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Top 5 financial challenges for women and how to overcome them

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Women face unique financial challenges. While more women than ever may be breaking through the proverbial glass ceiling, many of us may also experience a break from work to raise children, divorce, care for aging parents or lose a partner. These experiences can lead to feelings of financial ignorance or financial insecurity.

I know this was true for me early in my career. In my mid-twenties, I was newly divorced when the tech bubble burst. I suddenly found myself out of a job due to a layoff from my telecom job. At that time, the job market was in a bad state and there were no job offers.

This led to a long period of financial instability. For a while, I decided to stay in the dark about my money (and where it was going!), which ended up leaving me with over fifteen thousand dollars in consumer debt. Oh!

After finding full-time work again, I realized it was time to get my financial house in order. I started following the teachings of a money expert Dave Ramsey and was able to get out of debt, save an emergency fund and start investing in his future.

Guess what? It was amazing to feel confident about my finances! Since then, I’ve been motivated to make good money decisions and stay on top of and involved in my family’s financial decisions with my second husband.

That’s why I’m so passionate about helping other women identify their financial challenges so they can face them head-on. So, which ones financial problems that many of us women faceor how can they affect us?

Challenge #1: Longer life expectancy

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

The result of a longer life

On a serious note, the financial well-being of these widows is more at risk if they don’t understand their full financial picture or save those extra years before they find themselves single.

According to a Merrill Lynch white paper titled Women and financial well-being, a typical retirement is worth about $738,000. But only 9 percent of American women have $300,000 or more saved. Obviously, this is a big disadvantage that can lead to possible money problems later in life.

Challenge #2: Interrupted Work

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

I know many other women who have done this as well. As part of the so-called “sandwich generation,” I have friends and clients who have cut back their careers to balance the demands of caring for their children and caring for their aging parents. (Typically, their mother is a widow.)

And as we all know, the COVID-19 pandemic has caused even more women to leave the workforce to care for family members as schools and orphanages close.

The result of exit (or partial exit) from the labor force

Many women are not considered the primary breadwinners and may have additional household responsibilities as a result. Can you say overload?

Additionally, because of this, many women lag behind their peers in career opportunities, and as a result earn only 77.9 cents for every dollar earned by men, according to a recent PayScale report. The situation with the gender pay gap.

Task No. 3 Reduction of salary and the possibility of pension savings

According to A Pew Research A study on the gender pay gap found that by 2020, women in the US will earn 84% of what men earn.

The analysis was based on average hourly earnings for both full-time and part-time workers. In terms of days, women may need an extra 42 days of work to earn as much as men.

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

When a female worker is found to be more likely to become the parent or primary caregiver of an elderly or sick family member, there is a pay gap of $0.74 for every dollar earned by a male caregiver.

Fortunately, Pew research also found that the gender pay gap appears to be slowly but surely narrowing among younger workers, and hopefully will do the same for working moms.

The result is less savings for retirement

Over the years, this has increased to the point where women not only earn less, but also save less for retirement. You also have to consider that no matter what a woman (or even a man) earns, a large portion of it will be spent on increasing costs of child care, health care, education, and children’s activities.

According to a Merrill Lynch document, “When a woman reaches retirement age, she can earn a total of $1,055,000. less than a man who works constantly.’

Challenge #4: Consequences of Divorce

Women experience a great deal of financial stress, not to mention emotional stress, during and after divorce. If the divorce process is complicated and lengthy, the legal costs alone can destroy a woman’s financial bottom line when all is said and done.

According to a Stanford paper by Michael J. Rosenfeld’s “Who Wants a Breakup?”, the United States has the third highest divorce rate in the world, with women initiating 69% of all divorces.

Commonly referred to as “grey divorce,” the divorce rate among American adults age 50 and older has roughly doubled since the 1990s, according to Pew Research.

The result of the divorce

Divorced women, especially those over 50, who depend on their spouse for their financial well-being, may find themselves in a more difficult position after retirement.

According to one report from US Government Accountability Officewomen’s household income dropped by 41% after divorce or separation after age 50, while men’s household income dropped by only 23%.

Problem #5: Lack of confidence when making financial decisions

Many women were raised by mothers who did not participate in making important financial decisions in the family. Fortunately, this trend is beginning to decline, and more women are actively initiating conversations about money and handling their family’s finances.

According to the survey According to Susan K. Neely, president and CEO of the American Council of Life Insurers (ACLI), “73% of working women manage their long-term finances separately from managing their household budgets.”

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

Participating in research and decision-making about mortgages, tax returns, real estate investments, and investment assets should be a top priority for every woman, whether single or partnered.

How to overcome these financial problems

If you got this far, you might be thinking, “Yikes! I feel very confused when I see these statistics.’ I promise, I’m not sharing them to make you feel bad. Rather, it’s to give you a high five to celebrate what you’re doing and motivate you to figure out how to do the rest.

Ready to take action? Here is a list of suggestions.

  1. Google can be a great place to start if you have a question. Just make sure you research the information from a reputable source. As an example, if I read an article or blog post that links to useful information related to investments or taxes, I will check it out by going to another reputable source, e.g. IRS or SEC site.
  2. Improve your financial literacy by reading personal finance blogsto listen podcasts, or watch videos created by experts that simplify concepts. (I’m going to post a future blog with links to my favorites.)
  3. Keep your future needs in mind. Recognize early on that you may spend a significant portion of your life alone, so always make saving one of your top priorities. Even if it’s just saving an extra $50 a month or increasing your 401k contribution by 1-2%money can really add up over time.
  4. Don’t go alone. Seek advice if you feel ill-equipped to make a financial decision or are going through a big life change, such as 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 make informed decisions when your financial life seems overwhelming. Find someone objective, unbiased, and empathetic to assess your situation so you can focus on the emotions associated with big changes or losses.

We women face unique challenges, and usually another woman understands them best. Such knowledge should go beyond academics and consider the emotional aspects of your money journey.

Learn more about why I love serving women here.

This article was originally posted on Life Story Financial and reposted on Wealthtender with permission. This article reflects the ideas 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 founder Financial history of life. She provides comprehensive financial planning and investment management services to women and couples in executive and entrepreneurial positions in Arvada, Colorado and virtually throughout the United States.

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