Women’s Equality Day was just last weekend and it’s another reminder that there is still much to be done when it comes to pay parity. It’s also a reminder that financial planning and making smart money decisions is even more important for women. Below, I will discuss ways that women can set themselves up for financial security.
Enlist Support
A 2014 Management Science study found that when negotiability was not explicitly stated, women were much less likely try negotiating than men. I am classically terrible at car negotiations at dealerships. Somehow, I always end up spending way more time, paying more, and not getting exactly what I painstakingly researched and knew I wanted. The last time I had to go, I was dreading getting taken advantage of again, so I asked a friend who delights in negotiations to accompany me. The result was that I had a far better experience and got more than I wanted.
If you’re like me and negotiating makes your skin crawl, others can help advocate for you if you communicate your wishes. The same study discussed above found that when women negotiate for someone else, they have the same rate of success as men. If you don’t feel confident asking for the raise or better position in your career, enlist a mentor or coach for support.
Block Out The Noise
There is a lot of noise out there and social media influencers who discuss financial moves that they convince people to take. Keep in mind that most of it is just noise. Even financial news from credible sources is not intended to be a roadmap to live your life by.
What everyone else is doing has no bearing on your personal goals. What if you want to achieve financial independence by the age of 40? Your goals and investment strategy will be much different from someone who couldn’t imagine retiring before 70 because their dad and grandpa worked until 75.
Plan According To Your Personal Goals
Once you block out all the noise, that leaves room for you to plan for your personal goals. The two most important aspects of those goals are your tolerance for risk (Can you handle fluctuations in asset levels along the way?) and your time horizon (How long until your goal? Are you flexible?).
To illustrate this, let’s use a hypothetical woman named Sally.
Sally is 35 and would like to buy a home in one year and fully retire in 25 years. If she is 100% set on purchasing a home in one year for a specific price, her time horizon is short and her tolerance for risk is low. For this goal, Sally should be invested in cash and cash alternatives, which include Certificates of Deposit and Money Market Funds. This can generate modest returns but will not be subject to large fluctuations you may see in a stock portfolio.
For her retirement goal, Sally has a 25-year time horizon and says that she is not concerned with fluctuations in value year to year. In this case she should be in a diversified portfolio of stocks, which are partial ownership stakes in companies. Over time, stocks can experience positive and negative years, but the long term averages are 10.16% for a large company index and 11.8% for a small company index. If Sally invests $1,000 per month in her 401(k) and gets a 10% compounding return for 25 years, she will have saved $300,000 and grown her assets to $1,243,986.
Investing does not need to be complicated. You aren’t expected to be a research analyst and you don’t need to know everything about every company you’re investing in. Understanding market fundamentals is enough. Many diversified portfolios will contain thousands of companies. Consulting with a financial professional can go a long way toward gaining comfort towards different asset classes and mapping out your goals.
Conclusion
Financial planning for women is unique because we make less and are expected to do much more with it. Advocating for yourself, enlisting help, blocking out the noise, and planning according to your personal goals can go a long way towards ensuring your financial security is set.
This informational and educational article does not offer or constitute, and should not be relied upon, as tax or financial advice. Your unique needs, goals and circumstances require the individualized attention of your own tax and financial professionals whose advice and services will prevail over any information provided in this article. Equitable Advisors, LLC and its associates and affiliates do not provide tax or legal advice or services. Equitable Advisors, LLC (Equitable Financial Advisors in MI and TN) and its affiliates do not endorse, approve or make any representations as to the accuracy, completeness or appropriateness of any part of any content linked to from this article.
Cicely Jones (CA Insurance Lic. #:0K81625) offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN) and offers annuity and insurance products through Equitable Network, LLC, which conducts business in California as Equitable Network Insurance Agency of California, LLC). Financial Professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. Any compensation that Ms. Jones may receive for the publication of this article is earned separate from, and entirely outside of her capacities with, Equitable Advisors, LLC and Equitable Network, LLC (Equitable Network Insurance Agency of California, LLC). AGE-5856981.1(08/23)(exp.08/25)
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