Top 5 Tips for Women Seeking to Build Wealth
Women are a powerful force in the economy. Women manage the finances in a majority of U.S. households, and 99% of women in high-earning households are involved with financial planning. And the next generation of women is poised to earn even more – millennials already have the largest percentage of female billionaires of any generation.
Yet it’s important to acknowledge that women face a unique landscape when it comes to building wealth. Women still earn 82% of what men earn, a wage gap that has remained stubbornly stable over the last 20 years, and many women find finance and investing an intimidating boys club. It’s not all bad news – women also face distinct advantages when it comes to personal finance. Women still outlive men, allowing more time to take advantage of compounding interest while also resulting in more inheritances. And women make excellent, if not superior, investors – Fidelity Investments has found that women outperform men by 40 basis points with a more cautious buy-and-hold investing strategy that leads to better returns over time.
We asked two of Obermeyer Wood’s industry-leading advisors to share their most important financial advice for women.
1. Lean in…to taking financial control in your life
Nightingale’s top piece of advice for women in finance is to actively engage with your finances. “The biggest challenge women face in personal finance is neglecting it,” she observes. “It isn’t always fun, so I often see women putting off the discussion.”
How should you lean in, exactly? “Learn the source of your wealth. Understand why and how it could change,” Nightingale urges. “Set up your life so that you aren’t reaching. And insist on being part of the conversation. ”
As an advisor herself, Phillips knows it can be intimidating at first to join financial conversations and encourages women to speak up without worry. “There really are no dumb questions,” she explains. “The financial sector can be intimidating with terms and acronyms. If you don’t understand something, don’t be shy about asking a friend, family member, or advisor to explain.”
2. Choose a financial advisor you like and trust
Working with a financial advisor can help you craft a personalized saving and investing strategy while helping you stay on track to your goals over time. “Hiring an advisor can help by making sure someone is overseeing your strategy and highlighting opportunities and risks to you,” explains Nightingale. Whether you are looking for an expert to help you fine-tune your strategy or looking to outsource the long-term management of your financial plan, an advisor can help you stay on track so you can reap the benefits in the long term.
It’s important to select a relatable and competent advisor who makes you feel comfortable – male or female. Your advisor should welcome questions and brainstorming. Don’t be afraid to speak with a few advisors before finding one who works for you. “Women have a lot of choices today and should keep looking until they can select an advisor who they like and trust,” adds Nightingale.
3. Don’t be afraid to start small and keep saving and investing
One of the most important ways to build wealth is to invest as early as you can, even if it’s a little at a time. “These little moves do add up significantly over time; the key is to start,” explains Phillips. “Even investing a small amount of money matters,” agrees Nightingale. “You may not have income, but you have time. Compounding returns are a beautiful thing.”
Phillips reminds women to have confidence in their financial decisions. “Studies have shown women are excellent investors (even superior investors!) as we tend to take things in stride and focus on the big picture,” she says.
And Nightingale reminds women that building wealth is a journey that can, and should, take time. “There are times when you’ll feel ahead and times when you’ll feel behind,” she warns. “Just know that every positive accomplishment matters, whether it’s saving some of your bonus, or deferring a big expense, or contributing to your 401K.”
4. Think strategically about big purchases
A lot of financial advice focuses on the power that small, recurring purchases, like gourmet coffee, can have on your financial future. But Nightingale and Phillips focus on the power of the big purchases in your life. “Put your energy into the big decisions,” recommends Nightingale. “Choosing a base level car or buying a smaller home that is less expensive to maintain is going to have a much bigger impact on your net worth than skipping the cup of coffee.”
A trusted financial advisor can even help analyze the impact of big purchases before you spend a cent, modeling out how different choices could affect your finances.
5. Use your money to have a little fun along the way
Phillips and Nightingale like to remind women they should budget for important priorities in their lives. “You save for a reason,” says Phillips. “So spend money on memories, adventures, and people and causes you care about.”
Working with a financial advisor to identify how much you can afford while still meeting your future goals can make it less stressful to treat yourself to the occasional and meaningful splurge.
Reach out to our team if you would like to learn more about our financial planning and investment management services; we are here to help you and your family reach your goals and maximize the work you have put in to secure your future.