According to an article in the Austin American Statesman, women are 80% more likely to end up in poverty than men. Women earn about 76 cents on the dollar compared to men’s compensation, and this difference in income during a forty-year career equates to $430,000. Other factors tilting the scales against women are divorce and longevity. Women are more likely to stay at home, raise children, and be the caregivers for parents taking them away from the workforce or severely reducing their working hours.
Whether married, divorced, single, or widowed, here are a few strategies to help strengthen your financial situation.
- Create a budget. Budgets highlight where your money has been and where it’s going. Mint.com is a tremendous resource for organizing your finances; carrying a notebook to record cash purchases is also wise. Once cash leaves an ATM, most people don’t record how they spend it, and it’s easy to get nickeled and dimed with cash transactions. After tracking your expenses, you can identify a few items to reduce or eliminate. If you can lower your spending, you can increase your savings.
- Build an emergency fund. An emergency fund covering three to six months of expenses can help you bridge the gap during difficult financial times. Buy US T-Bills or invest in a money market fund because both provide attractive rates with liquidity.
- Establish a financial plan. A financial plan helps quantify your hopes, dreams, and fears and expands your budget to include investments and liabilities. Annually reviewing your plan can keep your financial life on the right track, and the best time to check it is near your birthday, an easy day to remember.
- Automate your expenses. Automating your expenses can help your budgeting process and simplify your daily cash management activities. It may improve your credit score because your payments will never be late, and automatic payments can eliminate pesky late fees.
- Automate your investments. Setting up a monthly investment program into savings, investment, or retirement accounts allows you to create wealth automatically.
- Contribute to your 401(k). Take advantage of your company retirement account. Most employers will match your contributions to a certain percentage, usually 3% to 5% of your income. Depending on your circumstance, you can contribute pre-tax or after-tax dollars; the maximum amount is $22,500 if you’re under fifty and $30,000 if you’re older.
- Establish an IRA. If you’re under fifty, you can deposit $6,500 per year or 100% of your income if it’s less than the allowed amount. If you’re over fifty, you can contribute an extra $1,000.
- Invest in an annuity. Annuity funds grow tax deferred and provide a guaranteed income stream for life, and they can offset longevity risk by paying you a monthly income for as long as you live.
- Seek guidance. Working with a financial advisor, CPA, attorney, or banker can help you set up accounts, establish a budget or create an investment plan. A team of trusted advisors can bring you financial tranquility.
Last, my Grandma Bee was born in 1900 and lived into her nineties. She always carried a small spiral-bound notebook with a few colored pens in her purse. When I was young, we shopped together, and after a purchase, she would take out her notebook, jot down a few notes, and record her expenses. If it worked for my grandma, it might work for you too!
Keep your life free from the love of money, and be content with what you have, for he has said, “I will never leave you nor forsake you.” ~ Hebrews 13:5
April 6, 2023
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on your asset level.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor. Prices and yields are for today only and are subject to change without notice.
 Older Women More Likely Than Men to Face Poverty by Adam Allington, Associated Press, Austin American Statesman, July 11, 2016.