by Debbie Sassen, Financial Planner, Labinsky Financial and Licensed Investment Advisor
by Debbie Sassen, Financial Planner, Labinsky Financial and Licensed Investment Advisor (US)
I recently presented a seminar with this title to a group of more than 20 women in Jerusalem. The following day, the husband of one of the participants approached me saying, “My wife told me everything you discussed and there was nothing that I couldn’t hear. Why was the seminar for women only?”
The simple answer is that women think, talk and relate to money differently from men. The uncomfortable truth, however, is that most women are likely to find themselves dealing alone with complex or vulnerable financial situations. And they may be ill-prepared to do so.
Women today are better educated and hold more executive and professional positions than ever before. They manage the household, maintain the monthly budget and are smart shoppers. Nevertheless, when it comes to financial planning and investing – women, including women who feel confident and secure in most areas of their lives, report a lack of confidence. Many feel intimidated by or unwelcome in the financial world, a domain traditionally dominated by men.
For a woman experiencing widowhood or divorce, these feelings are often intensified – she may be totally unsure how she’s going to manage the longer-term financial issues alone.
According to a new report by the Society of Actuaries, women today face five key risks as they approach and move through their retirement years:
- Outliving Assets – Women typically earn less than men – 24% less, on average, according to the latest annual survey from Oketz Systems. Moreover, women tend to take more time out from their careers to raise children and care for aging parents. The time a woman spends out of the work force reduces her pension accumulation. Due to her life expectancy, which is longer than a man’s, and lower retirement reserves, there is a greater chance that a woman’s financial resources will be insufficient for her needs.
- Loss of Spouse – Because women have longer life expectancies than men and traditionally are younger than their husbands, periods of widowhood of 15 years or more are not uncommon. For many women, the death of a spouse is accompanied by a decline in her standard of living.
- Decline in Functional Status – Women are more likely than men to have longer periods of chronic disabilities and, as a result, are more likely to need long-term care.
- Healthcare and Medical Expenses – While a healthy 30-year old will spend an average of NIS 100 per month on health care, the average 70-year old will spend NIS 1000 per month. These costs continue rising with age.
- Inflation – Inflation can greatly impact women as a result of their long life expectancy. Money saved for retirement will lose its buying power if it is invested too conservatively – a problem plaguing many more women than men.
So what is a woman to do?
- Educate yourself. I cannot emphasize enough the importance of reading books and articles, attending seminars and speaking with knowledgeable professionals in order to increase your financial aptitude and confidence.
- Identify your goals. If you are like most women, you have goals, but haven’t really thought about what it would take to achieve them. Think them through and write them down. The more concrete your financial goals, in terms of magnitude (how much money you need) and timing, the more likely you are to achieve them.
- Develop and implement a long-term financial and investment plan. No rational traveler would take a trip to a far-off location without a road map and directions. Similarly, no rational investor should jump in without spending time and effort developing a plan to meet her financial goals. The plan provides you with a framework, discipline and accountability. If you are married and your spouse hasn’t taken the lead in formulating your family plan, run with it yourself and involve him as much as possible. The plan should be tailored to your life expectancy, your standard of living, your risk profile and your unique financial goals.
- Understand the risks. Women tend to err on the side of caution when investing, preferring to avoid short-term loss rather than achieve long-term gain. The erosion of purchasing power due to inflation is one of the major financial risks faced by women. Conservative bank deposits, which will not keep up with inflation, can often be more damaging to your financial well-being than the partial (and often temporary) loss of your investment values due to market volatility. Currency risk, especially for those individuals with income and/or assets in more than one country, must also be considered.
- Reassess, Rebalance, Reallocate. Even the best financial plan needs to be revisited once a year to ensure that you are still on track to meet your goals. Adjustments should be made and the plan should be tweaked as necessary. And if you have experienced a major life change – the death of a spouse, a divorce, the loss of a job, an inheritance – your plan should be re-worked to reflect your new situation. Planning is not a one-time exercise. As your priorities and goals evolve with time, your financial plan should evolve along with you.
- Remember that success with our finances is in the hands of HaShem, as with all other areas of our lives. We should try our best to plan and to prepare for our financial future, while never forgetting that hakol b’yedei Shamayim!
Yes, women are different from men, and historically, have been less exposed to the financial world. But that’s history! Educate and empower yourself to take control of your financial life. Financial security is not something that just happens – it is something you work toward. And with HaShem’s help, you can succeed.