5 Ways Women Can Improve Their Financial Futures

5 Ways Women Can Improve Their Financial Futures

February 13, 2024

An unprecedented change is taking place in the United States — women control more of this country’s wealth than ever. Today, women control a third of the household financial assets in this country — about $10 trillion. By 2030, women are expected to control much of the $30 trillion in financial assets that baby boomers will possess.

Traditionally, many women have been intimidated by finances, but that needs to change. More than ever, women need to be equipped with the knowledge and resources they need to take charge of their financial futures.

Despite making much progress in their financial well-being, women still continue to be at greater risk than men of not achieving a financially secure retirement.

Women in the United States who work year-round are paid 84 cents for every dollar that men are paid. Because of this wage gap, a woman loses more than $400,000 over the course of a 40-year career, compared to men. Equal Pay Day (#EqualPayDay), recognized on March 12, 2024, helps raise awareness about the continued wage gap women experience and its impact on women and their families.

That pay gap has persisted despite women’s increasing levels of education and representation in senior leadership positions. Women are also still more likely to take time out of the labor force or reduce the number of hours worked because of caretaking responsibilities, often referred to as the “motherhood penalty.” The result is a continued wealth discrepancy, which is especially difficult to manage for women nearing retirement.

In addition to the wage gap, there is also a confidence gap among women when it comes to their finances. According to a 2023 study from Northwestern Mutual, 43 percent of American women feel financially secure (compared to 59 percent of men), and 44 percent of women think they will be financially prepared for retirement (compared to 61 percent of men).

We are committed to guiding women toward financial strength and confidence. Here are five ways women can take charge of their financial futures and overcome these disparities.

1. Work with a financial advisor

One of the best ways for anyone, including women, to take charge of their financial future is to work with a financial advisor. A recent LIMRA study found that 40 percent of women who worked with a financial professional felt very prepared for retirement, compared with just 27 percent of women who did not work with an advisor.

The study revealed that women who worked with a financial professional were more than twice as likely to have a formal written retirement plan; 25 percent of them had a plan, versus just 10 percent of women who did not have a financial advisor. Also, 53 percent of women with an advisor had calculated the amount of assets and investments they would have available to spend in retirement, while that applied to only 44 percent of women who did not have an advisor.

There are several reasons why working with a financial advisor can benefit you. First, when you work with a financial advisor, you are increasing your financial literacy. Not only are you learning about wise financial strategies in general; you’re learning which of those strategies are appropriate for your unique situation, and why.

As you and your advisor build a strong working relationship built on mutual trust, you will feel comfortable asking questions and learning how various actions you take can affect your overall financial situation. Second, once your financial advisor develops your customized financial plan based on your unique needs and situation, you will have a road map to follow into the future — to and through retirement. As you navigate life transitions, your advisor will adjust your plan as needed. And as tax laws and other regulations change, your advisor will keep you informed about how those changes might affect you.

2. Increase your financial literacy on your own

You can empower yourself by learning more about financial management and investment on your own. There are numerous financial tools and resources available online, including budgeting apps, investment programs and podcasts, and articles and videos.

You can also join a women’s investing group to get hands-on experience with investing while learning from women who have been doing it a while. In addition, many community colleges, community organizations and even churches offer courses on financial management.

3. Set financial goals

Once you begin working with a financial advisor, he or she will work with you on prioritizing your financial goals. Yet even before you meet with your advisor, you can start figuring out which financial goals are most important for you right now. Maybe you need to pay off some high-interest credit cards or increase your 401(k) contribution with your employer.

As a first step, write down three financial goals you want to accomplish, such as purchasing a home, starting a business or funding a child’s college education. Set timelines for when you want to accomplish each one. For longer-term goals, set interim goals along the way to keep yourself on track. Also estimate how much each of your goals is likely to cost.

4. Know where you stand

Many people don’t have a solid grasp on how much money they spend and what they’re spending money on. Finding out where you stand is an essential starting point in gaining control of your finances.

To figure out where you stand, go through your bank and credit card statements, and tally up how much money you’re spending in categories like rent/mortgage, utilities, home repairs and maintenance, groceries, eating out, clothing, vehicle expenses, professional expenses and so on. Once you’ve added up several months’ worth of expenses, take a close look at each category. Where can you cut out some spending to free up money for savings?

That’s the essence of a budget, and budgeting can help you get to your goals faster. Budgeting is the foundation of financial stability. The word “budget” gets a bad rap because it implies scarcity or denying yourself things you enjoy. Yes, the goal is to see where you could possibly cut back, but again, it’s a matter of prioritizing what’s most important to you and your family members.

Once you have specific financial goals in mind, budgeting can guide you in saving for them. For example, if you and your family want to take a really special trip in six months, and you anticipate that it will cost $4,000, start saving now. You’ll need to save about $667 per month to have $4,000 in four months. Look at your expenditures, and figure out where you can cut out some spending. Involve everyone in your family, and share the responsibility. It will be a great exercise in getting everyone on the same page and involved in the family’s financial goals.

5. Diversify your portfolio

Diversifying the investments in your portfolio is essential to minimize the risk of loss. This means allocating your funds in various investment products, such as stocks, bonds, mutual funds and exchange-traded funds. Diversification spreads your investments, and therefore your risk, out so you’re not overexposed to a single market or sector. Your advisor will guide you in creating a balanced portfolio that aligns with your investment goals, risk tolerance and investment horizon (the amount of time before you plan to retire).

________

We encourage women, regardless of their marital status, to develop a strong working relationship with a financial advisory team. Working together, we will design a customized financial plan that is appropriate for your unique situation, needs, concerns, dreams and vision for the future.

 

Any opinions are those of the author and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. No investment strategy can guarantee your objectives will be met. Past performance is no guarantee of future results. Prior to making an investment decision, please consult with your financial advisor about your individual situation.