Women: How and Why to Take Charge of Your Finances
Ladies, I’m going to be blunt — the statistics about how we handle our finances are depressing.
A USA Today article from August 2012 notes that, “Many studies in the last decade have shown that women consistently feel less confident than men in their understanding of financial products, their ability to make financial decisions and their perception of their current economic standing.”
I’m not trying to peddle some “This is how women just are!” bunk here. I firmly believe that men and women are equal, and women have the tools and power to be fully in control of our finances. But the really depressing thing is that research shows that, all too often, we aren’t.
There isn’t just one reason why women aren’t as financially in-charge as they should or could be, but several experts point to women’s traditional role, where the husband was typically the breadwinner and in charge of the family finances. Even now, women typically gravitate more towards penny-pinching than investment. Again, it makes sense if you’re looking at traditional roles — housewives were tasked with stretching grocery dollars, keeping clothing in good repair, and so on. But when I read that, it shocked me to realize how much that resonated with my own life. Even as a financially savvy and independent woman, I have to admit that I know more about stretching the money and things I have than making investments.
Why should we be better with our finances? Well, partially for the same reasons that any human should be financially savvy — to be confident, secure, and independent. But, unfortunately, women also have some additional concerns — for example, we generally live longer than men and make less, which leaves us with less money set aside for retirement. And living longer also means that we’ll likely need to make decisions about financial products like long-term care insurance — for ourselves and for others. According to an article from the Women’s Institute for Financial Education, “Because women live longer than men, they require lengthier care as they age, and because women often assume responsibility for their family’s health and welfare, the task of caring for elderly parents, an ill spouse, or disabled brothers and sisters usually falls to us.”
Whether you’re single or with a partner, better understanding your financial picture can save and make you money, put you in a better situation for retirement, and help you protect yourself and your family in case of an unexpected emergency. (See also: Financial Educational Resources for Women)
If you feel like you have gaps in your financial knowledge, here’s what to do.
Make a Budget
If you don’t already use a budget, make one now. A budget is one of the most basic and powerful financial tools you can have — not only does it help keep your spending down, but it also helps you understand where your money is currently going, and where it could go. Having a budget is sort of like that old adage about how you need to love yourself before you can love someone else — you need to understand where your money is going on a day-to-day basis before you think about investing it elsewhere.
Forget What You’re “Not Good” At
Before you start diving into financial education, you need to internalize this: You can do it. And you can be great at it.
One reoccurring theme in the research about women and money is the sense that many women think they just aren’t good with money, numbers, or math — especially on the investment side. But if you’re ignoring your finances just because you think you aren’t good at it, you’re both hurting your financial health and selling yourself short. At any age, humans have an incredible ability to grow, adapt, and learn — plus doing things you’re bad at has benefits beyond just learning new information, such as actually making you smarter.
It’s also interesting to note that even though studies show that women often know less about investing than men, research also suggests that when women do invest, they make better investment decisions, partially because they’re more in touch with their emotions and less likely to take huge risks.
Now that you have a picture of your day-to-day finances and a positive attitude, it’s time to learn.
I suggest making a list of all of your financial accounts and obligations — loans, retirement accounts, bank accounts, and so on, as well as ones that you could have, but don’t yet (say, for example, if you’re interested in opening a money market account, but haven’t yet). Put a star next to any you feel like you don’t fully understand, and start researching.
Researching online is great, but one issue that the USA Today article points out is that the financial services industry “still overwhelmingly caters to men in the way it presents and discusses information and products,” and that women tend to shy away from jargon and prefer a personal approach. If you feel like you don’t understand something you’re reading, don’t be afraid to seek help — whether it’s from your partner, a friend, or a certified financial planner.
Here are some resources to get you started:
- A Beginner’s Guide to Frugal Living
- A Guide to Online Brokers for Investing Newbies
- 7 Great Investments for First-Timers
- Choosing a Retirement Account: What’s Best for You
- Women’s Money Week
Make Sure Your Financial Education Is Comprehensive
I mentioned before how much it resonated with me to see that women are often dollar-stretchers, but not investors. Just because you practice good financial habits in one area doesn’t mean that your knowledge is comprehensive. Examine your entire financial life, and make sure you aren’t ignoring any areas. Consider learning more about:
- Retirement accounts (401(k)s, IRAs, Roth IRAs, pensions, etc.)
- Investments (index funds, annuities, bonds, etc)
- Insurance (health, life, long-term care, homeowners, car, etc.)
- Loans (student loans, mortgage, credit cards, etc.)
- Frugal living (making smart purchases, examining needs vs wants, reusing and making do instead of buying new)
Focus on Goals
In this piece on Time’s website (originally published in Real Simple), writer Geraldine Sealey notes that women work better with specific goals than with numbers. Her suggestion? Instead of simply trying to amass more wealth, “Make your financial goals as detailed as possible (included an estimated cost) to increase the likelihood that you’ll follow through with what’s necessary to achieve them.” Whether your goal is to buy a house, have a six-month emergency fund, or be able to travel when you retire, making specific plans can help you achieve the goal.
Just do it. Sign up for a retirement account if you haven’t already. If your partner is usually in charge of your family finances, ask to share responsibility or take it over. Anyone who’s tried to learn a foreign language in school and then traveled to the country where people speak that language will tell you — you learn better and faster when you have to.
Do you feel like you’re financially savvy? What helped get you there, or what are your goals?
This article was made possible by the support and inspiration from Genworth Financial, a S&P 500 insurance company with more than $100 billion in assets. Check out Genworth's website for more financial education resources for women.