Making Money isn’t Enough: Managing Your Finances Is Essential
Does having enough money to not worry about your finances mean you don’t have to worry about managing them?
It’s a pretty common theme and a perplexing one. Picture this: sitting in a circle with a dozen or so college educated women, all graduating at the top of their class and starting in their pretty cool (and high paying) careers in bioinformatics and literal cancer research. Each of us considers ourselves liberal. We go around and describe our ideal partner, and someone mentions that having a partner to manage all the financial aspects of life would be ideal. The room nodded along as if managing one’s finances were somehow more complicated than their actual job.
Out of necessity, my upbringing propelled me towards financial independence. However, it’s clear that while America’s diverse upbringings encourage young women to pursue higher education and lucrative careers, the same young women are still led to believe they would somehow be better off handing off their financial management to another party.
This sentiment isn’t just mine though. Fidelity reports that only 19% of women feel confident about money.
Your Long Term Self Will Thank You
Not to be a pessimist, but just because one is getting by right now, doesn’t mean they always will. 26% of women across employment statuses didn’t contribute to their retirement savings between August 2022 and 2023, compared to 19% of men. The reasons why aren’t clear cut but research indicates that women don’t feel understood or welcome in the financial world and report higher levels of financial stress. 67% of working women reported they felt behind on their retirement savings in August 2023.
Long Term Financial Health
While it’s true that women retire with less because they also get paid less, women also tend to hold onto their money in cash, exacerbating the issue. Green, the head of private wealth management at Ellevest, notes that women miss out on hundreds of thousands of dollars over the course of 40 years. If a young woman can but chooses not to invest $500 every month into the S&P 500, assuming an average annual return of 10 percent, she will forfeit earnings of $2.5 million over 40-years.
Women’s longer life spans and greater caregiving responsibilities further these differences. On average, women receive social security benefits that are 80% of those men receive.
Your Financial Health Leads To Your Better Health
Being proactive about your finances and investments does require energy right now, but not being proactive about your finances will require more energy later.
Financial stability can free you up from stress and anxiety, improving mood, and leading to better health according to Susan Trotter, Ph.D. Managing your finances allows you to enjoy the life you’re working hard to create, rather than pushing the problem aside only to be facing the repercussions later.
Overcoming the Hesitancy
Research indicates that women are better investors than men, yet experts report that men tend to invest more due to a confidence gap. Women’s lack of confidence in their ability to invest isn’t innate; it originates from a lack of knowledge that prevents them from taking calculated risks. This stems from the financial structure and social norms, but it’s not an unsolvable problem.
Younger women, particularly Gen Z, are demonstrating that. A Fidelity survey reported that 44% of Gen Z respondents aim to actively unlearn gender stereotypes about money.
There’s a baseline privilege in not proactively managing your finances. However, our finances follow us for a lifetime; whereas the privilege to ignore them is probably not in our control; it depends on our relationships, health, and external factors.
I understand that breaking the habit of avoiding tackling our finances head-on is tough until we’re in a worse position and ill-prepared to take control. But decades of stories and statistics should serve as lessons that just because we can currently afford to ignore our personal finances doesn’t mean we always will.
Many of us will spend our lives working gruel hours because we are aware of the importance of financial independence. It only makes sense to see it through.
We have to be willing to adopt a long term mindset and increase our financial literacy to feel confident in our financial management decisions.
This isn’t a new problem, but it could use some new solutions. Organizations such as HerFinance Forum are dedicated to fostering financial literacy. The resources are out there, and moreover, there are communities of women who’ve been in your shoes and are dedicated to doing their part to make financial literacy more accessible.
Therefore, in whatever way suits you best, be proactive about the nuances of your personal finances, for your present self and especially your future self.
You can join our Slack here and comment to be added as a writer and share some of the financial literacy lessons that you wish you had known earlier.
