In general men and women have the same financial needs. We all need money to cover the basics of life, as well as enough savings to cover our expenses when we can no longer work. However, there are 3 facts that make financial planning for women unique.
Women Earn Less than Men
On average women earn 80 cents for every dollar a man earns. The situation is worse when we break that number down by race – African American women earn 37% less than white men and Hispanic women earn 46% less than white men. The gender pay gap remains when factors like education, experience, industry, hours worked etc are considered. The gap actually widens at higher education levels. (source)
When you put together your financial plan the reality of that wage gap will hit you. When we earn less we have less to save and less to invest over our entire working life. That means less money in retirement if we don’t plan carefully.
In your financial plan consider how additional savings can help your plan. Don’t go with the generic you should save 10% of your income. That may not be enough – really look at the numbers. When you get a new job or get promoted negotiate to get the highest salary possible. I know it is easier said than done, but really do your research and know what your male colleagues are getting paid.
Women Take More Career Breaks
Both men and women take breaks in their career to help with family obligations, but the reality is women take career breaks at a higher rate. Recent data from the Pew Research Center indicates:
42% of mothers with some work experience reported in 2013 that they had reduced their work hours in order to care for a child or other family member at some point in their career, only 28% of fathers said the same. Similarly, 39% of mothers said they had taken a significant amount of time off from work in order to care for a family member (compared with 24% of men). And mothers were about three times as likely as men to report that at some point they quit a job so that they could care for a family member (27% of women vs. 10% of men).
Career breaks can be wonderful and are often very necessary. The key is to plan for them as much as possible.
If you are going to take a planned break, say to stay home with your baby, make a plan to save and invest as much as possible before your break. Investing is key so that your money can compound while you are not bringing in a salary or saving to your retirement accounts.
Make sure you are saving regularly so an unplanned break won’t bankrupt you. If possible consider freelance and part-time work while you are off. This will keep your resume current and hopefully prevent any need to take a lower paying position when you are ready to come back to work.
Women Live Longer
The average woman in America lives to be 81.2 years old, while the average man lives to be 76.3 years old. When we create a financial plan for a woman or a couple we need to factor in a longer timeframe to account for this longer lifespan. These extra years of life can be expensive since they are often filled with higher medical care costs and the need for more assistance at home or in a care facility.
Make sure your financial plan incorporates your longer lifespan. You need your money to last your entire life!
Need help creating a financial plan tailored to your unique situation? Please reach out to schedule a call.
Have a friend who needs to know what she should consider when creating her financial plan? Send these 3 facts her way.