The Top Things Women Should Consider When Creating a Financial Plan

women holding money

The lives of women have changed dramatically over the past three decades. Women are no longer the stay-at-home mothers of the 1950s sitcom “The Donna Reed Show” or even the popular 1970s sitcom “The Brady Bunch.” Today, women are more like Clair Huxtable of “The Cosby Show”—college-educated with professional jobs and sharing in the family’s financial decision-making.

“Our families don’t look like the ‘60s anymore,” says Susan W. Sweetser, who heads the Women’s Markets department at MassMutual Financial Group, a Fortune 100 company. “Women really are the drivers in their households.”

According to the latest data from the Bureau of Labor Statistics, nearly 60 percent of women are in the labor force today compared with only 43 percent in 1970. In fact, half of all management and professional positions are held by women, and they make up 38 percent of all entrepreneurs.

But women are still more likely than men to live in poverty despite women’s advancement in the labor force and their growing financial power. Black and Hispanic women are twice as likely to live in poverty as their White counterparts. Why?

Several factors contribute to women’s unique financial status. First, women live longer than men and therefore need more for retirement. Secondly, women take time out of the workforce more often than men to have children or take care of aging parents. Lastly, women historically earn less than men and as a result have to save more.

The reality is that most women will be without a spouse at some point in their lives – whether by way of death, divorce or never marrying — and have to make important financial decisions.

“It’s likely that a woman is going to be by herself, and at some point you’re going have to learn how to take care of yourself,” says Marilyn Hubbard, author of Sisters Are Cashing In: How Every Woman Can make Her Financial Dreams Come True. Unfortunately, she adds, “Most of us haven’t been taught about money.”

Sweetser, a certified financial planner and financial consultant, agrees. She says women haven’t dealt with putting together their financial plan because they don’t know whom to talk to or trust. “In financial planning, we don’t have the same networks we have when we’re looking to find a good doctor or a good child care provider,” Sweetser says.

In addition, she says, the financial industry hasn’t really addressed the needs of women. That’s why she developed the financial education series, “Never Kissed a Frog. Never Had To,” based on women’s desires and wants.

“Women want to be educated,” she says. “They want someone to listen to them, give them options so they can decide [for themselves] what’s best for them.”

Hubbard and Sweetser say there are several factors women should consider when creating a financial plan. Here are some of their suggestions:

Have a goal.

Your plan should start with a goal, says Sweetser. What is it that you want out of life? How are you going to achieve these goals financially? Review your plan once a year, says Sweetser, and when facing life-changing events (such as marriage, divorce, death of a loved one, or birth of a child).

Do a financial checkup.

Clean up your credit. Pay bills on time. Deal with any outstanding debts. Develop a budget. Manage your money. In other words, “Clean up the mess that you created,” Hubbard says. “If you have bad credit, it doesn’t mean that you’re a bad person. It just means you’ve made some bad choices.” You have to be committed to doing what it takes to create wealth in your life.

Create new habits.

Look at ways you can cut expenses and start saving. “Women do a lot of conspicuous consumption,” Hubbard says. “We spend a lot of money on looking good now instead of saving for the future.” Also make sure you have an emergency fund with at least four months worth of salary. “You need to have that nest egg if something happens,” Sweetser says. “If your business slows down, or you have a cash flow problem, or your company is downsized, an emergency fund is going to carry you through.”

Get a financial advisor.

“You’ve got to become an informed investor,” Sweetser says. Talk to someone about how you feel about money and what your goals are for your life. How are you going to save for your child’s college education? How much will you need for that retirement home in the islands? Ask yourself: What do you need to be better educated about money and different investments? Learn about ways from a financial counselor to make your money work for you.

Have a support network.

An investment club is a good way for women to talk about money and ideas with others. Women should talk about other ways to make money, such as joint investing or passive income. What can you do part time that will develop other income streams? “Surround yourself with other success-minded people, those who will encourage you,” Hubbard says.

Think about retirement.

“Social Security is not enough for us to live on,” Sweetser says. The earlier you start saving for retirement the better. It’s never too early or too late. As more and more big companies begin to change their pension plans, it’s going to be incumbent on the employee to save for life after they retire.

The role of women in today’s economy is significant. As more and more women become creators of wealth, what they do with their income is extremely important, not only to their families, but also to society. “For women, we have to understand how powerful we are,” Hubbard says. “We set the tone in being role models.”

Many women may find it daunting to draw up a financial plan, but it will ultimately create a sense of freedom, Sweetser says. “To start seeing things you want happening, seeing your savings grow, that’s liberating,” Sweetser says. “It’s liberating to have a plan in place.”