Women Head of Households: The Road to Financial Security

Women Head of Households: The Road to Financial Security

They’re taking on more responsibilities than ever before, but most are still on shaky ground when it comes to planning their fiscal future.

Women Head of Households: The Road to Financial Security

Today, more women than ever are earning college degrees, participating in the workforce, and taking an active role in the financial decisions of their households. While this trend seems to be good news, it still lacks critical mass.

According to Prudential’s 10th anniversary study, “Financial Experience and Behaviors Among Women,” a whopping two-thirds of all women lack a financial plan for the future and the confidence to make important financial decisions. Given the fact that most women will be head of household at some point in their lives, one thing is certain: women have some unfinished business.

What’s the Big Deal?

Whether “single” status is voluntary or otherwise, there’s a lot of work that needs to be done to create a successful financial plan for the future. For women who choose to remain single, they assume head-of-household status from the start. These women have a strong advantage because they gradually gain the information, experience and confidence they need when it comes to making sound financial decisions.

For many women, however, becoming head-of-household was not part of their plan. Rather, the role was suddenly thrust upon them through divorce or the death of a spouse. Regardless of how the situation materialized, this new status as head-of-household spells C-H-A-N-G-E. And lots of it. Understandably, during this period of considerable adjustment on all fronts, the seemingly urgent overshadows the truly important, and issues of financial planning are often relegated to the back burner. This is a big mistake.

Rather, when women become head-of-household, the need for a thorough financial assessment and detailed financial plan becomes far more urgent. Unlike male head of households, women are much more likely to be the caretakers of dependents — caretakers of the young children, adult children, aging parents, even the aging former in-laws! The reality of these relationships elevates the importance and need for a plan in order to meet current obligations and plan for future retirement needs.

Just think about it. Women who are head-of-household rarely have somebody to lean on in case of job-loss, sickness, or any number of potential emergencies — emergencies like court-ordered child support that is inconsistent at best, or worse never received. Think it can’t happen to you? Think again. Statistics show that approximately forty percent of court-ordered child support payments are never satisfied. (Child Support Statistics and Trends, FindLaw).

Unfortunately, women face many hurdles when becoming a head-of-household. For example, while the wage gap is narrowing for younger women, women in the age group of 45-54 can still expect to earn only 73 cents for every dollar earned by their male counterparts. So, women have to work harder and smarter to achieve the financial security they seek.

Financial Challenges

Still, the greatest challenge women face when assuming financial responsibility as head-of-household correlates to the biggest mistake married women make when it comes to finances. Too many married women become complacent and allow their spouse to have sole responsibility for financial decisions. In the best case scenario, this mistake creates a void of knowledge that must be filled before moving forward.

In the worse case scenario, taking a hands-off approach to family finances can leave women in a financially precarious situation.

Consider Gloria. She was a happily married wife and mother of three preteen children. She embraced her responsibilities as mom and happily chauffeured the children to all their activities: school programs, soccer practices, soccer games, music lessons, etc. Meanwhile, her husband took care of the finances, until he unexpectedly died from an aneurysm at age 43. He had handled all the financial decisions, including how much debt to assume.

Much to her chagrin, it was a bundle and something they had never really discussed. To make matters worse, despite his company offering voluntary life insurance coverage with a death benefit of five times his annual income, he chose the minimum benefit that equaled one year of his salary. While the details vary, this story is not uncommon.

No Room for Excuses

A wise person once said, “If you really want to do something, you’ll find a way. If not, you’ll make an excuse.” It’s time to put all your excuses to rest and make some progress down the path to financial security, one step at a time. First, develop an adequate assessment of your current financial situation. To accomplish this, locate and review the following documents:

  • The last three years of tax returns
  • All legal documents such as wills, trusts
  • Bank loans and mortgages
  • Current credit report
  • Bank accounts: savings, checking, money market
  • Insurance policies (especially life insurance and make sure it’s adequate given current/changing circumstances)
  • Retirement accounts
  • Inventory of all assets

If reading tax returns, wills, and loan documents is not something you enjoy or feel qualified to do, don’t let that become a roadblock. It simply means you need to locate a trusted expert — a CPA, a lawyer or a financial planner. Ask friends or family members for referrals, get out the phonebook or contact your local Better Business Bureau. Before making a selection, conduct several in-person interviews. Make sure you check credentials, trust your instincts, and never tolerate pressure to commit to any decisions immediately.

Whether you seek an expert’s assistance or go it alone, educate yourself. There are many books, seminars, community programs, church programs and web-based information designed to improve your financial literacy and understanding. You will not regret investing time to learn more about your options for creating the financial future you desire.

At a minimum, take these precautions:

Make sure all important documents are kept in a secure location, and tell at least one person where those documents are kept.

Check all beneficiaries, and make certain they represent the right choice given changing circumstances.

If you don’t have a will, get one today. Many women make the mistake of not creating a will, leaving loved ones to deal with the hassle and expense of probate court. A will leaves no doubt about what should be done in the event of death and helps protect your assets for future generations.

In addition to a will, most lawyers suggest that you prepare powers of attorney and a health care directive.

Lastly, develop a realistic spending plan and commit to it. We all hate to do a budget, and stick to it! But, it is simply a good foundation to build on future success.

Proactive, Purposeful and Persistent

As a single woman, the head-of-household responsibilities are many. But few responsibilities are more important than planning a secure financial future. To this end, be proactive, purposeful and persistent. Anything less may leave you and your dependents at the mercy of circumstances and at risk for financial hardship. Start today so that financial security is not a pipedream or fantasy but rather a reality that comes from sound, informed choices and decisions made in conjunction with trusted advisors.

DID YOU KNOW?

  • 95 percent of women are the financial decision-makers in their households
  • 57 percent of women believe that the economic recession has led them to become more cautious with their money and recognize the importance of a financial plan
  • 86 percent believe that they do not know how to choose financial products and lack the confidence to make good financial decisions
  • 51 percent stated that they are not knowledgeable about generating income in retirement and need more information about specific insurance and retirement programs
  • When asked about the outlook of the economic recovery, 11% were very optimistic and 44% were somewhat optimistic

Source: Prudential’s 10th Anniversary Survey of Women:

About the Authors:

Rich Lindsay / Rob Proano
Rich Linsday ChFC, AEP and Rob Proano PhD, CFP are financial services representatives and offer financial and life planning through Planned Estate Services (PES), an office of MetLife, with locations in Southern California. Focusing on financial planning, investment services and life planning, PES develops strategies to help clients better plan life’s goals. PES does not give tax or legal advice. Rich and Rob can be reached at 800-468-6885 or at www.plannedestate.com 

Metropolitan Life Insurance Company (MLIC), New York, NY 10166. Securities products and investment advisory services offered by MetLife Securities, Inc. (MSI) (member FINRA/SIPC) and a registered investment adviser. MLIC and MSI are MetLife companies. CA Insurance License #0454145 and OE53814. L091031781(exp1111)(CA).

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