Hot on the (well-shod) heels of International Woman’s Day and renewed focus on the pay gap, we look at 5 ways women can become more financially empowered.
Just this week, the International Women’s Day committee stated that while women continue to contribute to social, economic, cultural and political achievements, “progress towards gender parity has slowed in many places”.
When it comes to falling behind men financially, the pay gap doesn't seem to be making it any easier for women to gain momentum monetarily either. But as Cathryn Gross, Principal of Twelve Wealth, sees it, the future looks brighter than you may think.
“The way we usually look at the gender pay gap is to look at averages," she explains, "and on this basis; women earn 5.5% less than men when the graduate from university and take their first job."
However, Cathryn points out that this gap has been falling over the last few years, which would indicate that the gender pay gap for young Australians has been falling not rising.
"The future looks bright for women with a university education,” she says. “In fact, female Engineers, Lawyers and Psychologists are earning more than their male peers when they take their first role.”
“In executive management positions, the gender pay gap is now close to 30%. This gap is larger when total remuneration is taken into account, indicating that women are getting a smaller portion of discretionary bonuses.” Cathryn notes research that suggests this is because women’s attempts to assertively argue for a pay rise are viewed more harshly than men’s, even when they exhibit the same behavior. “This then results in women being less likely to put forward their case for a pay rise,” she concludes.
Here are Cathryn's Top Financial Tips for Females:
“Talking about it is a good start,” says Cathryn. “We need those making the decisions to be aware of their biases, but we as women also have to have the confidence to step forward and ask for what we want in a way that is authentic to each and every one of us.”
“We as women have to be thinking long and hard about how we communicate and negotiate our base pay and bonuses," she points out. "This means doing our research and seeking advice from those who have been there before us, both men and women." Talking about money is often viewed as taboo, she admits, but when it comes to salary and bonuses, discrete research and advice is a must if we are to put forward a persuasive argument. "This has to start from early in our careers, or we risk being left behind. Graduate salaries on average increase 40% in the first four years out of university, so we need to start having these conversations right from the beginning of our careers.”.
Once we are earning a wage, the challenge becomes not to grow our lifestyle with each pay rise, Cathryn explains. “So to keep it simple, I recommend that we all try to do the following.”
- Spend no more than 50% of your take home pay on ‘Needs’.
- Spend not more than 30% of your take home pay on ‘Wants’.
- Contribute 20% of your pay to future savings (includes debt repayments, savings and super.)
- The 20% going to future savings is where investing comes in, Cathryn says. “This means getting rid of credit card debt first, making sure your savings is in a high-interest account that you can not easily access to spend on ‘Wants’ on a whim." Also, make sure your superannuation is consolidated and managed by an efficient manager, preferably with a skew to growth assets if you are under 45. "Then you can start to think about how to invest to fit with your life goals," she advises.
“Women are widely viewed as being more financially conservative than men, which can result in less long-term growth in their asset portfolios,” Cathryn notes. “It can also mean that they think long and hard about where to invest their money, but never end up taking the first steps and investing." This is where women can come unstuck in the long-term, she adds. "Taking the first step is the hardest, but it needs to be made.”
The choice of investing in property, stocks or businesses is very much a personal one, and needs to be driven by your goals for life, says Cathryn. “Over the long term, which is how I like to look at investing, the returns on residential property and diversified equity portfolios are broadly similar," she observes. "Over the twenty years to December 2013, residential property has returned 9.9%, and Australian equities have returned 8.7%," she notes. “For me, the important part is to start with a strategy that fits with your goals." For example, if you are saving to buy your first home, it’s important not to risk all your savings by investing it all in growth assets (shares) which have a lot of volatility. "But, if you already have a home and are looking to diversify your exposure and build your wealth over the long term, shares might make sense.”