Financial Planning for Women

Financial Planning for Women
Words by:  Bryon Gragg
Published May/June 2011

Most financial planning techniques and strategies are gender neutral as far as maintaining a safety net or emergency fund, saving and investing appropriately, proper risk and debt management.  These are simply areas everyone should cover.  However, women commonly face more challenges in financial planning.  Issues such as life expectancies, work patterns, earning potential and risk tolerances make financial planning more involved for women than their male counterparts.

This column will highlight some of the common questions women ask, or should be asking, in regard to their financial lives.  Of course, these are general in nature and should be tailored to the individual woman and her unique needs.  What follows are four hypothetical women and some of the financial issues they should be concerned with.

Stacie – The Single Woman
Stacie is newly on her own and has never been married.  Her financial concerns should focus primarily on budgeting and saving.  Her insurance needs are centered more on health and disability coverage rather than life insurance.  Stacie should develop a safety net or emergency fund of three to six months of income in case she loses her job or faces an immediate emergency need for cash.

Lisa – The Married Woman with No Children
Lisa would most likely need to be concerned with overall household budgetings.  Is her income enough to support the household in case of death or disability of her husband? On the flip side, is her husband’s income enough to cover expenses in case of her disability?  Do they have a safety net in case of job loss?  Is their debt load appropriate?  Does she have a firm grasp of the family finances?  Many times, the wife controls the checkbook, so the question here is whether she takes time to explain it to her husband. Is there a coordinated family plan for retirement?  These are all questions Lisa should have a good answer for to make sure everything is in order.

Janice – The Married Woman with Children
Janice faces the same concerns as Lisa plus the cost of raising and educating children.  Her concerns revolve around being able to care for her children should something happen to her husband.  Can the family adjust to one income if she is staying at home with the children?  If not, can the family adjust finances for daycare while Lisa works?  These are budgeting questions best discussed prior to having children.  Life insurance becomes much more important in a financial plan when children are involved.  Remember that insurance is for insuring against a specific risk and not for an investment.  This this case, the family is insuring they can maintain tier living status, and fund educational needs and retirement should the primary wage earner no longer be around.  Work patterns are different for women with children, and over their lifetime they generally work 13 years fewer than men the same age; consequently they often retire with fewer assets.

Dawn – The Newly Single Woman
Whether by death or divorce, Dawn faces financial challenges while enduring a traumatic life change.  Like Stacie, budgeting is a major focus for Dawn.  She wants to know she is going to have enough money to live comfortably and maintain her lifestyle. While facing the freedom to be her own woman, Dawn is still concerned that she will have enough money to live, as well as plan for long-term care.  If Dawn is involved in a divorce, she should take a financial viewpoint into consideration.  While it may be desirable to receive the home in settlement, there are ongoing costs of maintaining a residence.  Is the cash flow going to be sufficient to cover those expenses?  If Dawn’s husband passed, does she still need the house and related responsibilities?  These are some of the financial issues that Dawn should consider.

The basics of financial planning apply to everyone but as the examples above show, each situation has unique circumstances.  If you’re a woman, now is the time to make sure you have your financial house in order.  If you’re a man, now is the time to sit down with the special woman in your life and make sure you have all the bases covered.  She’ll appreciate it and you’ll find it makes you feel pretty good, too.