It’s no secret women tend to earn less than men. This wage gap can be attributed to many factors beyond our control. Gaining a solid financial education is often more likely for men than for women, which can unintentionally undervalue our financial worth. It’s not that we don’t know we need a wealth management plan. It just gets put on the back burner.
Of course, this doesn’t go for all women. Some women are powerhouses in the workplace and set a precedent when they walk into a room. They exude confidence, and I’m willing to bet they have reasonable control of their financial and retirement plan. Unfortunately, this isn’t the norm.
If more women understood their finances and their financial worth, they could be better set up to succeed financially. The first step to wealth management is to recognize you are worthy. Then you must determine how much you are worth and how much you need to retire. From there, you can get started on a clear financial plan.
What is Your Financial Worth?
Many of my clients have a limited view of their financial worth and willingly accept less. Because they don’t fully understand their finances, they don’t know what number they are truly worth and how to ask for it.
Before throwing out a number, we need to take a step back. Part of understanding your worth requires some inner work first. Inner work comes down to believing you’re worth it, financially and otherwise. You get to be confident in your abilities and wear that confidence on your sleeve, so you can project the same powerhouse energy I mentioned earlier. With this comes respect and fair wages.
What is Your Financial Worth Goal?
Everyone’s number may differ because you must consider the cost of living, the number of kids you have, and your monthly expenses. Wealth management takes time and effort. If you know your salary needs to be X amount, and a potential new employer offers a number less than X, you will have to practice the art of negotiation. Speak confidently as you thank them for the offer and ask for more.
If you are unclear about your baseline salary goal, I encourage you to take steps to pin it down. Don’t just think about it; do the research and find the data to support your number. It represents your worth, which is very powerful in negotiations and financial planning.
How Much Do You Need to Retire?
Research has shown many women do not know their workplace retirement plan. The Social Security Administration says women 44 to 64 years old and unmarried, divorced, or widowed are not prepared for future retirement.
This falls on our lack of financial and wealth management education, lack of negotiation skills, and inexperience in the workplace. The average woman works fewer years than a man, so they have less time to gain experience and save for retirement.
There are many factors to consider when evaluating how much you need to retire:
- Your monthly bills
- Groceries
- Savings or emergency fund
- Vacations
- Holiday gifts
- Unexpected doctor’s appointments
- Education – your children’s college fund
Writing everything down is essential to arrive at a concrete number and to ensure you don’t leave out anything costly.
Calculating Your Replacement Rate
Investopedia says your replacement rate is “the percentage of your salary that you’ll receive as income during retirement from your retirement accounts.” Your replacement rate includes variables such as taxes, savings, and spending needs. The rate is not locked in; it can fluctuate throughout your retirement, depending on the market and your tax bracket.
Typically, financial planners use a 75% replacement rate, which depends on your expenses. If you have not worked on your retirement plan for long, 75% may not be feasible.
Start Your Financial Planning Today
Many of us regret not starting our financial planning sooner. As a Career Coach, I can work together with you to ensure your career and life goals are on track while you work with a financial advisor. Your future self will thank you!
