I’m a big proponent of financial empowerment for everyone, but women in particular have a lot on their plates.
While women are responsible for 85% of all consumer purchasesand 90% of household financial decisions, many still don’t feel financially confident: 63%of women say financial information can be overwhelming and difficult to understand, and only about half say they make investment decisions on their own, according to E-Trade data.
It might be an adjustment to think about your financial future as something that stands alone, separate from your partner or your family. But at the end of the day, you can be your own best friend when it comes to your financial empowerment. Take 30 minutes to think about what you’ll need for the next 30 years—and educate yourself about your choices so you can make confident decisions for your and your family’s (financial) future.
Hitting close to home
Traditional financial planning tends to assume that income will grow at a steady rate each year, but our financial lives as women can often take a more nonlinear trajectory. Consider caregiving: More women have left the workforce today than at any other time in the last 33 years to take care of children and/or aging parents during the pandemic.
But taking a break from work can mean losing out on salary and professional opportunities not just today, but down the road—as well as wealth-building opportunities like equity compensation or company retirement plans with matching contributions. It’s a hard question to answer, but how will your choices today affect your cumulative and future earning potential? And how will your money affect your future security?
Plan for the best, prepare for the worst
Since women so often step up to the plate for others, family and life events tend to have an outsize impact on our financial outlook. Rather than being caught off-guard, think through some of life’s more predictable “unpredictable” events and how you can start to get yourself better prepared:
· Caregiving: If you’re facing a caregiving need, don’t be afraid to take advantage of flexible work policies or backup care options—and ask for help. Outsource if you can, but if you do decide to take a pause on work, set up a regular calendar reminder for virtual networking check-ins to keep your professional connections warm. Also, be sure to discuss a savings plan with your family. If you’re caring for a child, consider starting a 529 College Savings Plan to help offset future education costs.
· Retirement: Only 39% of women are confident they’ll have enough resources to last into retirement. Make sure you understand the retirement plan options available to you and take advantage of any employer matching. Save early and often, automate your savings whenever possible, and increase your savings every time you receive a salary bump or bonus. If you hold any company stock via an employee stock purchase plan (ESPP) or equity compensation program, make sure you have a strategy around that to build for your future.
· Losing a loved one: Losing a loved one may be one of the most traumatic events we ever face, but with women living on average five years longer than men, many women may outlive their male partners. That’s all the more reason to save for your golden years, and make sure you have enough set aside to give yourself a one-year “decision-free” buffer if the worst should happen.
· Divorce: While it won’t happen to everyone, divorce is a common life occurrence that can be a cataclysmic emotional and financial drain, often leaving women juggling their own financial security as well as the needs of children and older relatives. While no one wants to plan for a worst-case-scenario, make sure you are setting aside retirement and emergency savings today that can help keep you afloat in emergencies like this.
The financial challenges we face as women can have a ripple effect on our lifelong financial success. One way to give yourself more power over your financial future is to start building savvy habits today that can help you prepare you for whatever life throws your way. Here’s a good way to begin:
1. Start the conversation. Talking about money can be intimidating, but it’s important to take an active role in stewarding your family’s assets. Tackle your retirement plan, how your assets are allocated, future estate planning, and financial protections for your family (like life insurance). Don’t forget details like usernames and passwords for online financial accounts, and build a trusted circle of loved ones or financial professionals to support you.
2. Cover the basics. Your financial future starts with your financial present, so make sure to keep yourself financially healthy today. Establish an emergency fund with 3-6 months of living expenses. Pay off high-interest debt first. Automate your savings and monthly payments if you can. Account for healthcare costs in your retirement strategy, and talk to an adviser about long-term-care insurance, annuities, or other strategic investments.
3. Establish your own credit history. Your credit score plays a major role in which financial opportunities, interest rates, and credit card rewards you can reach. You can build up a positive credit history by using credit cards strategically, paying utility bills on time, and making regular payments against student loans and mortgages. Avoid canceling credit cards or applying for multiple credit cards at once—and aim to stay below a 30% utilization rate.
4. Make your workplace work for you. More companies are taking steps to help women plan for their financial future, whether through planning tools, professional guidance, or emerging benefits like student loan repayment. More employers are also offering flexible work options that may meet your family’s needs. Check in with your employer to find out what they might offer that can help you build a more secure financial foundation.
It’s important to take care of yourself and your family, but it’s even more important to do so with a realistic view of how life’s twists and turns can affect your anticipated income, possible breaks from work for family needs, and planning for your retirement and legacy.
Along with caring for others, make sure to also care for your own future needs. Taking evensmall, simple steps like these today can go a long way in helping you stand strong and take confident control of your financial future.
Kate Winget is head of corporate and participant engagement, Morgan Stanley at Work.
This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be appropriate for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
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Investors should consider many factors before deciding which 529 plan is appropriate. Some of these factors include: the Plan’s investment options and the historical investment performance of these options, the Plan’s flexibility and features, the reputation and expertise of the Plan’s investment manager, Plan contribution limits and the federal and state tax benefits associated with an investment in the Plan. Some states, for example, offer favorable tax treatment and other benefits to their residents only if they invest in the state’s own Qualified Tuition Program. Investors should determine their home state’s tax treatment of 529 plans when considering whether to choose an in-state or out-of-state plan. Investors should consult with their tax or legal adviser before investing in any 529 Plan or contact their state tax division for more information. Morgan Stanley Smith Barney LLC does not provide tax and/or legal advice. Investors should review a Program Disclosure Statement, which contains more information on investment options, risk factors, fees and expenses and possible tax consequences.
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