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Top 5 Ways Women Can Take Control of Their Financial Wellness

Financial wellness has become a hot topic for employees, particularly women.

A 2021 financial wellness survey found that women are more concerned about their finances than men—and it’s not just because women earn less than men do.

Women still aren’t being compensated equally, and the situation is worse when we break it down further. Overall, women earn 83% of what men make, but Black and Hispanic/Latina women fare worse, earning 64% and 57% compared to white men, respectively.

It makes sense that two-thirds of women worry about their finances at least once a week, and 46% say that their financial-related stress has increased since the pandemic began.

In addition to the pay gap, the pandemic significantly upended the finances of women. Not only were many women-dominated industries (like leisure and hospitality) impacted by the various health and safety measures put in place, but many women also found themselves reducing their hours or even leaving the workforce altogether to help their children with remote learning or take care of an ailing family member.

The emotional, mental, and physical toll on women is significant:

  • 49% of women have experienced a negative impact on their mental and emotional health
  • 46% of women say they’ve lost sleep stressing about their finances
  • 40% of women report it has damaged their physical health

So, what’s the underlying factor exacerbating this problem?

We spoke with Tamara Wiley, CFP©, Financial Advisor at Family Focused Financial LLC, to learn more about those mistakes, what professional women can do to avoid them, and how employers can support their financial wellness.

According to Wiley, the three most significant ways women neglect their financial wellness are:

  • Not creating a financial plan
  • Not budgeting (or sticking to a budget)
  • Accruing too much debt

Wiley also stresses the need for women to be financially literate, even if they are in a multi-income household.

“What I see a lot, especially with women who have been married a long time, is that they rely on their partner to manage the long-term financial strategy,” she says. “They have little to no financial literacy and are at a disadvantage, particularly if the relationship ends.”

These five strategies are fundamental to establishing and maintaining financial literacy and health for everyone, not just women. All too often, women aren’t exposed to resources that highlight these strategies, and even if they are, they’re too busy juggling other responsibilities to learn about them.

That’s why it’s vital to include financial wellness education in corporate wellness programs. For many women, it’s their only opportunity to focus on themselves, their finances, and their futures.

Let’s look at each strategy individually. Wiley’s first recommendation is to create and maintain a budget.

1. Make and Manage a Budget

With rising inflation causing the price of everything to increase, it’s more important than ever to track where every dollar goes.

This is especially important for Gen Z and Millennial women who have grown up paying for convenience, with the instant gratification of having everything—from sushi to skincare—delivered right to their doorstep. However, Wiley cautions, young employees need to be wary that they don’t “DoorDash themselves to financial disaster.”

Wiley recommends that women in the workforce spend time sitting down and looking at what they’re earning monthly, what they want to spend (including deliveries and other splurges), and what they can spend.

Then—and this is critical—Wiley advises to manage that budget weekly.

“It requires a lot of planning,” she says. “I usually spend my Sundays saying, ‘All right, we're eating out twice this week and we’re meeting friends for a concert on the weekend’ to determine where our discretionary funds are going.”

And it works. More than 80% of people who budget by hand or through secure mobile banking apps say it’s what helps them stay out of debt.

2. Maintain Good Credit

Did you know that according to Experian, the average credit score is 714? That’s considered a “good” score, while anything between 800 and 850 is considered “excellent.”

When we look at credit score averages by generation, it looks a little different (and surprisingly, those numbers don’t vary much by gender):

  • Gen Z: 679
  • Millennials: 686
  • Gen X: 705
  • Baby boomers: 740
  • Silent generation: 760

So, what’s the secret to maintaining good credit? The most important factor, according to Wiley, is not carrying too much debt. In fact, when she works with clients, that’s the first thing they address.

“As a financial planner, I want to help my clients become as financially healthy as possible,” she stresses. “If they come to me with debt, I put a plan together to help them address that first based on interest rates and balances.”

Wiley focuses on interest rates because a high interest rate can quickly turn a small debt into a big, unmanageable deficit. If an employee is paying 12%-25% interest on a credit card, there’s no way to out-earn that rate in the market.

“It is nearly impossible to consistently have a rate of return on your investments that is greater than the cost (interest rate) of your credit card," she adds. "Because of this, it is important to tackle your debt before you can truly focus on saving for retirement.”

A financial planner can help employees explore ways to pay off debt more efficiently, such as consolidating debt from high-interest cards into a lower-interest loan or credit line.

3. Create an Emergency Fund

Having a budget is great, but life always brings a series of expensive left turns.

That’s why Wiley strongly recommends that women set aside liquid funds of between three and six months of expenses, in case of a medical emergency or some other financial setback. Not only will these savings help offset unexpected costs, but they’ll also provide a sense of security, helping women feel less anxious about their finances.

(If you’re worried about not having a sufficient emergency fund, you’re not alone; only 23% of Americans have access to six months of emergency savings, and 26% have no savings at all.)

While saving months’ worth of your expenses can be challenging in tight times, even small amounts can make a difference. Automatically setting aside $50 a week, for instance, can quickly create a helpful cushion for emergencies.

Another way to fund emergency savings is through a raise or bonus. Sure, it’s more fun to go on an all-inclusive vacation to celebrate, but this is where Wiley suggests women should really think about where that money goes.

“As women move through their careers, they need to think about using their raises wisely,” she points out. “If you get a 10% raise, where should it go? Maybe it needs to go toward paying off more debt. Maybe you can increase your contribution into a retirement account, or if you don’t have much or any savings, it should go there.”

4. Get Life Insurance as Early as Possible

Life insurance often isn’t on the radar of younger women in professional positions, but it should be. Wiley points out that life insurance is quite inexpensive; term insurance for a healthy 20-something woman can be as low as $25 a month for up to $250,000 in coverage.

“Purchase life insurance while it's cheap and while you're young,” adds Wiley. “So many people develop ailments later in life that preclude them being able to get life insurance…when it's most important.”

While investing in life insurance early on is invaluable for women, maintaining the associated costs won’t be feasible without first establishing an overall long-term financial plan.

5. Establish a Personal Financial Plan

Wiley recommends that women establish a long-term financial strategy for themselves. As long as women are prepared and set expectations for their financial futures, they’ll experience less stress and feel more comfortable in the long run.

What does this look like? It involves a series of moves over time.

  • Early in their careers, women should contribute to their 401(k) plans if they can, especially if their employer offers matching. “That’s free money,” Wiley says. “We never turn down free money. And if you don't have a retirement plan through work, you need to create your own through a Roth or traditional IRA, minimally.”
  • A woman’s mid-career financial strategy is about consolidation. Many professional women will have multiple, disparate 401(k)s; start saving for their children’s college funds; or start looking into estate planning, which can include a will. This is when a financial planner can help. In 2021, 38% of Americans worked with a financial advisor, which was up from 29% pre-pandemic. The reason has a lot to do with the challenges they endured and the need for professional advice.

How Employers Can Help Women Achieve Financial Wellness

Supporting your employees’ financial wellness is critical, and not just because it’s the right thing to do. It can impact your ability to retain employees.

PwC’s 2022 Financial Employee Financial Wellness Survey showed that financial stress can make employees twice as likely to look for another job. Of the employees currently looking for a new job, 65% say money is their primary reason.

But that’s not the only statistic that caught our attention:

  • 59% of employees looking for another job report that they struggle to pay monthly bills.
  • 50% of employees depend on credit cards to pay for necessities.
  • 49% of all financially stressed employees say it has a severe or major impact on their mental health.

Employees in that last group are also reported to be less productive and less engaged, leading to them being out of the office more as a result.

Financial wellness programming should include counseling and coaching, simply to address the stigma associated with poor financial wellness. In the PwC survey, respondents cite privacy, shame, and family tradition as the top reasons they typically don’t ask for help.

Half the battle for employers will be to help employees summon the courage to get help, and Wiley has some specific suggestions for how to provide this support.

Health Savings Accounts (HSAs)

Offering HSAs to employees can be particularly helpful for female employees. Not only can they be used for medical expenses, but they can also be transitioned into an investment account and carried all the way to retirement.

Wiley says HSAs may not get used for medical expenses when women are younger, but once the account balance is large enough, it can be invested in the market like a retirement account. Plus, if an employee decides to retire before 65, that money can be used to pay for medical premiums as a bridge until they turn 65.

Financial Coaching

Companies should also consider offering financial coaching for their employees, especially for women who didn’t learn about financial literacy early in their careers. If employers utilize in-person or digital coaching services, employees have access to financial counseling that can help them make decisions or talk through their anxieties.

Financial Knowledge Base

If your company doesn’t have a knowledge base of information, webinars, training modules, or financial wellness challenges, finding a partner that does offer those programs and services can be beneficial to employees.

Financial wellness for women in the workplace is something that every company needs to consider as a future investment. If your company is considering ways to foster financial literacy in your workforce, our wellness consultants are here to help.

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