It Pays to be a Financially Independent Woman

My mom stressed to my two sisters and me from early ages the importance of growing up to be financially independent women. That meant everything from encouraging us to develop a work ethic and earn our own money to helping us understand the value of a dollar and how to budget our allowance.

As we matured and developed into young women, she taught us how to balance a checkbook, open a savings account and begin building credit in our own names. I didn’t realize it at the time, but she was instilling a financial foundation in me that would lead me to a career in finance, provide the freedom to make choices and give me the confidence and ability to be self-reliant.

Regardless of age and gender, these are important skills to have. For women, statistics show, they’re not only important but critical.

The Reality of Being a Woman in 2017 and Beyond

In the United States, women generally outlive their male counterparts by five years (average life expectancy is 81 for women and 76 for men)1. This means despite having a spouse or partner to rely on today, there is a significant likelihood that you will be tasked with making major financial decisions for yourself and your family someday.

Living longer also means higher health care costs. The CDC and National Center for Health Statistics reports that 70 percent of nursing home residents are women and almost two-thirds of home health care recipients are women.2

Combine this with sobering statistics on divorce rates, gender income inequality and the fact that women take more time away from work than men to care for their children and the reasons to build a strong financial foundation are compelling.

Where Should You Start?

First, get educated on your current financial picture. While it’s easy to hand things off to your spouse (or future spouse), it’s critical to understand what you have (assets), what you owe (liabilities), where they are and how they’re titled. Gain a clear picture on income and expenses and identify and become familiar with all important estate documents and insurance policies. It’s also good practice to create a list of important contacts to keep on hand (think trusted advisers). Should something happen to you or your spouse, these items will provide a road map to surviving family members.

If you’re currently working, make sure you pay yourself first by maxing out contributions to your retirement plans and taking advantage of employer benefits like Flexible Spending Accounts, Health Savings Accounts and dependent care. As women, we’re naturally inclined to take care of others before ourselves. While this may instinctively feel right, we’re doing ourselves a great injustice.

Young or mature, it’s also important to build credit in your own name and establish your own investment account. While it’s good to have joint accounts, possessing an individual account can be useful for estate planning purposes (estate equalization). Individually owned accounts can also provide quick access to liquid funds in the event marital assets are held up in divorce court or probate and can also provide just the right inspiration to get us off the sidelines and into the world of investing. Setting up an individual account prior to marriage that you don’t commingle with marital assets can also shield your pre-marital assets upon dissolution of marriage.

Equally important to investing and building credit is protecting your assets. Enroll in a credit monitoring program and regularly check your credit report for any errors and/or identity theft. It’s also wise to check in with your property and casualty agent to make sure you are properly insured from a liability standpoint (umbrella insurance). Proper asset titling and structuring of trusts can provide additional creditor and marital protection.

Last but not least, don’t be afraid to speak up and ask for help. Financial markets and investment vehicles can be overwhelming and difficult to understand at times. There’s no such thing as a wrong question when it comes to securing your financial wellbeing. You can also set an example for your children and encourage them to get into the conversation. Communication is key when it comes to transferring values and your financial legacy.

Sources: 1. CDC 2014 Mortality Report 2. CDC/NCHS, National Study of Long-Term Care Providers

The material shown is for informational purposes only and should not be construed as accounting, legal, or tax advice.  Altair Advisers LLC is a registered investment adviser with the Securities and Exchange Commission; registration does not imply a certain level of skill or training.  While efforts are made to ensure information contained herein is accurate, Altair Advisers cannot guarantee the accuracy of all such information presented.