Our youngest client is a 13-year old teenage boy who is saving and investing money earned from a lawn mowing business. His mother and a friend brought in their homeschooled children to us to complete an economic unit on investing.
While the students came to our office to learn, it’s the mothers that drove them — and sat in on the lesson — that may have gotten the most out of the unit. These two moms had been focused for years on raising families and home schooling children. They came in not knowing what they didn’t know, and they left wanting answers.
They went home to their household budgets and started asking critical questions in three key financial areas:
• Health: Where are we today
• Wealth: Where are we headed
• Planning: How will we get there
More importantly, these women left ready to talk about money. Women are generally talkers, except when it comes to personal finances. Personal finances are one of the most intimate and emotional conversations we can have with others, which is why so many women find it difficult to talk about personal finances.
The women that do take action early are more likely to plan and follow through than men in their financial choices. This is equally true of successful women in business and business owners, who already know how to go it alone in business but may look to other experts for advice and execution in their personal finances.
The demographics of being a woman today demand that all women become conversant in managing their own and their family’s wealth. Women don’t need to be experts in the field. Rather they should have the knowledge and understanding to know what to ask and a go-to resource, whether family, friends, or professionals, they want in their corner to help make sure they are on track to achieving the financial life they want.
Making up lost ground
Due to demographic shifts, we are in a race to increase the number of women freely talking about their financial lives. Women live on average five years longer than men and make 18 percent less than men, according to the report, Women and Financial Wellness: Beyond the Bottom Line. Combined with time spent outside of work parenting and caregiving, the report found that at retirement, women face more than a $1 million gap in wealth compared to men.
This means women generally have less savings than men at retirement and may need to make what they own last longer. Yet here too women face an obstacle: Women are underserved by the financial services industry. Eighty-six percent of the industry’s financial advisors are male, making it difficult for a woman to find an advisor who relates to their money goals and values in quite the same way as, well, another woman.
As daunting as the wealth gap appears, women are making strides toward bridging the gap. Various studies have found that the vast majority of women have become significant household earners. They’ve also become key decision makers in managing money matters and making spending decisions, either primarily or at the least sharing equally in decision making with the men.
This growing group of women wants control over their finances. When it comes to investing, they want to know what their portfolio is doing for them and whether it is in line with their long-term financial and retirement goals. And they generally want answers to two primary questions:
• How much do I/we need to live?
• If something happens, what safeguards my portfolio?
The answers to these questions lie in the work you do both during the accumulation years and after. The former years are a time when you earn and save, amassing a sum of money set aside for the future.
This is a great time to build out your financial plan and make sure you are doing all you can to achieve financial success. Do a good job of saving early and you won’t need to “retire.” You’ll become financially independent to the point where earning a living becomes optional.
Once you’ve mastered your personal discipline, it’s time to take on an investment discipline that preserves and grows the wealth you’ve earned. The goal here isn’t to hit it out of the park every year — most people can’t stomach that level of risk and market volatility. The goal instead is to invest in different asset classes that bring stability to the portfolio and more longer-term growth.
This may require a shift in how you think about time. Instead of thinking about timing the market, think about time in the market. The longer you have, the better you will do. It’s not about entry and exit points along the way; it’s about remaining disciplined and invested during the financial journey.
Educate and empower
Fully nine out of 10 women will be solely responsible for their own or their family’s finances at some point in their lifetime. This means almost all women will either share in or be primarily in charge of financial decisions.
The more you know, the less you fear. Whether you are a beginner or advanced in how you think about your financial future and investing, act now to fill the knowledge gaps in your financial health, wealth, and plan. The sooner you act, the better the chance you have to succeed later in retirement.
Finding an advisor you trust is half the battle because of the abundant options. Do you go to your local bank, with a private client service sector? Do you go to your local investment advisory office because they are located down the street? Do you go to a large broker/dealer with minimums? Do you sit down and ask your successful friends for a referral?
Know what you want
Advisors are an assorted cast of characters: you need to decide which one you’ll relate to best before you engage them. Each of these advisors specialize in one or multiple areas of wealth management:
• Investment advisors
• Wealth management advisors
• Financial planners
• Retirement, insurance, generational transfer and other specialties
• Registered investment advisors
• Commercial bankers
• Broker dealers
The wide range of choices makes it difficult to know how to select the right fiduciary relationship, with someone who wants to get to know you — your mission, vision, value and goals — and who will be proactive in guiding you along the journey.
Fiduciaries should have a single agenda: to make and keep you and your family financially whole. They work on your behalf, not in their own interest. Avoid advisors who guide you to products, stocks or investment strategies where they benefit twice — from a commission on what they put in your portfolio and a management fee for managing your portfolio.
In addition, look for a relationship that:
Is fully transparent so you know where you are at and what it is costing you
• Provides a financial plan which guides your personal and investment disciplines
• Delivers improvement strategies from a financial, tax and legal perspective
• Takes the time answer your questions
Take comfort in money talk
Educate and empower yourself in the world of personal finance. Take action and choose wisely when you tap a potential advisor. And be ready to define what success means to you when having that conversation with your financial support system, whether that’s with a professional advisor or family and friends.
The authors are representatives of Wambolt & Associates. Lindsey Miller operates in Northern Colorado for the company. Both Cindy Alvarez and Lindsey Miller can be reached at 720-962-6700.