We all know that men think differently, and this includes all areas of life. Including money. Here’s a real life example:
Jack and Sarah went in to see their banker. Jack stated that he wanted the mortgage paid off in five years and asked what lump sum payments he would need to make each year to achieve that.
Since it would add up to a large amount, his advisor asked him what he would be willing to give up. Jack readily replied that he and Sarah would not do any traveling for the next five years. Sarah had remained quiet till that moment. Then she blurted out, “Wait a minute, you never discussed this with me.”
She continued with, “There is no way I would ever be willing to give up our travels so that we can pay off the mortgage. It’s the one time we leave all our work behind and truly connect.”
This meeting is one example of how women approach money differently from men. Men tend to focus on numbers, women often approach money through the lens of their relationships.
Women’s financial needs are also different from men’s. They live longer, take more time away from work to raise their children, and in many parts of the world, they still earn less than men do for the same job done.
So, what do women need to know about money?
You should manage your money in alignment with your top five core values. Conflicting messages from the media can make it confusing when it comes to making financial decisions. Pay off the mortgage or save for retirement?
Our character Sarah clearly put more value to connecting with her husband than she did financial freedom. There is no right or wrong answer, but aligning your values with how you manage your money is top priority.
According to a study by Merill Lynch and Age Wave, 61% of women surveyed would rather discuss their death than talk about money.
Are you someone who throws your financial statements in a drawer and never looks at them? Mastering your money starts with knowing where it’s going.
Does most of your income goes toward meeting basic needs like food and shelter, without anything left for anything else? Or do you have a significant amount of disposable income that goes to leisure activities like eating out, travel, and adventure?
Do you spend a lot of money on eating out at the expense of something you value more? Would you prefer to have a more significant portion of your income diverted towards travel or paying down your credit card debt? Are you living for today at the expense of the goals you have for a later date?
These are all questions that can bring clarity to how you spend your money.
Once you know what your 3-, 5-, and 10-year financial goals are, create a written plan detailing how you will go about achieving them. How much are you willing to set aside each month to reach these goals?
What are you willing to forgo? How much risk are you willing to take with investments that have significant potential for growth to achieve your long-term goals?
Saving in a bank account earning one percent interest is not what you want to do to achieve your long-term goals. It may be perfect for financial goals that are within the next three years. But if you’re going to tap into higher growth, then the stock market is the place to be. At least for part of your savings.
Most financial institutions provide a risk-tolerance questionnaire to help you assess your risk tolerance profile.
Work with a financial advisor who has a fiduciary duty to look out for your best interest. You cannot assume that everyone who calls themselves a financial advisor is a fiduciary. There are many people in the industry with different licensing and different capabilities.
If you want to retire within the next five years, then you want someone who can help you with a retirement plan. Some advisors are licensed in a variety of areas and offer a more extensive breadth of services. They may be able to give you advice and sell both insurance and investments.
Do your research.
You know you can’t take anything with you when life ends, so you definitely need an estate plan. It is part of a complete financial plan.
A good estate plan is one that honors your wishes for when you die. Who do you want to leave your assets to once you’re gone? How do in-laws feature in your estate plan? What about grandchildren?
Here are the most important components of a good plan:
- An up-to-date will that stipulates your wishes for when you die.
- A power of attorney that permits another person to act on your behalf if you are no longer able to do so because of an accident or illness.
- A living will that providing instructions for end of life medical treatment if you are unable to make decisions for yourself.
While a power of attorney is for financial decisions, a living will is for health care decisions.
Putting your financial house in order is part of self-care. Women spend a large part of their lives looking out for the needs of their loved ones. Life throws us curveballs, however, so we need to prepare for the unexpected as the best way to care for ourselves and those we love.
Are you uncomfortable talking about money? Where do you think there may be a gap in your financial knowledge? Please share with our community and let’s have a conversation.