Steps towards financial empowerment
Asked about their biggest financial regret, a sizeable portion of women participating in a recent study1 said they didn’t invest enough. The women also reported that they wished they’d chosen a career with higher pay, not taken on as much credit card debt and lived within or below their means. While these issues may be common among many women, the great news is that financial regrets, like mistakes, are correctable if not avoidable. For women, this means growing your financial knowledge base and sense of confidence to tackle your goals over the long term. Indeed, focusing on longevity – and the requisite long-term financial and wealth planning – is particularly important now that women are living much longer. In Canada, for instance, women on average live four years longer than men2.
Significantly, there is a clear trend towards financial empowerment for women in Canada. An increasing number of women are creating wealth (due to greater workforce participation as they become the leading holders of post-secondary degrees) or inheriting wealth (as they come into money from parents and/or spouses). In fact, by 2024 the privately held wealth of Canadian women is estimated to rise from $1.2 trillion to $2.7 trillion, representing 50 per cent of total private wealth in this country.
And while every woman has unique life circumstances and a different approach to money matters, there are also some common elements. For many women, money is an emotional subject closely tied to safety, security and independence. Add to this the fact that many women are currently swept up in caring for elderly parents while at the prime of their careers, managing the household and raising teenagers. This can create feelings of anxiety, loss of time and control in the “sandwich” generation of women.
“Women see money as a means to an end. And as such, they want to connect money and investing to their lives,” says Sarah Widmeyer, Richardson Wealth’s Director of Wealth Strategies. “Don’t simply tell me about the biggest pile of money I can accumulate, explain my money in terms of what it can do for me – if something happens, can I still stay in my house? Can I afford to send my kids to the universities of their choice or take in my aging mother to live with me?” Widmeyer says.
“There’s a big difference in how men and women consider themselves to be doing well financially. Men are more likely to be satisfied with seeing a healthy return on their investment portfolio, if not competitively wired to seeing how their portfolio return ranks against others, whereas women want assurance that they are on track to meet their financial goals and will have enough accumulated to last them through their declining years.”
Guidelines for each stage
Just as there are specific tasks and features associated with age-related physical health checks, here are some guidelines for each life stage to help you navigate your financial journey.
In your 20s
Milestones may include the following: Newly graduated; Entering the workforce as a permanent employee or contractor; Starting your own business or venture; Early career development.
What to consider
At this early stage of your adult life, think strategically and set goals in terms of your career and life direction. And as you focus on climbing the career ladder, build solid financial habits. Here are some of the key habits that can benefit you over the long term: For starters, become a diligent saver (the amount will depend on your income among other things); pay off student loans; and don’t overspend on entertainment and social activities.
Financial goals and a financial plan
Establish long-term, mid-term and short-term goals each year. Consider using the services of an Investment Advisor, perhaps one referred by your parents or your network. At this early stage of your financial life, you may need help prioritizing goals like eliminating debt and building an emergency fund, or advice on insurance.
This works in tandem with your financial goals and plan. Once you establish goals and a concrete plan, you will be able to determine your daily, weekly or monthly budget based on your income.
This is the key to your financial goals. Put a certain amount of money away each month and protect your savings from regular raiding. Consider a short-term account for monthly living expenses and one or more accounts, which are more difficult to access, for longer-term savings.
This is the opposite to impulse buying and helps you consider “needs” versus “wants”, particularly for large purchases.
Credit card use
Don’t rely on credit cards, particularly if you exceed your budget. They are an easy go-to but, as debt accumulates, they will undermine your savings and wealth plan in the long term.
Insurance for your life stage
At this phase, consider tenant or content insurance (also known as renter’s insurance) for emergencies, or disability insurance if you’re unable to work due to injury.
This stage kicks off when you enter the workforce and start saving for retirement. Yes, it’s never too soon to start contributing to a retirement plan. Utilize a Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA). Remember, the value of money compounds over the long term. It may not be possible to contribute much initially, but you will be able to work towards increasing this gradually as you earn more.
In your 30s and 40s
Milestones may include the following: Buying a house; Getting married/establishing a common-law partnership; divorce; Setting up a business or venture; Starting a family; Approaching mid-career;
What to consider
Ultimately, let your priorities guide your plan. In addition to continuing the core financial good habits from your 20s, you may need to add new options and/or review existing arrangements for this stage of life.
Ramping up savings
An investment portfolio
In your 50s and 60s
What to consider
Retirement planning and decumulation
This article was written for the Richardson Wealth website.
1 A U.S. study by Merrill Lynch in partnership with Age Wave, March 2018.
2 In Canada, average life expectancy for males born in 2012 is 80 and for females 84, according to a report by the World Health Organization. (World Health Statistics 2014 Report).