There are those who claim women are just like men when it comes to financial planning. Not on your pink booties! Despite recent strides toward economic equality, women continue to earn less - 70 cents for every dollar men make, according to the U.S. Census Bureau. And women are still more likely than men to end their lives in poverty.
Those facts of fiscal life underscore how important it is for a woman, particularly a single woman, to plan intelligently for her own economic future.Yet some women find it difficult even to talk about money. Elizabeth Slocum is a marriage and family counselor in Costa Mesa, Calif., whose female clients often have unsatisfactory relationships, not with men, but with money. Older women especially may have been taught that it is unfeminine to be too concerned about money, she says. Some are virtually "money phobic."
The 51-year-old Slocum says she had to come to terms with her desire to succeed financially. "It took me a long time to say to my friends, `I want to make $100,000 a year.' It sounds greedy and not very nice." Slocum encourages her clients to overcome their fiscal inhibitions by talking economics with friends, reading about personal finance and finding a financial mentor.
Young professional women tend to be more like men in terms of their financial-planning needs than women at other stages of their lives. But as Anne M. Hoeppner, a financial planner in the San Diego area, says, there seem to be far fewer fabulously successful executive women in real life than in magazines. "You can't make a middle- to upper-management assumption about women," Hoeppner says.
Asked to develop a plan for a hypothetical single woman of 35 earning $50,000 a year, financial planners contacted by the Los Angeles Times recommended strategies that would allow her to build her assets and protect them. This conservative approach would be equally appropriate for a single man in similar circumstances.
If her company offers a 401(k) savings plan, our working woman (let's call her Susan B. Anthony) should sign up at once, most planners agree. "You can't afford not to do it," Elaine E. Bedel says of 401(k) plans that include matching funds paid by the employer. Bedel is director of personal financial planning for Coopers & Lybrand in Indianapolis.
Most advisers also recommend that Anthony buy a house. "The reason is not the tax benefit, which is nice but can be legislated away," says Judith Works Wood, who heads her own financial planning firm in Los Altos, Calif. Wood likes home ownership, particularly with fixed-rate mortgages, because fixed housing payments protect people from inflation and, over time, usually become a relatively insignificant expense.
But before a working woman buys, she should take a hard look at both the local real estate market and her own life style. "Some people really like the security of a house, and some people really hate the idea of maintaining it: They see it as a burden," says Meryl Kahn, who founded the Boston financial planning and tax preparation firm Moneyworks.
If Anthony has dependents, she probably will need life insurance. (Dependents can be elderly parents as well as children, Kahn and others point out). In the case of her death, she would want to leave sufficient assets to support the people who depend on her.
If she has a child, she will also have to plan for college costs. Wood recommends that Mom look for a good investment and not worry too much about the tax consequences. When the child is young, she should begin putting money earmarked for college into a diversified portfolio . As the first tuition bill draws near, she should switch to conservative investments such as certificates of deposit.
Planners also emphasize the importance of disability insurance for working men and women. "The most valuable thing this woman has is her future earning capacity," Wood says. "That's her greatest asset, and it's important to protect it."
Wood recommends a policy that pays a disabled worker when she can no longer work at her chosen occupation. Some policies cut off benefits to people who can work at other jobs.
Wood also favors coverage that continues until the insured is 65. Such policies are expensive, the planner notes, but the insured can reduce the size of her premium by getting a policy that doesn't pay any benefits for at least three months.
Goal-setting is crucial to all financial planning, the experts say. Kahn favors an exercise in which clients describe what they would do if they had all the money in the world. The most heartfelt goals tend to emerge during such sessions, she says, "and you can always work back to reality."
For most people, the ultimate goal is financial freedom. As Hoeppner observes, for working men and women, that includes enough financial security to be able to tell an unsatisfactory employer "to go sit on a duck."
Not surprisingly, the financial futures of working men and women often begin to diverge at that point at which women do something men still don't do: Have a baby.
Hoeppner says she sometimes sees couples who ask her to calculate whether they can get by on one income, at least for a time, if they have a child. "The mathematics always says, `Don't have the child,' " Hoeppner says.