Given the changing roles women are playing both within their family and within society today, married or single, it’s vital for women to be informed about their finances. While many women have a strong interest in and play a large or the lead role in managing their financial life, many don’t due to lack of interest, lack of time, or complete trust that their spouse has got the family’s financial life in order. I’m here to say that understanding the basics—including how much money they have, how much is owed and what kind of insurance coverage is in place—is critical should they decide to, or need to, take an active role in managing their family financial situation.
As a business owner and financial advisor, my brain is wired for the economics of family and business finance. However, as a mother of two, who balances a full time career with a busy family life, I can easily relate to those who don’t even want to think about the family finances. In our practice, we work with many female clients who play the lead financial role in their household, and we also work with many families where the woman is not as engaged in the financial planning process as her spouse. Engaging both spouses by listening, communicating and educating so that there is continuity of knowledge and understanding of the family’s financial structure is a core element in our process and a role we take very seriously as financial advisors. It’s perfectly acceptable for one spouse to take the lead; however, we make every effort to ensure that both spouses share a base level of understanding and comfort with their financial situation.
I’d like to share some current trends that underscore the need for women to be knowledgeable about their financial life:
Women as breadwinners and business owners
Today, women are stronger, increasingly entrepreneurial, and busier than ever. Being an active corporate executive or small business owner or a mother managing a demanding family schedule, or both, doesn’t leave much time to focus on one’s financial life. This translates into additional challenges related to balancing family life, spending, and investment decisions. Women need to meet these challenges head on—particularly as they relate to their financial life—in order to protect their family, career and business ventures, and their own financial longevity.
Data from the U.S. Bureau of Labor Statistics show that in 2008 the female labor force comprised 30.7% of the total U.S. population, versus 23.0% in 1970. The data also supports that more and more women are becoming the heads of their households earning more than their husbands, rising farther in the workforce and starting businesses. According to the IRS’s Winter 2012 Statistics of Income (SOI) Report, just under 1 million women in the U.S. hold more than $2 million each in gross assets, comprising 43% of the nation’s wealthiest people (Internal Revenue Service. “Statistics of Income (SOI) Bulletin.” Winter 2012).
Women suddenly on their own
Divorce can leave women in financially challenging situations, bringing new responsibilities and stress. Women can find themselves extremely well off, but in need of sophisticated financial planning for themselves and their family, or they can find themselves worse off where financial planning and hard work is the only way to manage a positive financial future.
Women are inheriting the responsibility to manage wealth more so now than ever before. Statistics show that with an overall aging U.S. population, half of women over age 65 will outlive their husbands by 15 years (Milestone Bank, “Financial Empowerment for Women – Feb 2009). Devastated, women are thrust into the difficult situation of balancing grief with critical financial decisions. From an investing standpoint, women must prepare for a minimum of 15 years of income beyond their husband to meet their expenses, cost of living and other requirements during this time. Women need to accept that they will likely spend some of their retirement years alone and think about how they will be financially prepared for that.
We believe you should be able to answer the following questions if the need arises:
- How much money do I/we have?
- Where is it and how do I access it?
- How is it invested and how much risk is being taken?
- How much debt do I/we have?
- How much am I/ are we saving, spending and giving each year?
- Am I/ are we exposed to risk at work or in my/our business?
- Do I/we have adequate insurance coverage (life, health, long-term care, disability, homeowners, auto, and umbrella liability coverage)?
- Are wills, powers of attorney, trust documents, health care directives up to date?
- Am I / are we on track to meet our financial goals (education, retirement, legacy and charitable)?
- Who are my/our key advisors to go to for help if needed?
Even if you don’t want to take full responsibility for your family finances, knowing the answers to the questions above will help you gain financial peace of mind and confidence should something unexpected happen.
At RNP Advisory Services, we help clients achieve clarity and confidence with their financial lives. We are happy to answer any questions you have about investments and planning. Please visit us at http://rnpadvisory.com or call us at (408) 779-0699.
