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Women and their role as Financial Decision Makers

By: Leah A. Murray, J.D.

According to the Family Wealth Advisors Council, both the amount of wealth controlled by women and the rate at which it is increasing are extraordinary. Women continue to increase their skills, pursue higher education and comprise nearly half of the workforce. They are more involved than ever in their households’ investment and financial decision making. In fact, a Prudential research study states that 95% of women will be their family’s primary decision maker at some point in their lives.

Women desire to make more informed and beneficial choices for themselves, their families and their communities. Moreover, the economic crisis has heightened women’s recognition of the need to develop a financial plan that will meet long-term financial goals. That is why it is essential for women to understand the opportunities and challenges to their financial independence as well as the steps to take to gain that freedom.

Women continue to reach their potential and are outpacing men when it comes to education and earning advanced degrees. They are also creating jobs and generating significant amounts of revenue as business owners. Higher earning power presents women with the opportunity of developing a sound financial strategy. Women should take a comprehensive approach to invest and grow their income in addition to protecting their assets with a professional estate plan.

Conversely, women’s career paths can be choppy when they opt to take time out of the workforce to raise a family. Time away from a career can have a major impact on future promotion opportunities as well as savings and retirement benefits. By spending time out of the workforce, women forgo income; miss out on pension plans and the ability to grow retirement savings by contributing to a 401(k).

Experiencing divorce or death of a spouse has both emotional and financial ramifications. It is not uncommon for women experiencing divorce to report less household income than men while bearing more responsibility for child care costs. So the question most women in this situation have to ask themselves is: how do I ensure the financial stability for myself and my family?

Because women usually live longer than men and take on many different roles throughout their lives, there is added urgency in knowing how much to save for retirement; how much is needed for an emergency fund; how much is needed in caring for a loved one?

Here are a few helpful steps women can take to prepare for their financial future:

1. First. Map out your assets and liabilities. Take a hard look at your income and expenses.
2. Second. Examine your credit history and insurance coverage. Do you have credit in your own name? What are your credit limits? Have you prepared for a worst case scenario? Review your insurance coverage and work with a professional to ensure you have the appropriate coverage with financially sound companies.

3. Third. Establish financial goals. What are your priorities, responsibilities and dreams? Once those are established they can be motivators to keep you on budget towards achieving those aims.

4. Fourth. Establish a comprehensive plan with someone whom you trust. Have you ever met with an advisor and felt that the person did not hear what you were saying or dismissed some of your concerns? Studies show women relate and communicate differently than men – sometimes by telling stories or preferring to collaborate. Women should choose an advisor with whom they feel comfortable.

Within the next decade women are expected to control the lion’s share of personal wealth. With great power comes great responsibility. Women who are the financial head of household will want to invest judiciously their family’s money and help secure its financial means.