What Happens if Something Happens to Your Spouse? Ladies, Let’s Talk Money.
A close girlfriend of mine is going through a divorce. Since her separation, her soon-to-be ex hadn’t been depositing enough money in their account to even cover weekly groceries. Her personal savings had gone into helping her husband’s once fledgling, now thriving business. Highly educated, she once worked at his office, but hadn’t held her own “second job” (I say second because her first job is as a full-time mother) in 10 years. As if the emotional turmoil wasn’t bad enough, with no immediate financial means of her own, she now feared she and her children would lose their home.
I read her email over and over with my eyes glued to the words, “lose our home.” I couldn’t shake the mental picture of the holiday card she sent me barely three months earlier. A family sitting in front of the fireplace, ensconced in a beautiful house, living a comfortable life, with her two amazing children wrapped tightly in her arms. Sure, after lawyers, and legal fees, the court would likely award her a percentage of the marital assets. Assets that instead of savings and retirement would now need to be used for day-to-day living, until she got on her feet. The new picture of the life she described to me was heartbreaking. Incredibly angering. And completely sobering.
I wish I could say this story is an anomaly. A one-off. That my friend just married a jerk. But it’s not. In fact, she wasn’t even the first friend who had experienced the terror of financial ruin. Another friend’s husband of 25 years died when he was just 52 years old. The shock of his death was further compounded by the cold fact that their savings and investments were based on the assumption that her husband would be contributing to their retirement for at least another 10 years. Even if she stretched every dime out of what they once considered a “good” life insurance policy, it would in fact only cover her for another 10 years.
“I really didn’t have anything to do with the investing,” she told me. “I thought we’d be fine. The truth is we might have been ok. But now, I ’m not sure I will.”
Unfortunately, neither friend is in the minority. According to the Institute for Social and Economic Research, incomes of divorced men rise 25 percent, while incomes of divorced women fall by a fifth. Other statistics show nearly 40 percent of women who divorce or lose a spouse live in poverty by the time they are 60. 40 percent live in poverty. Despite the fact that women’s overall wealth continues to grow at a rapid pace, according to a survey by Fidelity Investments, the majority of women still do not believe in their ability to be financial decision makers. Surprisingly, younger women hold this view the most. Of those women who divorced or lost a spouse, nearly 40 percent said financial concerns made dealing with the loss more difficult; a third weren’t able to continue saving for retirement and nearly 32 percent said they experienced far less financial security.
I don’t tell you these figures or stories to scare the daylights out of you – or maybe I do. They sure scared the hell out of me. But even if you don’t have a spouse, or you live happily with a spouse until a ripe old age (and I sincerely hope you do!), the issue of women’s financial independence is critical for a number of reasons. But yet, we barely talk about it.
The irony shouldn’t be lost here. As women, we talk about nearly everything. Ev-very-thing. Nothing is really off-limits. Nothing, it seems, except for money. Toddlers’ poop, breastfeeding, birth, sex, coconut oil, wine, hot yoga, travel, kids, business plans, politics, grandkids, careers, schools, spouses. Each of these topics has the potential for hours-long discussions. But mention money, and you’ll likely hear the crickets chirping in the background. While women have an uncanny ability to recall and recant every detail of our lives, money – while often at the center of many of these subjects, is somehow too personal. This is all a bit surprising when one considers that most of what women deal with on a daily basis can be incredibly frustrating and complex. Money, on the other hand, is fairly straightforward.
Women are generally known to manage money well. Recent estimates show nearly 50 percent of women manage the day-to-day household budgets. Most can tell you how much is really required to run the household and exactly where every cent goes. But, somehow, women are still reticent when it comes to talking about it. Learning about it. Negotiating around it. And certainly investing it.
The biggest irony, of course, is that women don’t typically like to outsource much of our lives. But, yet, when it comes to money, we’ll throw it in a 401(k) account (which I’ve learned are great from a tax perspective or as a way to force one to save, but with a typical bunch of mediocre mutual funds, a 401k alone won’t likely get you where you need to be). We’re also known to hand money over to a “good” financial advisor – probably someone our husband knows and trusts, and let him or her deal with it. We believe statements like “You can’t beat the market.” And even if we know our annual returns – we’re told things like, “An 8 percent return is good; we’ll reach our retirement goals.” So we believe it. And we think those retirement goals are good, solid. When they’re not. We ask few questions. Too few. Until it’s too late.
About a year ago, I personally decided to start asking more questions. I wanted to really look at my investments—most of which were not doing as well as I wanted, and talk to others about their strategies. Admittedly, the statistics I had recently read about women – and my friends’ situations – increased my interest around this. While I was probably more engaged with investing than some of my friends, I knew I needed to ask more questions. Make better decisions. Get better results. And I knew a number of people who were far better investors than I. Quite simply, I wanted to know what they did. So, I asked them – while also being clear that investing wouldn’t be/couldn’t be my full-time job. In fact, I think my opening sentence was, “I’ve got kids to feed, schools to pay for, a business to run, and a life to live, now. But I also want a beach waiting in 20 years (as well as some other plans) and don’t have a lot of time to make this happen. Tell me how to get there.”
Turns out, my instincts were right. The answer was both in the power of compounded returns AND the size of those returns. Yes, size matters. A lot.
My “normal” 8 percent annual returns (BEFORE all the management fees paid to my advisor) were not great. Shockingly, that was actually better than most people get. But they weren’t even as good as the historical average of the S&P 500…which I could get by just buying that one index and not even paying an advisor. And they certainly weren’t good enough to reach my financial goals. If I could get even a few percent higher returns, that would translate into hundreds of thousands or even millions of dollars more over a 15-20 year period. Check out your numbers and the difference here.*
*This calculator was developed by client, Baton Investing, specifically to show the stark difference a few percentage points can make.
I digress. My personal journey was initially just meant to ensure my own financial safety net – totally independent of my husband. Doing so, made us both feel better. Then, I decided to become more engaged, and share what I’ve learned and what has worked. Why do I share this with you? First, because I don’t want to see one more woman face an uncertain financial future. But also because I figure if I can get better at investing, anyone can – whatever her starting point. And if I can achieve financial independence – or quite frankly, simply make more money than I’m making now, I want other women to be able to do the same.
So ladies, I know I’ve had a good time blogging about — and we’ve had a good time talking about — motherhood. Business. Marketing. And children. And the fabulous, funny mess that all can be. While I’ll still blog about those topics, the more I thought about it, the more I thought: I want you to be rich — or at least financially better off than you are now, and in the future.
This is why I’m adding the topic of money and investing to my blog. I know money isn’t everything. But it certainly is necessary. And more of it isn’t necessarily a bad thing. As Sophie Tucker said, “I’ve been rich and I’ve been poor. Rich is better.”
So let’s start the discussion. We need to do that. And help each other. Just like we do in every other area of our lives. Stay with me on this one. Tell me what you want to know. I’ll do the same.
That should make everyone feel better. No matter what the future might bring.
Patty McDonough Kennedy is an entrepreneur and investor. In 2005, she founded Kennedy Spencer (www.kennedyspencer.net) – a marketing communication agency, that works with companies and individuals to measurably improve communication, raise awareness and increase sales. Her blog is a sometimes humorous, sometimes serious take on business, motherhood, investing & life. Contact her at: firstname.lastname@example.org