For many women, feeling confident is directly related to having financial security. The financial security that this confidence stems from is often tied to another person rather than an actual plan. For instance, how many times have you heard some variation of the following:
“I’m going to marry rich so I don’t have to worry about that.”
“I’m just waiting on my Prince Charming”
“Oh...I’m not really sure, <insert husband’s name> takes care of that…”
Granted, some of these conversations are rooted in the naivete of youth and perpetuated by the lives of wealthy reality stars. Housewives, anyone? But this narrative appears often enough that I felt the need to address it head-on.
As cynical as it may sound, relationships don’t always have a Disney-esque “happily ever after” quality to them. Women tend to marry later in life, may become divorced, may be caring for a disabled family member, or may end up a widow. In fact, studies show that nine out of every ten women are going to be responsible for their own finances at some point in their lives. With those kinds of odds, relying on a man as your financial plan is clearly a choice with potentially devastating consequences.
That’s why it is now more important than ever for women to take an active role in their financial lives. Here are some things you should consider to educate yourself.
It’s Called Personal Finance for a Reason
Forgive me for stating the obvious here, but your personal finances are your personal responsibility. You can't allow someone else to take on the liability for your choices. At every stage of your life, you must take ownership of your money decisions -- regardless of your marital status.
You can't go shopping with your credit card every week and bury your head in the sand when the bills come in, all the while hoping your future (or current) husband will pay them off. Filling your life with 'things' is a decision that can devastate your credit if not managed properly.
The moment you relinquish authority and depend exclusively on someone else to handle your finances, you essentially hand over the control of your financial destiny. By not actively managing your own money, you put yourself at the mercy of another person and your life will follow whatever direction they decide to take it in.
Extenuating circumstances aside, there is no reason to depend solely on a man to attend to your financial matters. Ideally, you should work together and make decisions as a team. This way, you both have equal authority and you are in just as much in control as your spouse.
There’s nothing worse than having to tolerate a person or a situation simply because you’ve allowed yourself to become 100% financially dependent. Simply stated, don’t put yourself in that position!
The Numbers Don’t Work in your Favor
Women that don’t take an active role in creating and managing their money typically find themselves at a disadvantage later in life. First, women generally have fewer years in the workforce as a result of giving birth and/or providing care for aging parents.
According to the Center for Work-Life Policy, in New York City, women lose an average of 18 percent of their earning power when they leave the workforce to care for family. And the longer you are out of the workforce, the higher that percentage becomes.
These events have been known to cost women as much as $565,000 in lifetime earnings in addition to $25,400 in social security benefits. Also worth considering is the income disparity between women and men. Some studies have shown that for every dollar a man earns, a woman gets $0.78. And since social security is based on your peak earning years, it stands to reason that you can expect to receive substantially less social security income than your husband.
Mind you, I'm not saying that leaving work for a time is wrong. I was a stay-at-home-mom for six years. While you have to do what's right for you and your family, you should not ignore the principles of prudent money management.
First of all, guard your credit. If you should find yourself alone, you may need to purchase a car, use a credit card, or rely on yourself to fund your needs. If your credit score has taken a dive because you weren't paying attention to it, you could find yourself paying more for goods and services at a time when you can least afford it.
It’s important that you maintain your ability to earn. Aim to keep your employment skills current and remain connected with the network you’ve developed throughout your career. LinkedIn is a great way to do this. Even if you plan on taking an extended leave away from the workforce, having marketable skills and a list of contacts to assist when you’re ready to jump back into the corporate world can be invaluable resources.
There Are No Guarantees
According to a BBC report, women will live, on average, 5% longer than men. If that ends up being the case for you, consider what could happen if your husband is the only one with details on the family finances.
This happens all too often. At and at a time when widows should be left to mourn, many are left attempting to locate financial information that they aren’t 100% sure even exists. Or even worse, what if your husband is incapacitated in a nursing home and you are left to care for him and shoulder the burden of all those extra medical bills.
Even if you’re in a fairy tale relationship with the man of your dreams, it is safe to assume that at some point, you will be solely responsible for the financial decisions of your household. If you haven’t already, take the time to sit with your spouse and gain access and an understanding of what's going on with your family's finances. Talk about everything from the monthly budget to the investments in his 401(k) plan to what insurance policies your family owns. Nothing is worse than believing that everything is taken care of financially only to find out that it is in fact, quite the opposite.
While these may be difficult conversations, don't put them off in the hopes that they’ll be easier down the line. They won’t! The truth is, there’s no need to be fearful when it comes to dealing with the reality of your household finances. Find a way to make the process something you will both enjoy and you’ll have a greater chance at success. Maybe you can meet for coffee and budgeting once a month, or dessert out and a quarterly investment review. These conversations open the door to being closer with your spouse and result in fewer money arguments. Remember: happy wife, happy life!
A man is someone to share your life with -- a caring companion. And while there’s nothing wrong with him being the breadwinner, the one thing that he should never be is your financial plan. All women should be in control of their financial affairs -- regardless of whether you’re single, married, divorced, or otherwise. You owe it to yourself to experience the financial independence that comes with understanding and personally managing your finances. So don’t delay, your financial future begins now!
Pamela J. Horack, CFP® of Pathfinder Planning LLC provides personal financial planning advice for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.