In 2017, women earned $0.82 for every $1.00 that men earned. Although the gender pay gap has been narrowing over time, the inequity still exists, making it even more important for women to manage their finances with extra care.
Today, many women take on greater roles in managing their families’ financial concerns, but still others take a back-seat and allow their partner to run the numbers. Dividing household responsibilities is natural for any relationship, but even if you’re not the one balancing the checkbook and paying the bills, make sure you’re aware of the crucial aspects of your family’s financial plan.
If you’re not in the loop, it can have devastating consequences in the event that your partner becomes disabled, passes away prematurely, or you decide to get divorced. Newly divorced or widowed women may need to take extra time to review their financial situations and readjust their investment accounts, insurance, and legal documents. Women business owners will have an even greater complexity in terms of financial planning, and should also seek professional guidance.
Here are a few financial considerations– whether you’re married, single, divorced, working full-time, part-time, or acting as your child’s full-time caregiver:
- Know your family assets.
You should have a listing of all accounts and know the contact person for each account as well as the login for online access. You should meet with your financial advisor, at least annually, to review your investments and make changes given your personal circumstances and risk tolerance. You should also make sure the titling of your accounts and home match your estate plan.
- Pay down debts.
Know your household debts – car payments, student loans, mortgage, and credit card debt. These debts should be managed closely and paid down as soon as possible. Make sure to pay your full credit card balance monthly to avoid excessive interest charges.
- Make sure you’re managing your risks.
You should work with an advisor to calculate your Life Insurance needs, and consider Disability Income insurance to cover any gap in earnings should you experience an accident that leaves you unable to work. As you near retirement, consider investing in Long Term Care insurance, especially if you have family members with a history of nursing home or assisted living care.
- Save, save, save!
If you consider yourself a “spender,” it’s time to consider your future “spending” needs. In addition to building a substantial savings account for emergencies, make sure to contribute as much as possible to your company’s 401(k) retirement plan, or if you are not working, contribute to an IRA annually. Your future self will thank you for planning ahead.
- Plan for your children’s educational needs.
If you have children, you will want to consider the future cost of their college education, private school tuition, or vocational schools. Many children take on student loans prior to earning income, and if you’re in a financial position to save for their education now, 529 college savings plans are tax-efficient and can greatly reduce your child’s financial burden.
- Create an estate plan.
You should not only have a basic Will to distribute your assets in the event of your death, you should also designate a custodian for any minor children. Additional trust documents may be drafted by your attorney if you have special considerations for your children, your business, or real estate holdings. It’s also necessary to determine the appropriate people to manage your Financial and Health Care Powers of Attorney, as well as an Advance Medical Directive so that your wishes are known to your doctors, family, and friends. Keep any legal documents stored in a safe place and make sure relevant family members have copies of these documents.
- Consider your business.
There are more women entrepreneurs today than ever before. As of 2016, 40% of new entrepreneurs in the United States were women. If you own a business, you will have more financial decisions and planning to consider. Work with an advisor to develop a business budget, retain your key employees, and create a succession plan upon your retirement to ensure your professional legacy. Your advisor should also be able to help you make selections for your comprehensive benefits package – including Medical, Dental, Retirement Planning, and Financial Wellness.
While most of these are considerations that apply to everyone, not just women, it’s a good reminder to take stock of your situation and make a financial plan that fits your individual needs. Gaining financial independence and knowledge is empowering, and it’s an exciting time for women as they continue to close the gender income gap. Take charge of your situation and reach out to your advisor to solidify your financial plan today.