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Behind the Bucks
Women and men are worlds apart in the way they earn, spend, save and perceive money, financial experts say. Women need more money because they live longer, but they earn less. Women’s money attitudes are mired in gender roles, says Olivia Mellan, co-author of “Money Shy to Money Sure: A Woman’s Road Map to Financial Well-Being.” “Women tend to have an underconfidence problem when it comes to money,” Mellan says. “A lot of them are raised to believe they won’t be very good at this stuff, and, if they’re lucky, a man will do it for them.” The biggest threat to female financial security is turning over total control to other people, says Esther Berger, a financial planner and author of “Money Smart: Secrets Women Need to Know About Money.” “There is a mindset among women today that it’s fine not to deal with their own finances because someone else will do it for them,” Berger says. “It could be a spouse, an adult child, an accountant — fill in the blank — but it’s traditionally a male.” “Prince Charmings leave and Prince Charmings die and Prince Charmings aren’t always such great managers,” says Barbara Stanny, author of several finance books for women. “Always protect yourself. It’s like wearing a seatbelt. You don’t expect the car to crash, but you wear it just in case it does.” It’s never too late — or too early — to take control. The experts tell you how: If you’re new to the workforce… • Negotiate your salary. “Women are so into everybody being happy, including their boss, that they tend not to lobby for their own interests,” Mellan says. “It’s very important that women learn to ask for more.” • Get rid of your credit-card debt. After you wipe out your balances, make sure you pay off your cards every month. • Pay yourself first, and make it a habit. Consider setting up a regular, automatic transfer to a savings account. “If you get used to spending 90 percent of your income instead of 100 percent, you’ll be so grateful,” says Ruth Hayden, financial consultant and author of “How to Turn Your Money Life Around: The Money Book for Women.” “It starts with being willing to live on less than you earn, which is the absolute key to wealth.” • Contribute to a retirement plan. Retirement might seem like a lifetime away now, but the later you start saving, the more compound interest you miss out on. • Learn about investing. “Women tend to be risk averse,” Mellan says. “They might be afraid of investing, but doing nothing is the worst risk of all because inflation will eat their money up.” If you’re cohabitating… • Keep most finances separate. Just because you commingle your pots and pans doesn’t mean you should combine your money, Stanny says. “Your money is yours. Don’t support him if he can’t support himself.” • Get intimate — financially. “I would say that if a couple is sharing household expenses, it might be time to exchange credit reports,” says Anya Kamenetz, journalist and author of “Generation Debt.” “It’s extremely important to come clean, be honest and set goals.” • Draft an agreement. It’s not fun to approach a relationship as if it were a business, but it’s necessary. Decide who owns what and put it in writing in case you eventually split up. • Be especially careful about owning property together. Don’t buy anything as a couple unless you both intend the relationship to be permanent. Even so, consider defining percentage ownership in official documents. If you’re getting married… • Keep some money in your own name. “One of the scariest things that happens is when a woman loses her spouse and has no money, no credit in her own name,” Stanny says. • Stay involved. “If your husband is the primary caretaker of the money, you don’t have to kick him off the job,” Stanny says. “But you darn well better participate in financial decisions from a place of knowledge, not fear.” • Be honest now. Remember that your spouse’s credit history becomes entangled with your own. • Determine what money lessons you want to teach children. • Read your tax return before you sign it. It’s harder than in the past to qualify for innocent spouse relief, in which you are relieved from tax liability because you believe only your spouse is liable. If your name is on the tax return, you are legally liable for everything it says. If you’re happily single… • Maximize your earnings. “Be very clear about what you want and how much you want to make,” Stanny says. “That decision is like a magnet. You start drawing opportunities to you.” • Take advantage of your ability to save more. If you have no kids or spouse and live by yourself, your total expenses can be a fraction of a family’s. Save as much of it as you can as early as you can. • Work with a fee-only financial adviser. “They can look at your whole situation and goals,” Stanny says. Since they don’t work on commission, you pay only a flat fee per hour or per project. • Draw up a will. Typically, assets go to a spouse or surviving children. If you have neither, determine what will happen to your assets after you’re gone. If you’re an empty-nester… • Redefine your roles in relation to your spouse. “One of the highest times for a divorce is retirement. Another is when the kids leave because the roles change and we don’t know what to do,” Hayden says. “I would send those couples on a retreat for a weekend and have them approach it like a business. Come up with a vision.” • Redefine your own purpose. “Women self-define as a mom,” Berger says. “It’s a primary role, a primal role. It runs very deep. But now you can really start taking care of yourself.” • Put away more for retirement. Unless your child is away at college and you’re helping pay for education, your expenses likely will decrease. Invest that extra money. • Let the adult kids take care of themselves. “Give the helping hand if they need it,” Berger says. “But if you’re helping your children at the cost of helping yourself, you’re going to end up burdening someone down the road, and that’s not helping anyone.” If you’re going through a divorce… • In negotiations, don’t exchange retirement money for the house. “This is absolutely the biggest mistake women make because they can’t undo it,” Hayden says. “Whatever retirement money they do get is money and shouldn’t be seen as cash flow. This isn’t about paying for the groceries and the mortgage. It’s about paying the 70-year-old you.” • Don’t make big decisions for a while. If you can delay major steps — such as whether to sell the house — do so. “Hold off until the dust and emotion settle after a year,” Berger says. “Be smart about differentiating what needs to be decided today and what doesn’t.” • Seek good advisers. “Women need to get help in a variety of ways so they don’t act out of revenge or depression,” Mellan says. “They should see that they’re taking care of themselves in terms of what will make them feel good over time.” • Hold out for a fair settlement. “I have seen divorce after divorce where women don’t want to make waves, so they give away everything,” Stanny says. “A couple years down the road, they slap their heads and say, ‘What was I thinking?’” If you’re retired… • Determine how much money you need to live on. If you have investments, withdraw no more than 4 percent annually, says Diane Pearson, director of financial planning at Legend Financial Advisors. “But adjust withdrawals based on your new account balance each year. Four percent when you have a portfolio of $200,000 is different than if you have a portfolio of $100,000.” • Keep a tight cap on spending. If something doesn’t fit into your predetermined allowance, don’t do it. “Stay within that cash-flow plan no matter what,” Hayden says. “Spending 2, 3 or 4 percent more than you were supposed to can have a decimating effect on the long term.” • Consider retitling your assets into a revocable trust. “Your assets will pass directly to your beneficiary through the trust and will not have to go through probate, which will save time and money,” Pearson says. • Make sure your estate documents are in order. Many women take care of these documents, such as a will, a health-care directive and power of attorney, when they have young children. But even for women without children, life looks different at retirement. Make any necessary changes based on your current circumstances. • Nurture yourself in inexpensive ways. “I think a lot of retired women feel lonely and spend money they don’t have,” Mellan says. “We, as a culture, need to learn how to treat ourselves in a way that doesn’t cost a lot of money.” © 2006 BY WN/CHICAGO TRIBUNE |
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For all of the last century’s advancements in gender equality, women still may be the meeker sex when it comes to one critical area of their lives: money.