Who Run the World? Girls!
Overcome pay inequality, opportunity gaps, and the pink tax to achieve your maximum financial potential
The twenty-first century is the era of female power. There are over 12 million women-owned businesses in the U.S. More women are creating their own wealth than ever before, with millionaire women out-earning their male counterparts for the first time in 2016. We even elected our first female Vice President!
And yet.
And yet, the majority of women leave financial planning to their spouses. Why? Women cite a laundry list of reasons, from lack of time to lack of interest, to even feelings that shared assets are not as much theirs.
This needs to change.
We, women, need to claim autonomy in our own financial futures. Go beyond household administration and be part of the financial strategy. You are capable.
To help outline personal finance strategies specific to women, I spoke with Jessica Lee, Vice President-Financial Advisor at RBC Wealth Management. She offers several insights unique to making women successful in their financial planning.
Save More Aggressively
The standard advice you find on the internet, in books, and on podcasts assumes a full-time, 40-year career. Yet, many women take time away from their careers for childcare or eldercare. This was exacerbated by the COVID-19 pandemic, where women’s participation in the labor force hit a 33-year low.
This means that the standard advice does not apply to many women.
Typically, personal finance articles, podcasts, and advisors recommend saving 20% of your income. However, women often need to save more to counteract the negative financial impact of several female-specific barriers.
Pay Gap
While the pay gap is well-cited and familiar to many, it is as relevant now as it was when the Equal Pay Act was signed in 1963. At that time, white women earned 59 cents on the dollar compared to men. By 2010, the gap only narrowed 18 cents (less than half a cent per year!).
The pay gap is even more extreme for women of color with Black women earning 38% less than white men, Native American women 43% less, and Latinas 45% less.
The World Economic Forum estimates that it will take another 99.5 years to achieve global economic gender parity. This extends to 257 years when the impact of opportunity gaps is factored in.
Opportunity Gaps
Beyond the pay gap and career breaks, women are also harmed financially by opportunity gaps — where women are more likely to hold lower-paid, entry-level positions instead of growing into advanced leadership roles.
Women make up only 40% of managers and 28% of chief executives across organizations. Moreover, only 6% of the S&P 500 CEOs are women.
Career Break
Nearly half of women take breaks from their careers to care for family, be it children or aging parents. The financial impact is significant — more than annual salary, there is a loss of wage growth over a career, retirement assets, social security benefits, etc.
The Center for American Progress created an interactive tool to calculate a more holistic picture of the financial impact.
Pink Tax
Women pay more for certain consumer goods and services than men. This ranges from toiletries, clothing, kids' toys, and calculators to dry cleaning and car repairs. It is estimated that women spend an extra $1,300 annually on the pink tax. If that annual $1,300 was invested over 20 years at an 8% return, it would amass to over $70,000. That increases to nearly $392,000 over 40 years.
So yeah, it matters.
While action can and should be taken through regulation, in the meantime, ladies, quite frankly, we are on our own. To make significant strides in your financial future, save as much as you can. If you can’t hit 20%, save as much as possible and increase your savings ratio with each pay increase. If you save 20% or more today, save even more.
Based on the obstacles mentioned above, it should not be surprising that 62% of the poor, elderly population is women. This is especially concerning since women tend to outlive their spouses.
Have Your Own Account(s)
Many women choose to join all of their assets with those of their spouses upon marriage. While that can increase the administrative ease of running a shared household, you should maintain your own account for discretionary funds as well.
Don’t feel bad about having separate accounts. Recommend that your spouse does as well, but keep an honest, open dialogue about where all household money flows.
Having separate accounts is particularly important for retirement plans because you cannot be added to the title of your spouse’s retirement plan. Make sure to contribute something to your own retirement plan, rather than relying on your spouse. In the event of a divorce, you are not entitled to any of their retirement assets unless a divorce lawyer and Qualified Domestic Relations Order (QDRO) says otherwise.
If you are not actively working or don’t have access to an employer-sponsored retirement plan, open up an Individual Retirement Account (IRA) and set aside as much as you can, up to the annual maximum ($6,000 for 2021).
Check the Titling
If you have shared assets, don’t let inertia get the best of you — adjust the titling. The title specifies who owns the asset and what happens to it when the owner passes away.
The most common shared assets are established through marriage, but you can have shared assets with anyone as long as it is jointly titled.
Joint titling your assets ensures you have equal rights and dictates what happens to you or your partner’s portion in the event of one of your deaths. There are two options — one that passes the assets directly to the surviving owner and one that is more flexible.
- Joint tenants with rights of survivorship. This arrangement ensures that your portion of any shared assets transfers to the other account owner(s) upon your death. It avoids probate (the legal process where a person’s will is proven in court), but is more restrictive than joint tenants in common.
- Joint tenants in common. If you prefer your share of joint assets transfer to someone who is not currently a joint owner, you would choose joint tenants in common. This means that if you die, your assets would transfer to the beneficiaries noted in your will, such as parents, children, etc.
All too often, women trust their finances are being managed only to find out they own less than they thought and are left vulnerable upon their spouse’s death. You don’t want to be surprised later on by outstanding debt from a gambling habit, shopaholic, or entirely separate family!
Know Your Shared Assets
If you were to ask any engaged or newlywed couple about the likelihood they will get divorced, I bet the majority would say, “0%! There’s no way we’ll get divorced.”
40%–50% of those couples would be wrong.
This means, that essentially, your odds of a lasting marriage are a coin flip.
Regardless of whether you stay married or not, go a step beyond titling. Familiarize yourself with your joint assets. After all, they are a key part of your financial strategy and may influence decisions you make with your personal accounts. Rather than default these to your partner, establish yourself as a co-pilot on this shared journey.
Build Your Confidence
When I look around at the women in my life — friends, family, mentors, role models — I feel like I’m staring at a band of Amazon warriors. They are powerful, intelligent, articulate, and resilient.
Despite the amazing things women accomplish, women routinely underestimate their abilities while men, conversely, overestimate theirs. This is caused by a variety of factors, including the all too common experience of imposter syndrome — feelings of not belonging or being an underqualified fraud.
While these feelings are legitimate and deserve due recognition, Ruchika Tulshyan and Jodi-Ann Burey rightly point out that we need to stop using imposter syndrome as a scapegoat for workplace and other institutional biases.
“The answer to overcoming imposter syndrome is not to fix individuals but to create an environment that fosters a variety of leadership styles and in which diverse racial, ethnic, and gender identities are seen as just as professional as the current model, which [is described] as usually ‘Eurocentric, masculine, and heteronormative.’”
All of this to say, your confidence does not dictate your competence.
So ladies (or anyone who takes the backseat to their financial lives), I urge you to get involved! Be a part of every financial decision that impacts your life.
Ask questions. Join the conversation. Know what you own and what you owe.
It is not taboo to talk about money, to make money, or to like talking about or making money. In case you needed an invitation, I give you permission to be unrefined and plunge headfirst into the mess!
Have questions for Life’s Unsexy Toolkit? Send them to unsexytoolkit@gmail.com, and I’ll address them in future articles.
Disclaimer
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.
