Women: Now Is The Time To Take Charge Of Your Finances

Let’s face it:  Few of us marry and then begin planning for divorce or widowhood.  But based on the statistics, that is precisely what we should do to help us take charge of our finances.  I know this because I am one of the improbable statistics.

Consider this: the average age of a widow in the U.S. is 59. (I matched the age statistic almost to the day.) And, women divorce for the first time at age 30 (on average). Even more interesting, according to usafacts.org, in 2019 thirty percent of American women had never been married, up from 23% in 1990. Add to that, women tend to live five years longer than their male counterparts in the U.S.  In short, most of us will be responsible for managing our wealth and given our longevity—we need more money.

A recent study published by U.S. Trust, shows the majority of women defer financial and investment decisions to men.  Sixty-four percent of baby boomer men are the dominant investment decision makers in their home while 27 percent claim equal partnership with their wives.  Only 9 percent of baby boomer women take on the dominant role of investing the family assets.  The numbers are even worse for millennials.

If women are widowed at 59, divorced at 30 or single by choice and tend to live longer than men, we need a plan. A plan that reflects our goals. A plan to take charge of your finances.

The majority of women identify as savers and say they lack the confidence to invest, but, here’s the rub:  The empirical research demonstrates women make better investors than their male counterparts.  So, this is your #ChoosetoChallenge challenge: Don’t defer, don’t excuse yourself from the conversation. Instead, engage and raise your financial IQ.

Let’s examine the research. Brad M. Barber and Terrance Odean published a landmark study in 2001 entitled: “Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investing,” which analyzed the portfolios of men and women over an extended period. The findings? Men trade 45 percent more than women and generate returns on average about 1 percent less than women annually over the ten years studied. For single men, the annual deficit is 3%.

Why is that? In 2009 the National Council for Research on Women gathered an extensive amount of research from around the globe and published a comprehensive study on “Women in Fund Management”.  The study concludes that women make decisions based on a more comprehensive collection of data and are willing to consider ideas that may be contradictory to their original assumptions.

So let’s start with a few intelligent investing rules to get our financial IQ juices flowing.  Here are three from my book, The Women’s Guide to Successful Investing. 

Intelligent Investing Rule: Establish your life goals early and stick to your plan. If you think it’s hopeless because you’ve waited too long, remember that the time to save to invest is always now. It is never too late.

Witness:  Stephanie Mucha. A retired nurse who began investing after retirement, on a fixed income and who died (albeit at 100+ years of age) with a portfolio which topped $4.5 million dollars. It is never too late to invest — or to take charge of your finances.

Intelligent Investing Rule: Don’t run with the fast crowd: Establish an investing discipline that meets your objectives. Never chase total return and never, never, never buy a stock in a company you do not understand or does not meet your risk and investing objectives.

Witness:   The recent GameStop craze is a reminder that when stocks trade on momentum alone, they go down as fast as they go up.

Intelligent Investing Rule: High investment management fees are Enemy #1 for women seeking to accumulate wealth. Remember that fees are the single biggest threat to total return in your portfolio.

Witness:  The U.S. Department of Labor (DOL) published an interesting study on the eroding effects of 401(k) fees on long-term investor returns.  In summary, if your fund manager or advisor charges 1.5% versus 0.5%, for example, compounded over 35 years your account balance would be reduced by 28%.

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I know your plate is full with the daily business of living and that adding another “to do” seems impossible.  But, our greatest strength is our strength and the ability to squeeze just one more thing into our day and to do it well.  As the former governor of the Great State of Texas, Ann Richards once said, “After all Ginger Rogers did everything that Fred Astaire did.  She just did it backwards and in high heels.”