What All Women Should Know About Personal Finance
By Michael Vaughn, CFP®
Things have drastically changed for women in the past few decades. Women now make up 50% of the workforce, (1) and they are also starting to play an increasingly important role in managing their household’s finances. (2) Gone are the days when husbands were the only ones in control of the family’s finances.
It’s good news that women are starting to take ownership of their finances, because they tend to face financial challenges not often faced by men and they usually spend fewer years in the workplace because of time spent raising children or taking care of elderly parents. Because women generally live about 6-8 years longer than men, (3) women have fewer years to save a higher percentage of their income, so they can fund their longer retirement.
Doesn’t seem fair, right?
That’s why women need to be even more informed about their financial opportunities and how to maximize what they have. Here are a few key principles all women should know about personal finance in order to succeed.
Have A Plan For Spending And Saving
To reach your financial goals, you need to track your spending. Even if you have a high net worth, you may be surprised at how much more you could save if you cut unnecessary purchases. It could potentially equate to thousands more by the time you retire.
While it’s estimated that 85% of women make the primary decisions about their family’s day-to-day finances, that number drops down to 58% when it comes to making decisions about longer-term retirement and investment planning. (4) Since having a long-term plan impacts short-term decisions and behaviors, women need to be involved in all aspects of a household’s finances.
If you’ve left budgeting or planning up to your spouse or partner until now, set aside one night a week to go over the details and get on the same page. It could save you a lot of heartache and frustration down the road should something happen to your spouse or your relationship.
Find More Ways To Save
Once your budget is solid, start looking for opportunities to save more money. There are typically two ways to do this: decrease spending or increase income. The most effective way is a combination of both.
Small everyday purchases add up to a large amount of money over time. Think about ways you can decrease spending without depriving yourself. Could you make your own coffee throughout the week instead of grabbing a cup on your way into the office? If you want to increase income, could you ask for a raise at your current job, rent out your spare bedroom, or start a side job?
Whatever you do, make sure you take advantage of your retirement plan. Whether it’s an employer-sponsored plan or a personal plan, contribute as much as you can—especially if you’re near retirement. You’ll thank yourself later.
Invest With Confidence
Investing is a great way for women to close the gender pay gap and save extra money for retirement. Did you know women typically have a 0.4% higher return on investments than men? (5) It’s true. But women are also more likely to keep their money in a low-risk savings account than in investments because their earned dollars are more precious to them. Breaking this cycle and having a strong investment portfolio gets you one step closer to reaching your financial goals—and living your dream life in retirement.
Given the right tools and education, women can succeed in reaching every financial goal they set for themselves. It may be overwhelming at first, but the more you know about investing and the more you do it, the easier it becomes.
At Pinnacle Family Advisors, we can help you build a financial plan and investment portfolio that works for you. Want to learn more? Schedule your complimentary introductory meeting by emailing me at [email protected], calling (417) 351-2942, or using my online calendar.
Michael Vaughn is a Certified Financial Planner™ (CFP®) and Vice President at Pinnacle Financial Advisors (PFA) with 20 years of industry experience. Before joining the PFA family, he served clients with investment management and retirement planning at The Mutual Fund Store for 14 years. Michael graduated from Missouri State University with a bachelor’s degree in business administration and management and earned his CFP® designation in 2004. He also served 20 years in the Missouri National Guard, retiring in 2007 as a Major. He currently volunteers on the board of directors for Good Dads and Fellowship of Christian Athletes. He and his family attend Hill City Church, where he serves as an elder. Michael is married to Lori and they have two daughters. To learn more about Michael, connect with him on LinkedIn.