Personal Finance for Women: Time to Take Charge!
6 second take: “What’s mine is yours” until it’s not. Here’s how to take control of your finances when married, following a divorce, or in the event of becoming a widow.
Women are a major force in today’s economy. One in five women makes the same as or more money than her partner does, a recent international survey of over 14,000 people by YouGov revealed. But when it comes to personal finance, only 26 percent of women call the shots.
These numbers have risen dramatically in recent decades, but some homes can still afford to have women choose to stay home to take care of the house and kids while men go outside the home to work. That said, trends in family dynamics are making this arrangement less viable.
Forty to 50 percent of marriages end in divorce, according to the American Psychological Association. Even when couples stay happily married, there’s often still a shift in responsibilities as time goes on.
The average American woman lives to 81, while the average American man lives until 76, reports the Centers for Disease Control and Prevention.
Given this life expectancy gap and the low percentage of women who report calling the shots when it comes to personal finances, it’s quite possible that the 74 percent of women in relationships who seem to prefer staying out of the financial realm could one day be forced into the driver’s seat. So, how can women be prepared and take charge of their finances?
Plan Ahead for Your Financial Future
As a certified financial planner who meets with hundreds of couples every year, I come across three common reasons women often give for their aversion to the household financial plan:
- Talking about money is boring.
- Money causes anxiety.
- The husband is the breadwinner and feels money is his to worry about alone.
These three statements hold no proof that a man’s interest in personal finance is higher than a woman’s.
Not every kid wants to grow up to be a financial advisor, but fiscal responsibility should be as natural as eating healthy — for both sexes.
Money causes anxiety in many of us, but it’s important not to let this become a barrier to dealing with our finances. Many of us don’t enjoy visiting the doctor, but we all have to do it sometime.
Lastly, income is not an entitlement or prerequisite to financial decision-making. All opinions are equally valid when people are married and sharing a household. This last point is particularly important for the lesser-earning partner to consider. Earning more money doesn’t give your partner more control or more of a say in family finances.
To overcome these barriers, I insist that both spouses be present at all of our meetings.
“But I make the financial decisions, I’ll fill my wife in later.” Not anymore. There are no silent partners in a safe, effective partnership. Getting everyone on board is 90 percent of the battle, and makes the next two life events less stressful.
Divorce and Money
This transition is rife with emotions, and money can just add more fuel to the fire. Almost 50 percent of couples with debt name money as their most prominent relationship issue, a recent survey by Fidelity Investments revealed. And if you weren’t agreeing on money before a divorce, you’re unlikely to agree afterward.
The first thing a divorced woman should do is take complete stock of her finances. I use software called Living Balance Sheet to aggregate all my client’s financial data, but there are many other programs out there you can use for your financial plan.
Once you know what’s where, devise a monthly budget, prioritizing what’s necessary versus what may have been optional luxuries pre-divorce.
This budget can include any child support and/or alimony, but recognize this added income may be temporary.
Now that you’re not only the decision-maker, but also the immediate breadwinner, investing for retirement, creating a long-term care strategy, and other contingencies becomes doubly important.
A divorcée must also become well acquainted with a CPA for any tax obligations, a financial advisor to help guide the whole process, and an estate attorney who will have to revise your will and beneficiary designations. The last thing you want is your assets going back to your ex-husband upon your death by mistake.
Personal Finance for Widowed Women
If you do find yourself in this situation, hopefully it’s in your later years. If you did lose your husband at a young age, you would likely have to follow many of the steps just mentioned.
Life insurance should also become a part of the existing plan, as it would create an influx of cash at a necessary time.
A widow in retirement must again take stock of all financial plans and budgeting, but also now adapt to a lost Social Security benefit (you only keep the higher of the two retirement benefits) and a potential loss or reduction to pension benefits.
You must then probate, or establish the validity of, your deceased spouse’s will. Check the beneficiaries on all transfer-on-death accounts, retirement accounts, and life insurance policies so as not to delay the receipt of any funds.
Review and update estate plans and beneficiaries on new accounts. Lastly, don’t forget any required minimum distributions that may be necessary for your IRAs.
These are two major life events that no one wants to think about but do require proactive planning. The probability of success under all circumstances becomes greater when both spouses are involved.