She-cession. Career Interruption. Juggling competing demands. Burnout. Can you relate to any of these terms? They all describe some of the circumstances that are causing the pandemic to hit women particularly hard, and the ever-looming gender finance gap.
As of January 2021, women’s labor-force participation rate fell to 57% which is on par with the rate in 1988, according to a study by the National Women’s Law Center. Women are carrying stress about financial insecurities, physical and mental health concerns for loved ones, anxieties about job layoffs or furloughs, childcare and homeschooling, keeping up job performance, and household responsibilities, which is a recipe for burnout. In fact, the recent McKinsey 2020 Women in the Workplace study reports that 1 in 4 women are now considering something that would have been unthinkable a year ago – either downshifting their careers, or leaving the workforce entirely.
READ MORE: It’s Going To Take 20 Years For The Gender Pay Gap To Recover to Pre-Pandemic Levels
So, what should women be doing to make sure we are making the best financial decisions for ourselves, our families and our careers? And what can they be doing to bridge this gender finance gap? Taking the time (albeit limited during this crisis) to review your current financial plan and consider future options will go a long way towards providing you context for your best next steps.
Step 1: Review and update your financial plan
Start by making sure you understand your financial plan’s major components, like your investment strategy, tax planning, estate documents, budget and the goals you want to achieve with your finances. Are these components still accurate in their assumptions, or do you need to adjust them based on your current circumstances? Even if you don’t currently have a financial plan in place, it’s not too late – you can start now. Taking control of your finances will help you regain confidence and peace of mind.
Step 2: Explore options for change
If you are a small business owner whose revenue has been reduced by the pandemic or work in an industry that has been hit particularly hard in the last year, you may be considering if you want to close your business, or how long you can hang on financially to wait out the economic recovery. Your financial advisor will be a great help in projecting what makes the most financial sense for your unique situation.
I recently helped a client decide if she should use her personal funds to support her small business that had been running a significant loss in the pandemic. While her heart was still in the business, the amount of time, expense and effort that would be required to comply with the new health guidelines, and the impact of the cost to her personal assets, led her to decide that it made more sense to close the business and pursue other opportunities.
Another client owns a consulting business that provides services to an industry that has been very hard hit in the pandemic. When a business is looking to cut costs just to keep the doors open, one of the first expenses that gets slashed is consulting fees. She was looking at an extended period for the industry (and therefore, her consulting revenue) to recover, and she was not sure she wanted to keep working full-time for significantly less income. My client originally planned to retire in four years, but we revised her financial plan and helped her make some decisions about future lifestyle expenses that will allow her to retire at the end of this year instead. Whether you’re considering leaving a job or downshifting temporarily, making sure you understand the financial impact of each scenario will help you make sound choices about your next steps. These are challenging decisions and harsh realities to confront, but it’s important to weigh your options in order to plan for your future financial well-being, and are working toward closing the gender finance gap.
Step 3: Consider how your decisions may affect loved ones
While you and your immediate family are the most important people to consider when making these decisions, we’ve all had to consider COVID’s financial impact on others in our family circle. If you’re the fortunate position of not experiencing financial stress, your extended family may be asking you for help. If that’s the case, it is likely that you want to help, but the best practice is to work with your financial advisor to make sure you truly can afford to help without harming your own financial stability.
I have several clients who have adult children who have lost jobs in the pandemic and are in need of financial support. Do you consider direct financial support by just giving them money, should you structure a loan to be paid back when they are employed again, or is the best answer to provide support by letting them move in or help with childcare? Even the “simple solution” like letting a loved one move in with you has financial implications, like increased costs for utilities or higher grocery bills. Besides financial considerations, you’ll need to decide on logistics, like if you will be an always-on-call babysitter, or how to determine who gets to use the extra bedroom as an office and who will work from the dining room table. Discussing both the costs and lifestyle considerations with your financial advisor first, before you talk about how (or even if) you can help a loved one, will give you the confidence you need to know you’re making a good decision for everyone involved.
There’s no doubt that the pandemic has deeply impacted many women both emotionally and financially, forging a wedge in the gender finance gap. And likewise, for women in particular, financial independence has power. Embracing the power of your financial plan will give you the ability to live your life on your own terms, to prepare for the unexpected with confidence, and to make informed decisions that will give you long-term peace of mind.
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