Building wealth is more critical for women than ever. Core issues of systemic gender pay inequality persist, even in 2023: Women working full-time jobs make an average of 83.7 percent as much as men, which amounts to a difference of $10,000 per year. For context, $10,000 in a retirement account earning 6% interest over 30 years could grow to more than $57,000, so imagine the lifetime time value of money if a woman were earning as much as a man. What’s more, these gaps deepen for women of color and those with disabilities.¹ Other income issues persist: the likelihood that your job, duties, retirement options, and relationships will be consistent throughout your lifetime is likely not the same as it was for your parents.

While there are myriad challenges to earning a decent income, there are also savings setbacks in the modern era. The age of Social Security and Medicare eligibility is going up — all while life expectancy is increasing. It will be up to you to bridge these gaps with your own savings.

As wealth advisors, we often see common issues persist when it comes to women and wealth-building. There are a few “life hacks” that apply to many of our female clients. They can be grouped thematically: pay yourself first, invest for retirement, preserve assets during marriage, choose appropriate mortgage terms, and identify proper insurance solutions. Building wealth can help provide options — and the flexibility to walk away from unsafe or unsatisfying situations at any time. Beneficial financial wellness is integral to your overall wellness.

Pay yourself first

Paying yourself first is the foremost wealth-building strategy. What does this mean? It is important to define your savings goals — and meet those goals — before paying other bills. That means if you want a shiny new leather jacket, that comes after you pay your monthly bills and fund savings or retirement accounts. Your splurge budget is what remains after these accounts are funded for the month.

This brings us to an important point: it’s important to differentiate between savings and investing. Savings accounts should include your emergency fund, mortgage or down payment monies, and anything that will need to be liquid in the next five years held in a bank or money market account. Consider your investment and retirement accounts for future needs five or more years down the road.

It is also important to appropriately fund your emergency savings accounts. While some suggest six months of living expenses will suffice, one to two years of living expenses is a better target in this post-pandemic world of rising interest rates. Keep in mind that single people will require more savings, since a second income will not help cushion the blow of a job loss or other setback.

Don’t be afraid to start small. You can increase savings amounts as your earnings increase. The act of saving usually begets more saving (this is the point). Start as early as possible so the time value of money and compounding interest are on your side (consider the $10,000 turning into $57,000 example above). Time can be your best friend or your worst enemy.

Invest for retirement

If your work offers a retirement plan and employee matching, always make sure you contribute enough to qualify for the employer match. The match is usually 50% or your contributions up to a certain percentage of your salary. This can be a huge Return on Investment (ROI), so don’t leave that money on the table. If you have access to a Roth 401(k), consider fully funding it to help provide greater tax planning flexibility in retirement. There are no Roth 401(k) income limitations, unlike Roth IRAs.

If you qualify, contribute to a Roth IRA each year for tax-free growth: you won’t pay any income tax upon withdrawal. You can withdraw your original contributions at any time without penalty.

Your Wealth Advisor should assist with choosing an appropriate asset allocation and keep you on the path to your goals, even during market turmoil. They should also help determine your risk tolerance, as this governs what investments you should choose. Stocks are riskier than bonds but have a higher rate of return over time. Younger investors can tolerate a larger allocation to stocks. Consider a “target date” fund that will automatically adjust your asset allocation as you approach your retirement date. For example, select a 2050 target date fund if you plan to retire in 25 years.

Preserve assets during marriage

Considering marriage? While all may seem rose-colored, sunshine, and moonbeams at the inception of a relationship or prospect of matrimonial union, it’s important to strongly consider a prenuptial or postnuptial agreement to address the issues of “yours, mine, and ours.” Arriving at a meeting of the minds about how you and your partner want to maintain ownership of your assets and protect your separate property is an important first step before forging a legal bond. Coming to terms on these topics is also much easier at the inception of a marriage, rather than at its potential dissolution. A prenuptial agreement can provide confidence, since you’ll have visibility into how your finances may look if the marriage ends. An agreement can also work to limit attorney fees during divorce.

It’s also important to consider equal access to financial information within the marriage. Most partnerships have a financial “decisionmaker” who naturally takes the reins and actively pays bills, files tax returns, and monitors investments. If this is your role, involve your spouse so that you are sharing the burden — and they understand what to do if something happens to you. If your partner takes that role, ensure that you understand the family finances in case of contingencies. Make a physical (not digital) list of assets, account numbers, passwords, and contact phone numbers, and store it in a fireproof and locked box along with relevant documents like birth certificates and social security cards. It is much easier to resolve or prevent issues when both spouses have access to all financial information and are comfortable discussing family finances.

Choose appropriate mortgage terms

Keep in mind that the principal portion of mortgage payments are forced savings in the form of equity. That equity builds much faster with a shorter-term mortgage. We recommend taking on the shortest-term mortgage you can comfortably afford.  Another approach is to use a 30-year purchase mortgage to purchase a property, but pay the mortgage as though the term is 15 years, which will provide some flexibility in the event of a job loss or other unanticipated loss of income. If you refinance your mortgage to obtain a more favorable interest rate, you should strongly consider shortening the term of the mortgage as well. For instance, if you refinance a 30-year mortgage in year 25 to lower your interest rate and your monthly payment, you should also take to opportunity to consider shortening the term of the loan to 15 or 20 years with an even lower interest rate.

Identify proper insurance solutions

What good is amassing wealth if unanticipated events decimate that wealth? Ensuring you are appropriately covered in the event of contingencies is essential to protecting yourself and your loved ones. If you haven’t discussed insurance with your Wealth Advisor, make time to sit down and discuss insurance. If you have dependents, consider term life insurance. Also consider how you would like to live your final days in the event of a health setback, and review whether Long-Term Care or other insurance solutions may help you and yours flourish in the future.

Financial wellness isn’t all that mystifying. It’s about living in moderation, considering the time value of money, and keeping these five “life hacks” in mind. The more comfortable you become with investing and seeing your money multiply over the long-term, this can help give you the confidence to keep your overall financial house in order.