Learn skills to manage your own money!

Even successful relationships/marriages end in divorce or death. Each person in the relationship needs to be able to stand on own feet. This holds doubly true for women. For people in the STEMM community, evidence can be found in the Actuarial Tables for Life Expectancy and Survival Probability for example based on 2010-2012 tables.

 

Male Female Male Female
Life expectancy 55 yo 27.71 31.03 82.71 86.03
Survival probability 55 yo today
85 yo 46% 61%
        10,000                      4,600                 6,100                    1,500 Statistically 1,500 Widows
95 yo 8% 16%

Common Biases

(A) Parents telling you not to worry about money.

I know when I was a young woman, I got that message. Obviously because the assumption was I’d meet Prince Charming who’d sweep me off my feet, marry me and look after for all eternity!Sounds like a fairy tale – well it is. Approximately 50% of first marriages in Australia end in divorce and I think its about 75% of second marriages. Clearly not happily ever after.

(B) It’s not just fairy tales that lead you astray – often people dream of winning the lottery or anticipate a big inheritance so they put their worries aside. Instead they should be learning or honing their financial skills.

(C) Gambling: many a good woman I know has married into addictions such as gambling, drugs, sex, spending, debt, and the side effects of these addictions! They’ve been blindsided by the impact and most often have to rebuild financially from the ground up.

(D) Men are better money managers and investors than women. Not necessarily so!! Women I meet are typically better savers and more conservative when it comes to investing. That means that whilst women may have the resources to invest, they don’t take the plunge. They are daunted by it. Therefore, their wealth or net worth is behind that of male counterparts. From a risk perspective, men take more risks than women and are typically worse investors than women and often switch investments more frequently, which is costly. So, what difference will that make you ask? A BIG DIFFERENCE!

If you have $10,000 per year of savings to invest, each and every year from 20 years old to 65 years old and the out performance and cost differential is just 2%, the woman’s return is 8% and the man’s is 6%. That’s $1.9 million of a difference over that time!

Men are not necessarily better money managers
Annual Deposits Rate Regular Deposits Interest Total Savings Total
 $                 10,000 8% $450,000 $309,203 $309,203 $4,184,240
  6% $450,000 $127,645 $127,645 $2,265,058
Difference $1,919,182

The finance woman’s index comes out quarterly. The index tracks and measures economic progress of women in Australia. The March 2020 report stated that women’s financial progress is at risk of slowing further in 2020 on expectations of weakness in female employment relative to men, rising unpaid work, widening gender pay gap plus weakness in the pace of corporate board appointments to the ASX200 companies.

The key concerns were:

  • Rising job losses.
  • Lower pay through lost income as a result of job losses.
  • Less superannuation. Women already have 30% less retirement savings than men.
  • For me – when markets are down substantially, and withdrawal is made, say $10,000 now, and then $10,000 in the second half of 2020, that raises red flags for me.
  • With the average 44-49 year-old woman having just $62,000 in super, that combination of losses and withdrawal puts women seriously at risk of poverty in the future. I read a statistic recently (I don’t know where) that women over 75yo are 300% more likely to live in poverty! Now that’s scary.

What can you do about it?

  1. Financial discipline – Good foundations/pay attention.
  2. Know your numbers – look after yourself.
  3. Seek to understand investments
  • Listen and learn
  • Or get professional help, the earlier the better.
  1. Control costs and choices.
  2. Set goals for yourself and as boring as it may sound, set a budget and build in future needs – like a new car or washing machine and review regularly and adjust.
  3. Don’t get drawn into biases like
  • “Rent money is dead money”.
  • “Don’t worry about money, Prince Charming is on his way”.
  • Plan out your finances and make informed decisions.
  1. Don’t sign up for things you don’t understand!!
  • Don’t sign forms you haven’t read and understood.
  • Don’t buy investments you don’t understand – keep asking questions until you do or pass.
  • Regardless of who asks you, loved one, family friend, adviser – DO NOT SIGN blank forms or go guarantor for someone unless you fully understand the ramifications.
  1. Do sit down regularly with your significant other and discuss money and goals.

 

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