Women’s Involvement In Finances And How To Avoid Financial Regret

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Several studies have recently found that women have varying degrees of involvement in their finances over the course of their lives. Many women throughout have felt financial regret due to varying levels of involvement and inaction. This is a discussion of those findings, along with actions women can take to avoid financial regret.

Aspects Of Financial Involvement

It’s important to discuss the various aspects of personal finance because in the studies, involvement with these aspects varied greatly. Here are the aspects we are focusing on:

• Paying bills
• Budgeting
• Debt management
• Saving for emergencies
• Saving for retirement
• Building wealth

In a study by Bank of America, women were far more confident in being able to manage items at the top of the above list (70%) than the bottom of the list (27%). Many women also reported investing to be their top barrier to entry and highest regret preventing them from attaining things like retirement savings and building wealth.

Wealth Through the Ages

Perhaps due to generational differences around communication, the same Bank of America study found that younger women (ages 22-39) were more likely to have conversations around finances than their older counterparts (65 and up). These factors, among others, included speaking with a financial professional and discussing new investment opportunities.

I’ve seen this in action in my own conversations. From my experience as an advisor, I’ve found the younger age group to be open and willing to ask questions about financial matters to have a better grip on things while many women aged 65 and older are hesitant to engage with money matters.

Relationship Status Matters

In the past few years, I’ve encountered many women going through divorces late in life and taking control of their finances for the first time. They are often embarrassed to admit that they weren’t involved in their finances during their marriage and regret not becoming involved sooner. Many fear that this change will cause them to fall entirely off track of the life they wanted to live.

It’s long been clear that life events impact financial goals. A recent study by Equitable found that relationship status is one of the big factors that cause women to increase engagement with their financial lives. Women going through major events, like divorce and becoming widowed, were shown to have increased financial involvement as a result. Married women often had less current financial concerns and short-term cash needs than their single, divorced, and widowed counterparts.

The Equitable study also found that one of the chief drivers for increased financial involvement for single women are income boosts. This is a significant finding, especially since according to a 2021 Wells Fargo study , a record 52% of all women are single. The Wells Fargo study went on to say that single women, while driving much of the labor force, lagged all other categories of people in wealth and spending.

There is one thing that all the groups in the Equitable relationship study had in common. Among those surveyed, the vast majority of single, married, divorced, and widowed women alike expressed regret about not becoming involved in their financial lives sooner.

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What You Can Do

Across the board, the studies discussed showed a high degree of financial regret among women. So, how do you prevent yourself from feeling regret?

Plan

Prioritizing your financial goals and revisiting those goals often allows you to stay on track. You want your goals to be very specific, measurable, achievable, and time bound so that you can definitively say how you are doing. Let’s say you’ve gone through your own planning process, and these are your financial goals in order:

1. Retire by the age of 60 on $80,000 per year in today’s dollars.
2. Maintain an emergency fund of $15,000, which is 3 months of your current expenses.
3. Pay off $12,000 in student loans by January 1, 2027.
4. Purchase a home with a down payment of $100,000 by June 1, 2030.

Now, it is natural for these priorities to shift over time but important to maintain a ranking system over time. In this example, financial security in retirement is the highest-level priority. So, if these were your priorities, you shouldn’t pause funding your retirement plans to dedicate more money to your home purchase goal. Likewise, if you noticed that your emergency reserves reached the level of $50,000 instead of your $15,000 priority, it may be wise to shift funds from the cash reserves toward your other goals.

Talk About Money

Speaking with peers and professionals alike about money can lead to enhanced understanding and increased comfort. While not all advice from peers may be good advice, talking through problems and concerns can be both cathartic and enlightening. Most people didn’t learn about personal finance or investing in school so sharing experiences, even supporting peers through accountability, can go a long way. This is something the studies showed that younger people are already improving at, but older generations could benefit from bringing in support systems as well.

Save Automatically

The easiest way to maintain financial discipline is to create as many automated systems as possible. Retirement plans are one of the best examples of this. Many employer-sponsored retirement plans today automatically enroll eligible employees at a specified contribution percentage. It is up to the employee to opt out now, as opposed to an opt-in. This has been shown to dramatically increase participation and account balances, simply because savings become automatic.

If you’ve got a variety of goals you’d like to achieve, set up automatic drafts to your various accounts. You’d like to stay debt-free? Set up an automatic pay-down of your credit card balance every month. You’d like to save for retirement? Deduct contributions directly from payroll. You want to invest for an intermediate-term goal? Set up an automatic deduction into a taxable investment account.

Invest

One of the biggest regrets, not investing soon enough, makes a huge difference in wealth over the long term. The amount of risk you’re taking on should match up with your financial goals. Goals that are far away and flexible might afford you to take on a little more risk than goals that are closer. There are many resources available discussing how to build a diversified portfolio.

If you are unsure of how to tackle any of these, consult a qualified financial professional.

By Cicely Jones, CFP®, Contributor