Women and Money: Why It's Important to Take Control of Your Finances

Dear Readers,

As you may know, I'm a big champion of financial independence, and the month of March gives me a special opportunity to talk about the importance of women taking control of their finances. Why March? Two reasons.

First, the entire month is declared Women's History Month, this year honoring women who have fought and still fight for voter rights. Second, Sunday, March 8^th is designated International Women's Day. Both urge women to engage and work for a more equitable world, whether in politics, business, or personal relations.

I like the fact that these themes encourage women to be active and strong, and to use their talents to provide greater opportunities for everyone. And to me, one of the most effective means of doing that is through financial independence.

I believe that by taking control of their finances, everyone can be not only individually strong, but also strong partners and strong members of their communities. However, for women it's even more important. For us, financial independence is more than a matter of strength; it's a matter of necessity.

Take charge of your finances—take charge of your life

Statistically we live longer than men and earn less. According to a 2018 Bureau of Labor Statistics report, median weekly earnings for full-time salaried women are just 81 percent of what men earn. On top of that, we're often faced with discrimination in terms of wages and advancement opportunities. All of which means we have to work harder, save more, and be our own advocates.

So I'd like to use this March to encourage women everywhere to take charge of their finances as an important step in negotiating a better situation for themselves and their families. To me, financial independence is empowering. By taking charge of your finances, you're taking charge of your life. Here are some ideas on how to do just that.

1. Make retirement a top priority

Women are known to put others’ needs first, but when it comes to retirement, you have to think of yourself. Take charge of your own financial future by taking full advantage of a company retirement plan. Contribute at least up to the company match, and much more if possible. Don't have a company plan? Open an IRA. The point is to save as much as you can, as soon as you can.

Ideally you'll start in your twenties to save about 10-15 percent of your annual salary (including any contributions from your employer). If you start later, that percentage goes up precipitously. For instance, wait until age 40 and ideally you'd want to sock away 25-35 percent of your annual salary. That may sound like a lot, but retirement can be long—particularly for women. Many financial planners recommend that you anticipate living until 90-plus in retirement planning calculations. You need to be prepared.

2. Don't just save—invest

Part of that preparation is making the most of your money, and that likely means investing. Your first thought may be that you don’t want to take on the risk. But while stock market downs are definitely a reality, there's also a risk in being too cautious. Not investing in the stock market can mean missing out on long-term gains that can help you achieve your goals.

For a goal like retirement with a long time horizon, you ideally want a diversified portfolio that has the potential for growth. This means having a portion of your money invested in the stock market and accepting the almost certain market swings. While that can sound daunting, it doesn't have to be if you keep your eyes focused on your end goal. And you don't have to go it completely alone.

3. Team up with an advisor

When it comes to investing and managing your money, having a support team can be a great confidence booster. Even if you're just starting out—and especially as your assets grow—consider working with an advisor. I think of a financial advisor sort of like a personal trainer, someone to guide you and keep you going when you might feel overwhelmed or tempted to call it quits. 

An advisor can help you look at the big picture and build a portfolio to match your goals. Plus, working with an advisor who understands you can be a major source of peace of mind. So think about the type of person you'd be most comfortable with. A lot of women prefer to work with a female advisor. But gender aside, look for someone you can communicate with easily.

Of course, how often you want to interact with an advisor is up to you—a one-time consultation or periodic check-ins, in-person or virtually. Just make sure you understand how and how much your advisor is paid. Costs matter. 

4. Have a financial plan

To really get on top of your finances, you may want to work with a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional to develop a comprehensive financial plan. A recent study published in the Journal of Financial Planning found that households working with a financial planner made the best overall financial decisions.

I'm a huge advocate of a comprehensive financial plan because it goes beyond saving and investing and helps you look holistically at all the interrelated parts of your financial life. It reviews your income, expenses, investments, retirement planning, insurance needs, income taxes, estate planning needs, and—most importantly—how they all work together within the context of your goals. Plus it gives you a roadmap to follow and a plan of action. 

It starts with you

Financial independence isn't just about how much money you have. It's also about having the confidence to make your own decisions. Female or male, single or married, we all need to be in control of our financial lives. But women especially need to take greater charge. By doing so, we can each be part of the drive for a gender equal world—for ourselves and for future generations. 

Have a personal finance question? Email us at askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.