The pandemic has had a long-term ripple effect on just about everyone in the world. From job loss to losing loved ones, it might be years before we know the true impact of what we’ve been through this last year.
But I want to look at what’s happening now in my community and in areas across the United States – specifically the impact the pandemic has had on women and their finances.
Unfortunately, women have always been typically less likely to take control of their finances and/or increase their level of financial education. So, we were already starting out at a disadvantage in many cases. Now, statistics like these are letting us know that we have a real problem on our hands:
“(As of June 2020) Fifty-two percent of women workers have experienced one or more impacts to their employment situation as a result of the pandemic, including reduced work hours (24%), layoffs (16%), reduced salaries (13%), furloughs (13%), and/or early retirement (four%).” (Source)
At C. Beach Brown, we’re also meeting with clients who have seen a change in income because one of the parents in the household (many times the mother) has decided to either quit her job or reduce her hours to help with childcare. Those who haven’t are often working odd hours just trying to juggle both work and family life.
It’s actually happened in my own family! Even though my husband and I both worked from home while our kids were in school virtually during the spring of 2020, I found much of the childcare burden falling on me. So, I completely understand the level of burnout many of these families are feeling and sympathize with those women who might have made the choice to become a full-time parent (even temporarily).
But How do We Get Back on Track?
This pandemic will end at some point and we will all be craving the sense of normal we once had. So, let’s talk about what we can do to keep moving forward financially (and in some cases, take productive steps maybe for the first time).
Your Cash Reserve
Yet another reason that women are falling behind men is that they tend to keep more in a cash reserve; having a cash reserve is important but having too much in cash can be detrimental to you your wealth (strange, but true)! As women, we want to make sure we have a safety net, but sometimes we take it just a little too far.
It is not uncommon for me to meet a woman who has a year’s worth of expenses in a cash reserve - that’s too much. Keep three to six months’ worth of your expenses in a cash reserve, then make the rest work for YOU. When your investments are not growing at the same rate, you lose ground on your goals.
Get Back in the Game
If you made the mistake of pulling out of the market, come up with a game plan for getting back in over the next six to twelve months. Spread it out and put a set amount back into the market each month. If you are not comfortable with taking a risk, use investment products like annuities that transfer the risk to an insurance company instead of you. I don’t think that all of your investments should be in annuities, but if you need that extra level of security to make you comfortable, then use them!
Here’s an eye opener: I have a client who has had $800,000 sitting on the sideline for the last four years because they are worried about investing in the market. What this means is that the money should be worth $1,200,000 today, but it’s not. Ouch.
Tons of people can tell you about how they made the right decision to pull out of the market at the right time, but they don’t tell you the other half of the story – that they are still sitting in cash and missing out on all the returns.
You can’t time the market. Period.
Put Your Oxygen Mask on First
It’s natural for women to want to jump in and “fix” and let’s face it – after 2020 there’s a lot that needs fixing. Things like giving more to charity and helping friends and family financially are issues we’re all facing.
But before you jump in, it’s important to look at your own financial plan. Are you on track? If so, work with your planner to see what you have to “spare.” It’s the old “put on your own oxygen mask before helping others” analogy: If you sink your own ship, then you won’t be able to help anyone in the future – and that could have long-term effects on your family.
What’s the Next Step?
Never in my life have I wished I had a crystal ball more than I do now. I know that there have been so many things about 2020 that have made planning difficult, but here are a few things you can do now no matter what the future holds:
- Make sure your cash reserve is the right size.
- Check your investments against your risk tolerance. They may have shifted with all the movement in the market.
- Review your financial plan and take stock of where you are. Make changes as needed.
- If you don’t have a financial plan, now is the time to start one!
Not sure how to get moving in the right direction? Don’t get overwhelmed! Working with you through uncertain times like these is what we’re here for. If you’re ready to get some questions answered and gain a sense of security that comes with knowing you’re on the right path, CLICK HERE to make an appointment.