Every year you delay claiming from age 62-70 that benefit check increases by eight percent. So, give yourself a raise and find bridging strategies to delay claiming your benefits. Remember, your SSA benefit is adjusted for inflation and will last your lifetime.
2. The Big Stretch — Longevity
Save and invest for the long run. On average, women live five to seven years longer than men (depending on when they were born). Your money has to stretch longer. Investing in stocks and equity mutual funds with low investment costs over the long run will help maintain and grow wealth over the years as well as help you keep up with inflation.
3. Capture Your Earnings Now for Tomorrow
Pay yourself through a retirement plan like 401(k) and/or IRA. Of the 62 million wage and salaried women (age 21-64) working in the United States, only 45 percent participate in a retirement plan 4.
4. Create Your Own Retirement Plan — A Roth IRA
Women are more likely to work in part-time jobs that do not qualify for a retirement plan. In 2009, 24 percent of employed women (age 20 and older) worked part time, compared to 11 percent of men5.
5. Divorce
A couple must have been married for ten years before an “ex” can claim spousal Social Security benefits, but most divorces happen within the first seven years.
Your Financial Advantage
So, take advantage of the financial advantages and inherent traits you already possess—gain knowledge and investment smarts. It takes practice, patience, and time. Regularly capture and invest some of the flow of money around you in your paychecks, small business, raises, bonuses, and tax refunds. Do this and do what nearly all millionaires and multimillionaires do: live below your means.
You will build the financial muscle and tonality that will take you to your next money goals. And as you stand up financially, your self-confidence grows knowing you are taking basic, positive steps while incrementally undoing past negative financial choices. As you learn and practice positive financial principles, your financial principal—your net worth (assets minus liabilities) will grow.
This becomes your financial advantage and a life example to those you love.
Brent Neiser, CFP®, is a Foundation Executive specializing in financial education, consumer trends, and public policy. Brent serves on a Federal Advisory Board on consumer protection and is chair of a city commission in Greenwood Village,
Copyright © 2017 Brent A. Neiser, CFP®
All Rights Reserved.
1 McGregor, Jena, “Why It Is Smart To Invest In Women-led Companies,” August 2, 2017 Washington Post https://www.washingtonpost.com/news on-leadership/wp/2017/08/02/why-its-smart-to-invest-in-women-led-companies/?utm_term=.2e331b316eea.
2 Brown, Anna and Patten, Eileen, “The Narrowing, but Persistent, Gender Gap in Pay,” Pew Research Center, April 3, 2017. Accessed at: http://www.pewresearch.org/fact-tank/2017/04/03/gender-pay-gap-facts/.
3 Munnell, Alicia H. and Zhivan, Natalia, “Earnings and Women’s Retirement Security,” working paper No. 2006-12, Center for Retirement Research, Boston College, Chestnut Hill, Mass., 2006.
4 U.S. Department of Labor, Employee Benefits Security Administration. Women and Retirement Savings. Accessed at: http://www.dol.gov/ebsa/publications/women.html in 2008.
5 U.S. Department of Commerce Economics and Statistics Administration and Executive Office of the President Office of Management and Budget, Women in America: Indicators of Social and Economic Well-Being,” March 2011. Accessed at: https://obamawhitehouse.archives.gov/sites/default/files/rss_viewer/Women_in_America.pdf.
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