Too often, we as women neglect to invest in ourselves. It's vital that you invest in your future. Here are three investments you should be making.
In March 2016, the National Institute on Retirement Security released findings that indicate women are 80% more likely than men to live in poverty during retirement.
For many of us, that should be a big wake-up call. Women are still behind their male counterparts when it comes to finances — and it's not something that we can keep blaming on the reports of a continued gender wage gap.
The reality is that, as a woman, you are at a disadvantage when you want to invest in your future. If you want to make sure that you have a secure financial future, it's time to take action now.
Why are Women More Likely to Fall Behind Financially?
Before we can look at ways to invest in your future to overcome the challenges facing women and their financial futures, it's important to understand the causes of falling behind.
Even though there is still a gender pay gap regarding the way women and men are compensated for the same work, it's shrinking. The reality of the gender pay gap has more to do with the following issues than overt discrimination:
Traditional caregiving roles
On average, according to the AARP Public Policy Institute, women work 12 fewer years than men. Society still largely expects women to take on caregiving roles for children and aging parents. As a result, women spend years out of the workforce. This means missed earnings, fewer retirement account contributions, and other issues related to being off the career track.
Jobs women choose to take
On top of that, according to the St. Louis Fed, women are more likely to choose careers that pay less. Women are more likely to choose to be teachers, work part-time, and do other work that has lower compensation — usually in the name of flexibility so they can fill their traditional roles as caregivers.
Reluctance to negotiate pay
Another problem is that women are less likely to negotiate for higher pay. The Harvard Business Review points out that women are socialized as girls to “make nice” and that there are biases against women who assert themselves. However, a failure to negotiate higher pay could mean women leave as much as $500,000 on the table over their lifetimes. Another piece to this puzzle is the taboo around sharing salaries and the fact that many companies aren't transparent about their pay.
Unfortunately, even if you do ask, you might not get it. The cold, hard reality is that everyone else is socialized to think that women shouldn't be assertive. So if you ask for raise, you might not get it. But that still shouldn't stop you from asking.
Discomfort with investing
Finally, according to research from Fidelity, women are less comfortable with investing than men are. The general lack of confidence in money matters and investing means that women often avoid the very actions that could help them with long-term financial stability.
Understanding your choices
The choices we make as women are not necessarily wrong. There's nothing wrong with being fulfilled as a wife and mother in a more traditional setting. There's nothing wrong with choosing to be a teacher or to work part-time for a non-profit in order to do meaningful work that adds to your work-life balance. However, you do need to be aware of how these realities affect your ability to invest in your future.
How to Invest in Your Future
So what's the solution? Take steps now to invest in your future. It's important to take active steps to be involved in your financial life. Even if you don't keep your finances separate and you have combined money with your partner, you can still be involved.
Here are three essential ways to invest in your future so you are ready for whatever comes:
1. Keep learning and developing skills
Never stop learning. One of the best investments you can make in yourself is to focus on skills and education.
You don't have to get another degree to make this work. Use online resources to continue to learn and grow. Develop new skills. Some of the best skills you can develop include those that are easily transferred among careers and jobs. These soft skills include things like:
- Oral communication
- Problem solving
If you have put your career on hold, keep up with changing developments. Continue learning about the latest in software development. Watch for the latest best practices in business or public relations. Whatever your career, do what you can to stay up-to-date so that later you can jump back in with a smaller learning curve.
2. Develop a side income
Invest in your future by developing a side income. Thanks to technology, there are a number of opportunities for you to work from home with a side gig. From freelancing to running a website to selling on Etsy, there are plenty of ways to make money on the side.
Not only that, but you can turn your side income into a way to stay up-to-date in your career field. Depending on your specialty, you can consult or freelance. This reduces the rate at which you lose earning power while you stay home.
Your side income can help you save up your own money for the future, as well as protect you in the event that something happens to your partner. I certainly didn't plan on a divorce when I married my ex. However, I'm glad I have a career that allowed me to get a fresh start with my life when my marriage ended.
3. Start investing
Finally, invest in your future by, well, investing. Even though women face a confidence problem when it comes to investing, the reality is that they might be better investors, according to recent research.
Learn about investing. You might be surprised to discover that indexing is a relatively simple way to get started and that it isn't as risky as you might think. I like Betterment when it comes to beginning investing because it gives you a way to dollar-cost average with as little as $100 per month. You can use money from a side gig to invest in your future.
Meanwhile, as you use a roboadvisor like Betterment or Wealth Simple, you can read up and learn more about investing so that you feel more confident in taking the reins of your financial future.
Don't forget that you can still have an IRA, even if you are a stay-at-home spouse and don't have earned income. The IRS has rules related to spousal contributions to an IRA. That means that your spouse can make contributions to an IRA in your name. And because it's your IRA, that money stays yours.
If you're a stay-at-home parent whose main contributions to the household are non-financial, talk to your spouse about this arrangement. It's the least a loving partner can do for someone who is doing so much important work for the household without monetary compensation.
Pay Attention to Your Household Finances
No matter how you decide to invest in your future (and you should do all three things), it's important to be involved in your household finances. Meet with your partner regularly to talk about money and make sure you have a say in what goes on. You should understand the financial situation and be a part of the decision-making process.
Finally, consider different arrangements. As women see an increase in earning power, and as men start demanding work-life balance we can start moving in a direction that allows for more people in general to invest in their futures. There are more stay-at-home dads than ever before, and technology and progress give us more flexibility. There's no reason that we can't all work toward arrangements that work for our families — and that's a sure way to invest in your future.