Me either. I must have been distracted by “Sibling Day.”
And what exactly does one celebrate on Equal Pay Day you may ask? Turns out, not a lot. In fact, according to a recent CNN article, women make only 78 cents to every dollar men earn, and due to lacking retirement funds, have double the chance of ending up in poverty.
Frankly, that doesn’t sound like much of a party to me.
In the article, the authors assert, “That's why Americans -- particularly women -- need elected officials and thought leaders to introduce and support comprehensive proposals that address the years of our lives when women are most economically vulnerable.” It then goes on to state how women’s issues will be a center point of the U.S. elections (true), and lauds the efforts of elected officials leading initiatives like the Women’s Economic Security Act and Paycheck Fairness Act.
Calling on elected officials to help may be a good idea. In principle. But much like the elected officials themselves - known for somewhat delusional truths, I can't help but wonder if expecting them to address this grim financial situation, we're only further deluding ourselves.
Ladies, let me be more direct. While I respect the elected officials trying to lead on this issue – particularly trying to address the economic vulnerability of women during child-bearing/raising years (which, note to authors: is basically from the moment of conception until the rest of our lives), my belief that elected officials and “thought leaders” will solve these issues is about as high as my belief that men can endure childbirth.
Real change – and solving these issues - isn’t going to come from other people. Of course it makes sense to encourage others and VOTE to set up laws and reforms making equal pay and retirement security more attainable and feasible. But the reality is, women are also going to have to make it happen for ourselves, and by ourselves.
To that end, we can do two of two things:
1. Negotiate higher pay – which I’ll address in a future post.
2. Save and Invest our money wisely – which I’ll address now.
However, let’s say best case scenario we are successful and women get an additional 22 cents on the dollar, same as men. That’s no small deal. In fact, over the long-term, it’s substantial For example, if a man's salary is $100,000 x .22 x 30 years, that's a $660,000 difference (Insert man's salary x .22 x 30). Fabulous! We should have a big party, right? Well, not exactly. Even with a higher salary, this doesn’t solve the problem for women (or men for that matter) in the long-term. And the real problem is not having enough money to retire comfortably and in some cases, facing poverty in retirement, especially if you're a woman. Look, if you're short on money now, at least there is something(s) you can do about it. If you're short on money after you're 65, things could be very grim for you. So it's not that I want to pick one issue, but if I had to, I’d say poverty in retirement is a much scarier prospect.
Quite simply, women need to both work on earning more than we do now, and importantly work with what we already have.
And here’s the fact, ladies: while you may often read about those multi-billionaire CEOs and wunder-kids, very, very few people – like less than .5% - get rich, or even meet their basic retirement needs, based on a salary alone. You have to save and invest, well.
Save & Invest Well - CYA (Cover Your Assets) & Invest for Growth
Unfortunately, according to recent surveys, when women do actually put away money for retirement – and only an estimated 53 percent do, they fail to invest for growth, which further erodes their future returns (i.e. they keep the majority of their money “safe” in cash and cash equivalents, such as money market funds, Treasury bills and certificates of deposit, which have a low-risk, low-return profile). While everyone definitely needs to be conservative with some money women’s efforts to be overly prudent are actually hurting them in the long-term.
And I’m not so sure that women are necessarily trying to be overly conservative. I actually think it’s more the case that most women simply aren’t sure what to do.
In thinking about this, and while all people are different, one of the companies I work with Baton Investing - a stock-picking app that has beaten the market by 300% since 2003, suggests you divide your money into two buckets:
1. Short-term – money needed in less than 5 years should be managed conservatively
2. Long-Term – money needed in more than 5 years should be 100% invested in growth stocks regardless of your age.
The reason Baton suggests such a strategy is that although the media – and financial industry - would like us to believe that the stock market is this crazy, up and down, constant boom and bust beast, the reality is the stock market has always historically recovered within 5 years. So within that five years, and depending how risky your investments are, you could do well or lose your shirt - like many people did in 2008 when the market tanked. It all depends on what the market does -- and no one really knows what the market will do.
But the strategy makes total sense to me, particularly as someone who won't “play” the market. Be safe with your 5-year money; you don’t need the angst and don’t want to lose your shirt.
However, the money needed in more than 5 years should be 100% invested in growth. This is where you will make your money – far more quickly and effectively than by buying T-bills, sticking it in a money market, investing in some crummy fund, or certainly through a straight salary. The reason is in both the annual and compounded returns. Check the calculator to see for yourself. This specific calculator compares the difference between the S&P’s 12-year return (9% or 169% total) and Baton’s 12-year return (16% or 486% total) to demonstrate how the annual and compounded returns on your money make a huge difference. Now consider those figures if you put your money in a money market that averages maybe 1%t return or if you depend only on your salary which yields a - wait for it - 0 percent.
There’s no two ways about it. You have to save and invest - well.
So yes, let’s fight for equal wages. It’s a good and a necessary fight. It matters. But while these elected officials are yammering on to fight for us (read: get our votes), I’d actually like to see women solve the real problem.