Female financial professionals describe the fiscal woes women typically shoulder and how they can be managed — or avoided altogether
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Despite more women running for political office, holding CEO titles and being the top income earners in American households today, many are no more confident understanding financial products and making smart fiscal decisions than they were a decade ago.
A survey of 1,407 women for Prudential’s biannual study, “Financial Experiences and Behaviors Among Women,” found that although many women feel more financially secure and confident about managing day-to-day finances and have clearly defined long-term goals, many are worried about financial security later on.
Here’s some friendly female advice to calm your concerns:
1. “I’m not sure where to start.”
For many women, it’s one thing to have money, but it’s another to manage it. The Prudential study found only 20 percent of women feel confident enough to make wise financial decisions and many aren’t sure where or what to start with.
Feelings of uncertainty can intensify if debt or other financial hardships are also part of the picture.
As Lauren Bowling, 28, paid off more than $8,000 in credit card debt, she learned firsthand what it feels like to be overwhelmed by her finances.
“It’s easy to feel like, ‘How do I live and make progress when there is no more room on the plate?'” said Bowling, who writes the L Bee and the Money Tree personal finance blog. “It’s hard to save for retirement, plan for buying a house and all those other things when debt is on the table.”
What to do: Ask for help — emotionally and logically.
Asking for help is one of the best steps women can take to feel more confident managing money, even if it’s not easy.
“Women may be reluctant to ask advice from men because they may fear a little bit of lecturing — even if it unintentionally comes across that way,” said Linda Grady, financial adviser with Strategic Financial Alliance. “Or they are afraid they won’t understand the information they receive or won’t ask the right questions.”
Approaching financial matters with support from others can be especially helpful as women tend to thrive in collaborative environments.
Women turn to each other for help with relationship advice, family advice and career advice, but they are less likely to turn to friends and say, ‘Let’s each make a money goal and support each other.’
|— Mary Gresham|
Founder, Atlanta Financial Psychology
“Women turn to each other for help with relationship advice, family advice and career advice, but they are less likely to turn to friends and say, ‘Let’s each make a money goal and support each other,'” said Mary Gresham, founder of the Atlanta Financial Psychology consulting firm.
If friends or family members can’t offer the support you need, go to a professional. A financial counselor can help you establish a plan to reach your goals, whether that’s saving for retirement, paying down debt or starting an investment portfolio.
“Financial advisers try to always put things in plain English and give people encouragement to get started,” Grady said. If you are unsure of where to find a professional, female-oriented education groups, Women’s Institute for Financial Education (WIFE.org) can connect you with a variety of counselors and other resources, such as free seminars to get your financial literacy journey started.
2. “I had a lot of debt and now I’m leery of credit.”
Even if you know better now, mismanaging credit once (or twice) can put a bad taste in your mouth for future use. You may not have spent it all frivolously, but that doesn’t make the credit card debt any less difficult to deal with.
Bowling was able to pay off her card debt after college and remained debt-free until she bought a house and used credit cards to cover unexpectedly high renovation costs. She is now credit debt-free again, but remains wary of using her plastic, even she if doesn’t hold balances long-term.
For self-employment budgeting purposes, “I’m using a credit card to pay for everything and then pay it off at the end of the month when I get paid,” Bowling said. “I know a lot of people manage their finances that way, but I’m very worried about that because I’ve held credit card debt before.”
What to do: Make a repayment plan and review credit 101s.
If your current income isn’t enough to make a dent in your debt and you’ve slashed your budget to the bone, look for ways to supplement your income instead. Whatever you do, find what works best for you and be patient.
“It’s always so easy to get into debt, but you always don’t think about how hard you have to work to get out of it,” Bowling said. “Everything takes one step at a time, including getting your finances under control.”
You may be hesitant to use credit again, but like it or not, it’s part of life. If you use credit judicially (i.e. pay bills on time and in full), you won’t have to cut them from your life.
The ability to save can be more difficult because of lower earnings. For that reason, the rising percentage of female-headed households often means there is little left over to set aside for savings, emergencies, buying a house, educating kids and, of course, saving for retirement.
|— Sara Rix|
“Sometimes people will say they will never get another card again after going through a rough patch,” said Candace Bahr, co-founder of the Women’s Institute for Financial Education (WIFE.org). “But it’s like driving a race car. If you know how to drive and you understand what you have it for, you will be OK.”
3. “I’m worried I won’t be able to carry my current lifestyle into retirement.”
Having enough money to retire comfortably ranked the highest concern, deemed “very important” by 93 percent of respondents among all the financial goals noted in Prudential’s survey. Many women also defined reaching that goal as “financial success.”
“It’s a really common concern that gets discussed over and over again,” Grady said. “It’s also a very valid concern, and I think it feeds into our desire for safety and security.”
For perspective, if you retire at age 65 with $1 million in savings and assets, you can take in about $40,000 each year until you are 95, according to Jason Whitby, senior financial adviser for Investor Solutions. Social Security will add a bit more to your income, but that amount will vary.
Not a high enough income for your liking? Then you’ll need to save more than $1 million — or work longer — before you retire.
Plus, since women typically live longer than men, they’ll need more money to retire with, but gender equity barriers can make accumulating those extra resources tough, said former AARP researcher Sara Rix.
“The ability to save can be more difficult because of lower earnings,” said Rix. “For that reason, the rising percentage of female-headed households often means there is little left over to set aside for savings, emergencies, buying a house, educating kids and, of course, saving for retirement. There is progress, but there are remaining barriers.”
What to do: Be realistic and save, save, save.
Regardless of your current financial situation, start planning for retirement now by seriously considering what you’re after.
“Picture yourself at different points in the future. Like, let’s say at 35 you want to have money for a house, or at 40 you want to have a good savings account,” Gresham said. “Whatever it is, it’s important to connect to your future self who has wants and needs and goals. If you can focus on taking care of ‘her,’ that’s a really good technique.”
It might be too late to really save, so you’ll need to create some sort of a career that you can do for many years into retirement.
|— Ginita Wall|
Once you’ve figured out what you want, it’s time to get focused.
“We would all love to maintain the lifestyle we had with a regular salary coming in, but in reality there are a lot of things we probably don’t need to spend quite as much on” once retired, Rix said.
Having enough money to travel or live wherever you’d like are just a couple retirement costs to consider. Expenses such as health care and insurance are also important and likely only to get more expensive, so the earlier you start considering the bigger picture, the better.
If you’re younger, focus on saving as much as you can. If you’re older and nearing your ideal retirement age but aren’t financially prepared, you’ll need to rethink your plans.
“It might be too late to really save, so you’ll need to create some sort of a career that you can do for many years into retirement,” said Ginita Wall, co-founder of WIFE.org. “Something that would make you excited to get out of bed and go to work so you can retire, but still create an income for yourself.”
4. “Will I be able to care for my aging parents?”
The need for substantial savings increases when women start paying for the health care and living expenses of others, such as aging parents.
Approximately 29 percent of adult children will provide care for an aging parent or in-law for a two-year period and even more adults — 57 percent — will provide care for more than 12 years, according to a 14-year-long Urban Institute study released in March 2015. Adults paying for aging care are also more likely suffer financially, especially if the care is long term. The cost of informal aging parent care — non-institutional care — accounted for anywhere from $34.3 to $89.8 billion in 2010.
Plus, since women are more likely to provide such care than men — 42 percent versus 31 percent — odds are many will find themselves in such a financial situation, even if they aren’t worried about it yet.
What to do: Make a long-term care plan now.
Even if your parents are years — maybe even decades — away from needing intensive, expensive care, if you address such issues within the family now, you can prevent financial and emotional headaches later.
“Have a discussion with siblings and talk to your parents, not just one or the other. Make the situation clear and know what’s going on. Don’t just sit there not talking and worrying. That won’t help anything,” says Bahr.
The conversations should be centered around helping aging parents understand medical costs in retirement and planning for them while they’re still between ages 55 and 65.
“While most expenses decrease in retirement, health care costs can end up being as much as $275,000 to $400,000 because one in three people will need some type of long-term care at some point in their retirement,” Grady said. “Medicare pays only a very small portion of long-term care expenses — it generally pays for skilled care situations only. Therefore, we should assist [our aging parents] in writing long-term care policies before they have significant mobility or cognitive issues that would cause an insurance company to decline coverage.”
Thankfully, a new breed of life and long-term policies allow families to cover a variety of care expenses while avoiding issues once associated with traditional policies.
“Years ago it used to be that certain insurance companies offered long-term care policies for individuals but they were expensive ‘use or lose’ policies and did not have death benefits attached to it,” Grady explained. “But now, hybrid permanent life insurance policies with long-term care and premiums that never increase — and annuities that allow payments to be made using qualified assets — are good choices to cover at least a portion of long-term care expenses.”
5. “What will I do if my husband and I divorce or I outlive him?”
This can be a special concern for married, nonworking women — the group that Prudential’s survey found least likely to feel on track with financial planning and saving.
For many, a loss of a husband or partner — for whatever reason — can be costly in more ways than one. Medical bills, legal expenses, debt and a decline or complete loss of income are just a handful of the financial hurdles a suddenly single woman could be faced with.
“Anything can happen and it often does and that can have a very significant impact on one’s standard of living,” Rix said. “You could wake up one day and find out you up are really up a creek if your husband is one day no longer around to handle things.”
What to do: Be prepared.
Assuming you’ll separate from your husband or he will pass away before you can be a pessimistic way to live, but being prepared to handle the “what ifs” could make such life-changing situations more manageable.
To start, spouses need to sit down and talk about all things money related, even though the conversations may not be easy, according to Rix.
Make sure to ask and get answers to questions such as, “Where is the money, where are the retirement funds invested, etc.,” she said.
Once you know the big picture, consider what you can do to further batten down your individual financial security. For example, if you are out of the workforce now, what would it take to re-enter later if need be? Can you take college courses or gain more hands-on experience now to help out later? Or, can you set up a spousal IRA that would allow you to save for retirement even if you don’t have an earned income?
Whatever you do, don’t wait until pre-emptive worries become reality.
“A lot of women wait until they are in a crisis to learn about money,” said Bahr. “When you do that you are learning under very difficult circumstances.”