Women and Money

Are women worse off financially than men? More often than not. Why? Not only do they tend to earn less on average but they often don’t work for as many years. This impacts their total earnings and their superannuation or retirement savings.

Over my years in accounting practice I’ve seen a lot of very successful women – and many whose lives could have been easier with different financial circumstances.

The key things to remember are:

• Make sure you have a career of your own before you have children. Usually this will involve getting some sort of qualification.
• If you have children, or take extended time out travelling, keep your work skills up. This may be through volunteering at your local pre-school or having a part time or full time job. In particular, keep your computer skills current and maybe take the time to learn new skills.
• Have your own KiwiSaver and continue contributing if you have a career break.
• If you’re in a relationship, know your joint financial situation:
  Have access to all the bank accounts and investments.
  Understand your assets and liabilities. This might be your house and the amount of current mortgage. Know the amount and keep on top of it.
• Know the income you both earn and make sure it goes into a joint account.
• Understand your financial personalities and if money is a constant source of disagreement for you both then set budgets for contentious matters. For example you could each agree a clothing allowance or an activities allowance.
• If you have different financial approaches or personalities then make sure you each receive an allowance from the joint account each week that you can spend on whatever you like. It may be a small amount, $50 or $100 but you can do what you like with it. You may decide to invest yours.
• If you divorce, engage a good lawyer (use word of mouth) to ensure you get the best possible settlement. Don’t give in too easily.

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One client, who was married to a medical specialist, continued to work part time while raising their three children. They divorced when the children were still in primary school. She was so upset and humiliated by the whole situation that she accepted what he offered as a divorce settlement, a position she sorely regrets given the impact on the standard of living for both herself and the children.

While it rankles with her that he takes the children on overseas and skiing trips while she works extra hours, she is pleased the children are getting those opportunities. However if she had gone to the family court instead of accepting his settlement offer, it is likely that she would have received more both via ongoing financial support for the children (maintenance) and a higher than 50% share of their assets given his much higher earning capacity.

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Andie had been happily married to her husband for 20 years. She had stopped working a few years earlier as she was experiencing problems with RSI and arthritis and her doctor recommended that she significantly reduce her work or stop it completely. After discussion with her husband it was agreed that she would stop work completely as he earned enough for them both. Then her husband announced that he was leaving her for someone else. Andie didn’t know what to do. Suddenly she had no income and didn’t want to sell up and leave the home she had been living in and loved for the last 20 years. She had poured so many hours of herself into it, redecorating it just the way she wanted. Although she received a share of his future income she had to buy him out of the house. He agreed to lend her the money to do that as she was unable to borrow from the bank.

In spite of her immense grief Andie sat down and worked out a plan to recover financially. She let everyone she knew know that she was available for house sitting and then rented out the house. She then used the equity she had in the house to purchase a rental property which needed a lot of work and which she did up with some help from builders, plumbers etc. She stayed there part of the time she was renovating it and while she wasn’t house-sitting. She completed the work quickly and then rented out that property, had it revalued and bought another rental property. The three properties covered the mortgage and provided her with a small income but her costs were minimal. After two years she was able to move back into the property she owned and loved and had the income from two rental properties to keep her afloat. She kept doing some house sitting and rented out her house on Airbnb while she was away.

From a very low base she was able to make the most of her situation and create her own financial independence relatively quickly – but it required a lot of compromise on her part.

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In summary, always maximise your earning capability, be on top of your financial situation and, if you’re in a relationship, make sure that your financial approaches are working to improving your long term situation, not ruining it.