If you're a woman, chances are that you're not fulfilling your financial potential. Whether this will change is completely up to you.
Though more and more women are entering high-paying professional fields and earning substantial incomes, as a gender, they tend to lag behind men financially in many ways. They earn less than men and live longer — a double whammy when it comes to their resources for retirement. Further, many women fail to get the most mileage out of the money they do earn because they are generally reluctant to take control of their finances.
At the same time, many women are haunted by what's known as the bag-lady syndrome, the fear that they might end up financially destitute, regardless of how well off they may be today.
Too many women lack the confidence necessary to take control of their financial lives — to make investments, manage their money, plan and monitor their spending, make and manage investments and increase their wealth.
Why don't more women assert themselves financially? Is someone stopping them from doing so?
The answer: They are stopping themselves. Many women haven't yet purged their minds of the traditional social view that they aren't wired for financial matters. As a result, many subordinate their financial lives to those of their husbands, boyfriends or parents. They've failed to take steps toward financial control because they buy what society has been telling them for decades, thus perpetuating these social norms and precluding a change in their attitudes toward themselves, their money and their relationship with money.
Until they evolve out of this mind-set, they will lack real financial power. Like many forms of empowerment, financial empowerment must come from within. Women must claim their financial power. They must seize it with zeal reflecting an unshakable resolve to take control of their financial lives and thus improve their lives in general.
This is the first installment of a monthly column aimed at women interested in improving their comfort level with money in general and gaining knowledge and the confidence to invest wisely.
If you're a woman, you must make up your mind that you can do this, that you will do it and that you're not going to let antiquated, ill-conceived notions of gender drag you down. Keep "EMPOWER" in your mind as an acronym representing these concepts:
Education is critical
Motivation inspired by your values
Protection against risk
Ownership of your future
Work — claiming what is yours requires effort
Emotions should be kept out of decisions
Responsibility to yourself
To muster the resolve to change your thinking and claim your financial power, start by examining your beliefs about money. Some of these beliefs may be obstacles to empowerment. For example, do you believe that money is the root of all evil? Do you have trouble envisioning yourself as well-off financially because you believe this is only a status for others? By identifying and rejecting such obstructive myths, you can clear your path to financial empowerment.
The next step is to think hard about life goals that can be better reached with increased wealth. As money is best viewed as a means to an end — and not, materialistically, as an end in itself — this thinking tends to be highly motivating and can affect the way you plan your financial future.
In planning your investments, perhaps the most critical factor is controlling risk. Our culture generally credits men as having better investment skills than women. But behavioral finance research shows that men tend to make more investing errors than women because of overconfidence.
Along the same lines, women may be more attuned to risk when making investment decisions. If anything, they have the opposite problem regarding finance in general: under-confidence. Yet, investing successfully isn't just about reaping returns; it's also about being able to sleep at night while being aware of risks and your individual tolerance for them.
Your risk tolerance should affect the design of your investment plan from the get-go. And you should have a clearly defined plan. An investment plan is like a road map to your destination. If you're in unfamiliar territory, you don't just get in the car and drive. You make a plan based on information. Your investment plan should balance anticipated returns with the risk, and the risk levels inherent in your investment vehicles should reflect your risk tolerance.
Successful investing is unlikely without a plan, and you should stick to this plan with steadfast discipline — until you have good reason to change it. Just about any plan that you can stick to is better than no plan at all.
In upcoming columns, we will discuss how to choose investments and assemble and maintain an investment portfolio to position for returns over the long term while managing risk.
This work is the opinion of the author and not that of ABC News.
Laura Mattia is a partner with Baron Financial Group, and a fee-only financial advisor. She's a Certified Financial Planner professional (CFP®), a Chartered Retirement Plan Specialist (CRPS®) and a Certified Divorce Planner (CDFA™) and holds an M.B.A. in accounting/finance. Her Internet radio show is Financially Empowering Women™ with Laura Mattia. A professor at the Rutgers University Business School, Mattia is completing a Ph.D. in financial planning from Texas Tech University; her dissertation is on how to help women plan for retirement.