Women and Finance: Personal Finance for Women

By Katy McDonald, CFP® | May 13, 2024 |

Exploring women and finance reveals some financial challenges men don’t share. Overcome them for financial independence and security. 

Women’s financial challenges over a lifetime

In early adulthood, women often face financial issues related to education and career growth. The gender pay gap can make loan repayment and saving more difficult. Maternity leaves or caregiving responsibilities can affect what you earn now and what you can save for retirement.  

Midlife presents a challenge of balance. Work, family, and caregiving can all reduce income and limit career advancement. Not to mention that women tend to live longer than men and have to think about extended retirement and adequate savings. 

In later life, widowhood or divorce can dramatically impact women’s financial wellness as they may become solely responsible for managing their finances. Therefore, women must understand their financial situation thoroughly and collaborate with professionals to build a plan. 

Overcoming societal and cultural barriers is another significant aspect of women and finances. Women have historically been discouraged from engaging in financial affairs or pursuing high-paying careers. Challenging these barriers and advocating for equal opportunities can help women overcome financial obstacles. 

Investment strategies for women

Investment strategies tailored to women’s needs can significantly shape your financial journey. Here are three key strategies to consider: 

  • Create a diversified investment portfolio: By spreading investments across different asset classes, you can minimize the risk of a single investment negatively affecting your portfolio. Diversification helps withstand market fluctuations and achieve stable long-term returns. 
  • Understand risk tolerance and long-term goals: A personalized investment strategy that matches your comfort level and objectives. 
  • Navigate the investment industry as a woman: Look for advisors specializing in serving women investors and providing guidance on retirement planning, education savings, and wealth management. 

Planning for retirement

Women often encounter unique challenges when saving for retirement. The pay gap between men and women is usually the most notable. With a lower base salary, this automatically results in less being set aside in a 401(k). Even if a participant is maxing their account, the match received by their employer will be less than those of their male counterparts.  

Social security can be a vital income source during retirement, especially if you have taken career breaks for caregiving. Educate yourself about various strategies to maximize Social Security benefits, such as delaying benefit initiation and coordinating spousal benefits. 

Creating a retirement savings plan is also vital. Set specific retirement goals, determine the required funds, and establish a savings strategy to achieve those goals.  

We recently had a prospective client who is a single mom of two. She felt she understood the basics of investing and saving but did not know how much to put aside and where to put the amounts she placed aside. We ran an analysis for her, showing the shortfall in her savings with her specific retirement goal. We then worked together to find a retirement age and a monthly savings amount that felt doable to her and was sustainable for her plan.  

Balancing work, family, and financial goals

Juggling career aspirations and caregiving responsibilities while managing finances can be challenging. However, a strategy and a plan can help achieve some harmony.  

If you need to pull back from your career or want to put a date on your Vocational Freedom, review your current assets, salary, length of leave, potential future salary, and desired spending amount. With this information, run an analysis (perhaps with a Brighton Jones Advisor) to show any changes that may need to occur to make your ideal plan sustainable, including alternate strategies such as taking on consulting work.  

Planning for childcare and education expenses is another critical aspect of balancing work, family, and financial goals. Childcare and education costs can be substantial, and it’s crucial to factor them into the overall financial plan. Creating a dedicated savings account or exploring options like employer-sponsored childcare benefits or education savings accounts can help manage these costs. 

Building a Supportive Financial Network

Finding a trusted financial advisor is a key first step in building your network. A financial advisor can provide personalized advice tailored to your unique financial goals and help you make informed decisions.  

Seek friends, family, or colleagues who understand finance and can offer valuable insights. Engage in open discussions about money, sharing your goals and concerns, and leveraging their experiences to make informed decisions. 

Brighton Jones offers networking events, mentorship programs, and educational resources to help women build strong connections within the finance industry. 

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