Financial planning for women. Why do we need it more?
Throughout the history of our gender, we have been underestimated when it comes to money matters. I doubt this is true for all women, but for most of us, it has been a challenge to be taken seriously. To be fair, a part of it may be our lack of interest in thinking or talking about money. But there are reasons why we do what we do.
During our younger years, we are conditioned to be nurturing, to take care of others in emotional matters and to be taken care of by others in financial matters. In social settings, we are hardly ever asked what we do for a living. If we have a successful business, it is assumed that somebody is backing us, both financially and in matters of the business.
Let’s be honest. When we are stuck behind a bad driver, the instinct, for both men and women alike, is to assume a woman is behind the wheel. And statistically we are probably right in that assumption. But not always. The same theory applies when it comes to money as well. Statistically, we are probably less interested in matters of money, deemed more successful in spending it than earning it. But again, not always.
Seven years ago we wrote an article about why women are vital to financial planning. We reasoned that they are more organized, better at prioritizing goals and psychologically more attuned to see the bigger picture. Also, women don’t shy away from asking for help. We stand by this even today. What we need is knowledge and awareness, and a push to be part of important money decisions.
We may not be discouraged from any of it, but we are certainly not encouraged to take care of ourselves. Lucky for the next generation of girls, there is a new tide coming. And each of us can be the force that tips the scale in the right direction.
How? The answer will differ based on your circumstances.
Single and employed, or single and running your own business
Your focus should be on saving money to secure your future. And there’s no better time than when you are single, with less or no dependents to provide for. Controlling your expenses and saving as much as you can is very important at this stage. Whatever you want to do, whatever your goals are, should be what matters most. You may wish to take care of your parents, so count that as a goal. You may wish to travel with your friends, and that’s another goal, could even be a recurring one. It’s also important for you to understand the difference between saving and investing. Women prefer safer avenues to save their hard earned money. What you should be doing is allocating money into different avenues, taking risk with a portion of it while securely investing another portion. Keep your investments simple. Get properly insured. Write a will. And be disciplined. For those who are employed, automate your regular investments so you don’t miss or falter. Know and understand the benefits you have through employment. The business owners would need to instill a higher sense of self-discipline if your income is not regular. It would be better to set annual targets for your investments and be smart about the perks of owning your own business.
Married and employed, or married and running your own business
The difference between you and the single woman would be your real time responsibilities, especially if there are children in the equation. The advice would be the same, but with the twist of including your spouse in your decisions. Your goals may be larger, requiring more focused investment decisions from you and your spouse. But at the end of the day, it is still about being disciplined in your savings, allocating your money with a healthy balance between risk and safety, having adequate insurance, securing your family’s future with a will, and overall, keeping your investments simple. You could be the one driving the financial matters in your household, or you could be the one supporting it. Either way, the important thing is to ensure that you are an active part of it, and that you bring your skills to the table. You would be encouraged to do so if you have a portfolio of your own. Even if the decisions are combined, you get to invest your savings and doing it is the best way to learn and be more excited about it.
Married and taking care of your household
It would seem like a radical change from earning your own money. And psychologically it may be more difficult for you to be a part of the decisions regarding money when you are not directly earning it. If you have had that independence in the past, you could probably relate to it more. But if you have always been the one taking care of your household while your spouse is earning the living, then it may be more difficult to alter your attitude towards money. And that is what it comes down to ultimately, the way you perceive your place in the household. Don’t shy away from taking care of your family in matters of money as well. Be a part of the decisions, be encouraged to have your own portfolio. Income is not the only contribution one can make to your investment decisions. Bring organization and discipline to your household savings, make sure your spouse is insured and has a will, prioritize your family’s goals so your children and your retirement are provided for, and ensure that yours and their future is secured.
Divorced, or widowed, with or without your own stream of income
While the difference is vast, the focus should be similar. Whether you are divorced or widowed, you need to ensure that your expenses are met and your future is secure. The psychological turmoil either of these situations can bring on you is immense. If you have children, then their future is also suddenly in your hands and entirely your responsibility. Coping is the only way to move forward and to do that you need to first take stock of what you are left with. Make sure that you know what assets you possess and what your streams of income are, whether it is your inheritance, or alimony and child support. As an added step, make sure that you write a will so your children’s future is secure. If you have your own income, or have the provision to earn a regular income, then you should focus on saving and investing it the best way possible. If you do not, then you need to figure out a way to earn it, or sell some of what you have, to ensure a regular stream of income. The variables remain the same — simple investing, discipline, insurance, asset allocation.
Retired life is a whole other world that you need to prepare for. It is a time to take less risk with your investments so that the corpus you have built can last you your lifetime. Financial independence is so critical at this stage of your life and something that you should work for from the very start. Because once retired, all you should have to focus on is living within your means and still being able to do all that your heart desires.
It is difficult to cover every type of circumstance that is possible in today’s world. You could be in a serious relationship with someone, or living off your own inheritance, or a combination of any of the different circumstances discussed above. The common thread no matter what circumstance you are in, is to be more aware of your financial situation, take a more active part in your money decisions, and learn more about investing so you can make informed decisions. And never, ever, hesitate to look for professional help.
Such matters should come easier for us because expectations from us on this front are so low. But it does not. It has instead given us a long list of reasons to remain ignorant. We need to push past this state of mind, and stop expecting someone else to dictate the terms. It’s time to break the chain and work towards our financial independence.
This article is written by Diya Thommy. Diya is a financial planner at Northward. She is a Certified Financial Planner and an MBA in Finance.
