March marks the 31st year of National Women’s History Month, and when it comes to financial planning women certainly have something to celebrate. For many women, long gone are the days that the husband solely controls all the finances and investing.
Over the last few decades, women have played a critical role in the advancement of our country. Women have strengthened their position in the labor force and boosted their economic standing. Women are now a prominent component of corporate America and the global business landscape. Their emergence as leaders, entrepreneurs, and innovators has made them an integral part of our country’s economic health and the future of global business. More women are taking stewardship of family and business finances.
Women also are often seen as intuitive, thoughtful and compassionate, and can use these qualities to their advantage as they plan for the future. In doing so, here are some things for them to be mindful of:
Let go of baggage. We all make financial blunders; it is part of being human. Mistakes can range from large to small such as buying a second home that you can’t afford to paying a late fee on credit card. Whether the financial event that you regret was your fault or someone else’s, a time comes to let go of these regrets. Clinging to regrets about past mistakes and how you would have handled these situations differently is ultimately unproductive. The best way to let these regrets go is by forgiving yourself and moving past the regret. Women should never let these events make them feel incompetent when it comes to financial management. Nothing could be further from the truth. Think of each day as a new beginning; nothing is permanent or beyond correction.
Take money lessons to heart. Women need to understand where their attitudes and habits about finances come from. Be mindful of past financial mistakes and try to learn from them. Did you acknowledge the mistake and learn how to avoid it in the future? At the first sign of trouble, did you move to resolve the situation? For example, a client of mine has a financially irresponsible husband. He has hidden their true financial picture from his wife and has filed for bankruptcy twice. Rather than working with the husband to fix their situation and collectively learn to better manage their finances, the wife who is now in her 50s repeatedly asks her parents for money. This woman and her husband need to learn to be better stewards of their money. Mom and dad won’t always be around to help them out.
Recognize your needs and motivations. Many women are shoppers and that is their primary motivational goal. The short-term satisfaction of acquiring new things often overshadows the need to plan for your financial future. To be mindful, women need to understand what motivates them to both spend and save money. Before making that next purchase, take some time to be mindful about the long-term impact of your decision. Be realistic about your needs and wants. Identify and prioritize your financial goals.
Don’t lose sight of what you value. The financial choices we make determine what’s important. Buying a luxury vehicle for example, may sound like fun, but take a step back and think about how you want the future to look. Will making this purchase place your financial independence or retirement savings at risk? Ask yourself, how can I use my money to create the lifestyle I want, for now and in the future.
Consider how others may impact your finances. Women also often put others’ needs ahead of their own. Many women take time out of the workplace to raise families and/or provide caregiving for elder love ones. When they do return to work, they likely earn a lower income which can also impact their retirement savings and the amount of their Social Security benefits. Think about the details of your own situation and how it might affect your financial planning now and in the future. It may help to consult with a financial advisor to evaluate options and develop a strategy to fill in these gaps.
Don’t ignore risk. Market risk describes the fluctuations in security prices as a result of market activity and expectations. But market risk is not the only factor that can affect your balance sheet or financial well-being. Because women have longer life expectancies and often lower retirement account balances than men, they also need to be mindful of inflation risk and longevity risk. For this reason, it is important that women do not invest too conservatively. Age 80 is the new 60. Many women that retire at 65 are still very active well into their 80’s. They need to make sure their finances will support their lifestyle.
Life has a way of setting a new course. Being prepared to adjust to the challenges that major life transitions present is critical. Women are finding themselves in roles where they must be responsible for their long term needs and security. Women must understand and be knowledgeable about what it means to be financially secure and how financial planning can help them achieve their goals. Elm3 Financial Group provides comprehensive financial planning and investment guidance that can help you achieve your long-term goals.
