All Other Money Problems Women Should Know About
Money is more difficult for women than for men. Not because we cannot control our spending or are simply not motivated, but because there are real structural barriers to achieving financial freedom on a par with our male friends and family members. We will always have to work a little harder if we are to be successful and financially independent.
We’ve all heard the statistics on the gender wage gap: On average, women earn 76 cents on the men’s dollar. (There are a lot of nuances here, so before you comment: yes, I have heard, researched and interviewed experts on all the excuses for the wage gap. The figure I used compares wages for women to wages for men in general.) But the pay gap is far from the only gender money gap to worry about.
Ellevest, a roboadvisor launched by Sally Kravchek whose mission is to make investing more understandable for women (this scheme makes me cringe too, but I think the company is really doing well and genuinely wants to help women achieve financial success), has a free guide to all the gender differences in money women should be aware of. Because it’s not just about your salary, although it is the basis. There is a job achievement gap, an unpaid labor gap, and a food price gap (also known as a pink tax).
The two I want to focus on are the investment gap and student loan debt.
Investment gap
First, an important point: all of the tips in this article are also suitable for men. There is no difference in what you should do, but there are differences in how men and women think and interact with money that are worth analyzing.
Women tend to be more cautious about their investments, partly because they are generally more risk averse, and partly because they think they do n’t know as much about investing as men think.
“The mistake women make is that we think we need to understand everything about investing before we start,” says the Ellevest report. “But what happens all too often is that we feel like we don’t know enough and so we don’t invest at all,” or we postpone it – and this entails huge costs.
A 2016 Blackrock poll found that 71% of women’s assets are in cash, compared to 60% of men’s assets. This is a huge difference. How is it all shaken out? According to Ellevest,
Do you know how much you might be missing out? If you make $ 85,000 a year and put 20% of your income in a bank, you are losing $ 1.1 million or more over the next 40 years.
Too far into the future for you? Well, if you make $ 85k a year, put 20% in a bank and wait 10 years to invest, you could be losing around $ 100 every day. For 10 years.
As for your retirement savings, you can also add reduced Social Security amounts (based on the 35 highest wage years) or retirement benefits (if your company offers one) since your salaries are lower, not to mention everyone else. investments that you could make.
So, first, stop thinking that you don’t know enough to invest, and just go for it. A guy you know who likes to talk about investing? He may have read one book on the stock market, contributed to his 401 (k), and recently thought about buying Ripple. He’s not Warren Buffett. And you don’t have to be successful. According to Ellevest, it’s that simple:
- Nobody knows what will happen in the market, so diversify between different asset classes such as US and international stocks, bonds and real estate to reduce your risks.
- Do not pay more than 0.20% for the funds in your portfolio, and if you use the services of an advisor, no more than 0.75% in consulting fees.
- Don’t try to time the market because you will screw up. You are in it for a long time
- Invest regularly
- Keep it Simple with Inexpensive Index Funds
Of course, there are a million and one ways to mix this up and explore new asset classes and funds. But that’s actually all you need to know to get started financially enough.
Debt gap
According to a 2017 report by the American Association of University Women , women hold roughly two-thirds of the roughly $ 1.3 trillion in U.S. student loan debt owed by a combination of higher graduation rates and lower wages. And because men usually start with a higher salary than women at the start of their careers, they paid off 10% more of their student loan debt than women five years after graduation.
In general, due to the mismatch, it may take women two more years to pay off their debt.
Having this debt can negatively affect other aspects of a woman’s life besides her bank account. “The debt payment gap can also make it difficult for women to accept risks that can pay off in the long term, such as changing jobs or starting a business,” writes AAUW.
What can you do about this? Well, a lot of this is out of your control. It takes a lot to pay off the debt, and each case is individual. But here’s what Ellevest recommends:
- Check again that your payments are automatically paid
- Call every three to six months and ask your lender to lower your interest rate if you pay on time.
- See if you can get your loans refinanced if you have good credit
- Here are some more recent articles on student loan debt.
Ultimately, it’s important to know that the problem exists and to take the steps you can fix, which is most important.
What to do in priority
This may seem like a lot if combined with investing and setting up an emergency account and paying off any other debt you owe, not to mention paying rent and buying groceries. The report is full of good advice, but this general prioritization plan is helpful if you’re a real financial beginner:
20s: Pay off high interest debt, create a loan, create an emergency fund, start investing for retirement, invest for other purposes.
30s: Save / buy a house, pay off debt, increase retirement plan contributions, invest in other goals such as a college savings plan (529).
The 40s: Maximize your retirement plan contributions, pay off debt, invest in your nest, get life insurance, invest for other purposes.
50s: Maximize your retirement plan contributions, avoid debt, invest in once-in-a-lifetime travel, get long-term care insurance, invest for other purposes.
60s: Consolidate retirement accounts, avoid debt, maximize retirement contributions, keep investing for other purposes.
70s, 80s and 90s: Retire well, live like a boss and put on your Golden Girls.
Race, investment and debt gaps are also exacerbated by race: black women tend to fare worse in every category than whites. Paying off our own debt or additional investment will not solve structural problems, but it is important to understand that in order to achieve the same as men, we need to do a little more.