Financial Planning

Top 5 Financial Challenges for Women and How to Overcome Them

By  Michelle Francis

Disclaimer: To make Wealthtender free for our readers, we earn money from advertisers, including financial professionals and firms that pay to be featured. This creates a natural conflict of interest when we favor their promotion over others. Wealthtender is not a client of these financial services providers. Learn how we operate with integrity to earn your trust.

Women face unique financial challenges. While more women than ever are able to break through the proverbial glass ceiling, many of us may also experience a break from the workforce to raise children, a divorce, taking care of aging parents, or losing our partner. These experiences can lead to feelings of financial ignorance or financial insecurity.

I know this was certainly true for me in my early career. In my mid-twenties, I had just gone through a divorce when the tech bubble burst. I suddenly found myself out of work from a layoff in my telecommunications job. At that time, the job market was in bad shape, and the job offers weren’t rolling in.

This led to a long period of financial instability. For a time, I chose to remain ignorant about my money (and where it was going!), which ultimately left me with more than fifteen thousand dollars of consumer debt. Yikes!

After I found a full-time job again, I knew it was time to get my financial house in order. I began following the teachings of money expert Dave Ramsey and was able to get myself out of debt, save an emergency fund and begin investing in my future.

Guess what? It was amazing to feel empowered about my finances! I’ve been motivated to make good money decisions ever since and to stay very informed about and involved in my household’s financial decisions with my second husband.

It’s why I’m so passionate about helping other women identify their financial challenges in order to face them head-on. So what are the financial challenges many of us women face, or how can they affect us?

Challenge #1: Longer Life Expectancy

It’s a fact: nearly twice as many women outlive men. According to the U.S. Census, widowhood is far more common for older women when compared to older men. In the 75 years+ age group, 58% of women have experienced the death of their spouse, compared to just 28% of men. And half the widows over age 65 outlive their husbands by 15 years.

The Result of Living Longer

On a serious note, though, these widows’ financial well-being is in greater peril if they don’t understand their full financial picture or haven’t saved for those extra years before finding themselves alone.

According to a Merrill Lynch white paper titled Women and Financial Wellness, the typical retirement costs around $738,000. But only 9 percent of American women have $300,000 or more saved. Clearly, this is a large shortfall, which could lead to possible money challenges later in life.

Challenge #2: Interrupted Work Lives

As a working mom of three, two of whom have a rare metabolic disease called PKU, which requires extra care, I’ve experienced an interrupted work life. I chose to work part-time for more than five years after my second husband, and I had our twins.

I know many other women who have done so, too. As part of the so-called “sandwich generation,” I have some friends and clients who have downsized their careers to balance the needs of caring for their kids while caring for an aging parent. (Typically their widowed mother.)

And as we all know, the COVID-19 pandemic led to even more women exiting the workforce to take care of family members when schools and child care centers shut down.

The Result of Exiting (or partly exiting) the Workforce

Many women aren’t considered the family’s primary breadwinner and may have extra household tasks to manage as a result. Can you say overwhelm?

Additionally, doing so leaves many women lagging behind their peers with career opportunities and hence, earn only 77.9 cents for every dollar earned by men, according to PayScale’s recent report, The State of the Gender Pay Gap.

Challenge #3 Reduced Earning and Retirement Savings Potential

According to a Pew Research study, the ongoing gender pay gap showed that by 2020, women in the US were earning 84% of men.

The analysis was conducted on the median hourly earnings of both full and part-time workers. In terms of days, it may take an extra 42 days of work for women to earn the same as what men earn.

However, the difference is stark among women who are also parents. This gap is often referred to as “the motherhood penalty” or “childbearing penalty”.

When it’s discovered that a female employee is likely to become a parent or primary caretaker for an elderly or ailing family member, pay gaps of $ 0.74 for every dollar earned by a male caregiver are observed.

Fortunately, Pew studies have also shown that the gender pay gap seems to be slowly but surely shrinking among younger employees and will hopefully follow suit for working moms.

The Result of Saving Less for Retirement

Over the years, this adds up to women earning not only lower salaries but saving less for retirement. You also need to consider that whatever a woman (or even man) is earning, much of it will be spent on increasing expenses for child care, healthcare, and children’s education and activities.

According to the Merrill Lynch white paper, “When a woman reaches retirement age, she may have earned a cumulative $1,055,000 less than a man who has stayed continuously in the workforce.”

Challenge #4: Fallout from Divorce

Women experience great financial stress, not to mention emotional stress, during and after a divorce. If the divorce proceedings are convoluted and long, the legal fees alone can devastate a woman’s financial outcome when it’s all said and done.

According to a Stanford paper by Michael J. Rosenfeld titled “Who Wants the Breakup?”, the United States has the third highest divorce rate in the world, and women initiate 69% of all marital breakups.

Commonly referred to as a “gray divorce”, the divorce rate in U.S. adults ages 50 and older has roughly doubled since the 1990s, according to the Pew Research study.

The Result of Getting a Divorce

Divorced women, especially those over age 50 who have depended on their spouses for their financial well-being, may find themselves in a more precarious situation after retirement.

According to one report from the U.S. Government Accountability Office, women’s household income fell by 41% following a divorce or separation after age 50, while men’s household income dropped by only 23%.

Challenge #5: Lack of Confidence When Making Financial Decisions

Many women were raised by mothers who weren’t part of major financial decisions being made in the family. Thankfully, this trend is starting to reverse, and an increasing number of women actively initiate money-related conversations and are involved in their household’s finances.

According to a survey by Susan K. Neely, president, and CEO of the American Council of Life Insurers (ACLI), “73% of working women are engaged in managing their long-term finances, separate from household budget management.”

On the other hand, a different survey conducted by Artemis Strategy Group showed that only “57% of working women feel knowledgeable about personal finance, savings, and investments.”

Being involved in learning and making decisions about mortgages, tax returns, real estate investments, and investment assets should become a top priority for every woman, whether single or in a partnership.

How to Overcome These Financial Challenges

If you made it this far, you might be thinking, “Yikes! I feel super bummed out seeing those statistics.” I promise, my intent in sharing them isn’t to make you feel bad. Rather, it’s to give you a high five to celebrate the things you are doing and motivate you to figure out how to do the rest.

Ready to take action? Here’s a list of suggestions.

  1. Google can be a great place to start when you have a question. Just make sure that you’re researching information from a reputable source. As an example, if I read an article or blog post referencing useful information related to investments or taxes, I’ll verify it by going to another reputable source like the IRS or SEC website.
  2. Increase your financial literacy by reading personal finances blogs, listening to podcasts, or watching videos produced by experts that simplify the concepts. (I’m going to post a future blog with links to my favorites.)
  3. Be mindful of your future needs. Acknowledge early on that you may spend a big part of your life on your own, so always make saving one of your biggest priorities. Even if it’s just saving an extra $50 extra per month or increasing your 401k contribution by 1-2%, the money can really add up over time.
  4. Don’t go it alone. Seek guidance when you find yourself feeling ill-equipped to make a financial decision, or you experience a big life change like a divorce or the death of a spouse.

How a Financial Planner Can Help

A financial planner can motivate you to make positive changes and informed decisions when your financial life feels overwhelming. Find someone objective, unbiased, and empathetic to assess your situation so that you can focus on the emotions surrounding a big change or loss.

We, women, face unique challenges, and they are usually best understood by another woman. Such knowledge should go beyond academics and take into account the emotional aspects of your money journey.

Learn more about why I’m passionate about serving women here.

This article was originally published on Life Story Financial and is republished on Wealthtender with permission. This article reflects the insights and opinions of its author and is not a recommendation or endorsement of their views or services.

About the Author

Michelle Francis

Michelle is a financial planner and the founder of Life Story Financial. She provides comprehensive financial planning and investment management services to women and couples in executive leadership and entrepreneurial roles locally in Arvada, Colorado, and virtually throughout the United States.

Disclaimer: To make Wealthtender free for our readers, we earn money from advertisers, including financial professionals and firms that pay to be featured. This creates a natural conflict of interest when we favor their promotion over others. Wealthtender is not a client of these financial services providers. Learn how we operate with integrity to earn your trust.