By Sherri Goss, CFP
Sherri Goss, CFP® is the author of, Women and Money, Building Confidence ~ Creating Security, and it is available on her website, www.rfmoney.com.
Do you know that only 91 years ago, women gained the right to vote? And, only 48 years ago in 1963, the Equal Pay Act was passed? At that time, full-time working women were paid 59 cents on average for every dollar paid to men.
It is amazing to me that women have made such great progress in so many areas, yet they come to me and confess they feel “stupid” when it comes to money. Of course they are not stupid, but that is how they feel. I believe this is simply a result of lack of experience, and dependence on others when it comes to making financial decisions.
I believe this lack of financial confidence is a big problem because women live, on average, seven years longer than men, and the average age of most widows is 56. Plus, women are the primary caregivers in most households, meaning they spend less time working, saving, and earning pensions and Social Security benefits. Women truly do face unique financial issues.
I meet a lot of widows who depended on their husbands to make all the financial decisions in the household. Now, they are suddenly responsible for everything from paying the bills, to making investment decisions, to filing tax returns. Many are completely overwhelmed by the learning curve they face.
Based on the women I meet, I see five key areas where women need to become more involved when it comes to money:
- Women need to build financial confidence. I recommend tracking spending (all spending, no matter how it is done) for 30 days, then evaluating where your money is going. Not only will this help you understand what it takes toyou’re your household, but you will gain a new sense of awareness when it comes to spending. Next, I suggest having a plan to be debt free before retirement. Once you’ve tracked your spending for 30 days, you can determine whether spending should be decreased in one area to pay off debt faster or to increase savings.
- Women need the knowledge about how to make smart financial decisions. This involves understanding you credit score, knowing what your credit reports look like, and learning how to make good decisions whether you’re buying a house or using a credit card. The only website to visit for free credit reports is www.annualcreditreport.com. From this site you can download your credit reports from each of the three major credit bureaus. You can learn about credit scores at www.myfico.com, and you can evaluate current of future debt obligations via the free financial calculators at www.bankrate.com.
- Women need to understand how relationships are impacted by money. I consistently see women putting everyone else ahead of themselves financially (helping the kids or the grandkids) at the detriment of their own retirement. Think about how you make financial decisions when if comes to friends and family, and evaluate whether you need to make some changes. Are there any situations where others are more dependent on you, financially, than they should be? Is your “help” keeping them from taking responsibility, or allowing them to avoid a problem?
- Women need a plan for retirement, and need to know what sources of income they will have, how long this income will last, and whether this income can sustain their lifestyle for the long run. Project out into the future what your income will look like, considering all sources. Compare this to the number you reached after tracking your spending for 30 days. Is your projected income enough to meet your cash flow needs? Next, consider the fact that inflation will increase future expenses. For example, if you retire at age 60 and need $3,000 per month to fund your lifestyle, and inflation grows at 5% annually, you will need about $6,000 per month by age 75. Will your income increase with inflation, or do you need to spend less in retirement to plan for inflation?
- Women need to be prepared for the unknown. If you are dependent on a partner for income, what will happen if they lose their job, are disabled, need long-term care, or die? Planning from a “worst case scenario” perspective can assure that you can handle what life brings. If your spouse will have a pension, you may need to consider the survivor options. If your spouse will receive Social Security benefits and you will not, you need to consider what would happen if you lost this income to your household. None of us likes to think about these types of scenarios, but I find that the more we do think through them, and discuss them, and plan for them, the easier they get to deal with.
If you need to do some work in any of these five areas, I encourage you to pick the most critical area and take action within the next couple of days. It is very easy to put this work off until “later,” but all of these issues are critical to your future financial health. The time to act is now.
Sherri Goss is Senior V.P. of Rosenberg Financial Group, Inc., with offices in Macon and Warner Robins. You can reach her by e-mail at firstname.lastname@example.org.