When Should You Start Saving For Retirement? How Women Can Get An Early Start On Financial Planning
BY: Lydia O’Neal
June 16, 2017
After Stacy Francis, now the CEO and president of her eponymous wealth management firm, learned her grandmother remained in an abusive marriage out of perceived financial dependency on her partner, she started a pro bono financial advisory charity to help other women out of similar situations. But more recently — on Thursday, to be exact — she discussed with International Business Times the financial obstacles young women face, especially when transitioning from the years on the path to obtaining a career to siphoning off earnings to save for retirement and rainy days. In the following Q&A with IBT, which has been condensed and edited for clarity, Francis touched on why “a man is not a financial plan” and the importance of getting “financially naked.”
Women, recent research showed, graduate with more debt, take longer to pay it off and receive less help from their parents when it comes to handling that burden. As a professional financial adviser, what’s your advice for women right out of college, who are sort of finding their footing financially — often with plenty of student debt on their shoulders?
Well, you’re totally right. You know, seven out of 10 seniors owe [roughly] $30,000 when they’re graduating from college, so it’s a big problem. But there are definitely some things you can do. A lot of individuals, when they’re getting out of college, they’re going for that full-time job, and unfortunately, those full-time jobs are harder to come by. And so it might mean getting a part-time job after college, or — even more savvy — getting a part-time job during college. Not only will it increase the amount of money that’s coming toward you, but it’s also going to reduce your college debt. And that’s because you can use that money to either pay down those student loans already, or in addition, not have to take as many loans out.
It’s also really helpful, just long-term, for your ultimate investment potential from employers. So what that means is that when you go out to be one of those gazillion different candidates that are being considered for a position, the fact that you have some part-time experience will go really far in showing that you have, you know, both skills with managing in different employment situations, and just have more experience.
Another thing I would say is scholarships. Women can definitely do the research. There definitely is research and legwork involved in this, but scholarships can help lower the amount of money that women need to take out in the form of student loans.
And then there’s also, finally, repayment plans. So there are different repayment plans that actually lower the monthly repayment responsibility. For example, if you go into the teaching field, the federal government has a fantastic program for teachers who work full-time for five years in certain schools. And actually, they give loan forgiveness up to $17,500 on federal student loans, so that’s a very big number for a woman trying to keep her loans in check as much as possible.
How can young women, still establishing themselves financially, think outside the box in terms of managing their finances early in their careers, and do so smartly, perhaps after finally nailing down that full-time job?
I would say two areas where women are really having a deep, deep blind spot is in the area of having an emergency fund and also in the area of saving for retirement — using their employer 401(k).
With that emergency fund, for example, that’s anywhere from three to six months of basic living expenses, which, understandably, can be quite overwhelming. But you get started with it step by step, little by little. And, each pay check, try to put, maybe, $25, maybe it’s $100 per paycheck, but have that be an automatic, autopilot savings plan.
And it’s the same thing also with your 401(k). Ideally, put as much money as you can into your 401(k). And if you’re limited, make sure for sure that you put enough money in your 401(k) to get the full match that your employer might be providing. And again, I know it’s hard to think about when you’re 24, or 25, or 26, that you need to start to save for retirement, but the early bird gets the worm. And I will tell you that the dollars you put in, the earlier you put them in, it doubles, triples, quadruples over time, and gives you so much more flexibility with your retirement, with the types of jobs that you can take down the line.
At a panel event you moderated recently here in Manhattan, one of the panelists mentioned the difficulty women have in talking about money. Why is this seemingly-abstract problem really a concrete one and what are its concrete ramifications?
Four in five women confess that they have refrained from discussing finances with the people that they’re most close to… When [the authors of the study producing that statistic] dive deeper down into why we’re not talking about it… many women say it’s just too personal. I think it’s really interesting that women feel more comfortable discussing medical issues with their doctor than talking about money issues with their financial professional.
This often comes down to the fact that, for many women, talking about money was something they were brought up taught that it’s just something not to do. Maybe in their family, it was just considered rude, or even if it’s not that, it just really wasn’t talked about. And, unfortunately, not talking about money puts women at a very big disadvantage.
Women — we learn through conversation. And… if you think about, when you went out for drinks with your friends, and you’re talking about everything from sex to, you know, cosmos, to what’s on TV, you learn a lot. Could you imagine if, in those conversations, you had conversations about, “What are you doing with your portfolio? How much are you making?” “Have you ever asked for a raise?” “You did?” “How did you do it?”
All of those conversations that are just not happening. And because those conversations are not happening, it keeps women in the dark… about their finances, and unfortunately puts us financially behind in the long-term.
A big part of your back story and how you got into financial advisory work has to do with your grandmother, who felt financially trapped in an abusive marriage. But things are different now, I’m sure, than they were at the time your grandmother was unable to find her own financial independence. How much have things changed for the better in this respect, and what are the big obstacles for this generation of women to conquer?
It’s interesting… there’s been so many changes and improvements for women, but there also are a lot of pieces that haven’t changed. So, I look back to my grandmother’s marriage and where she came from — the beliefs that, essentially, a man was a financial plan, and “You need to find a man, if you want a financial plan.” And that was part of the reason she got married so young. She got married in her late teens.
What’s interesting for women these days is that that message of “a man is a financial plan”—it’s still out there… And we find a good number of women that, once they meet their prince charming, somehow, all of their financial smarts go out the door. And I’ve met wonderful women who have MBAs, who are very smart with numbers, that take a back seat when it comes to the longer-term investing and long-term savings, that’s really important for them to understand and be part of. Instead, they step into a role where they are more so involved in the day-to-day finances, which is important. But again, it’s even more important to be part of that marriage and play an active role in those long-term financial decisions, because that’s really key to success as well.
So, unfortunately, I think that we as women almost feel — and not all of us, but a good number of us — we feel like, “Ugh, I don’t have to worry about this, this crap anymore. He wants to do the investment, and that’s fine — you go ahead. I’ll pay the bills.” But unfortunately, that’s very short-sighted, because we’re leaving ourselves in that position where we’re relying on that man as our financial plan.
And no one should have to rely on anyone. Everyone should be married to the person they want to be married to, because they want to. They should never find themselves… in a bad situation where they have to because they’ve given up the reins on their financial knowledge or their financial involvement.
And at what point in the relationship should that conversation start?
It has to happen before you get married. Far too many people will end up walking down the aisle, and then all of a sudden, having a big reveal that their spouse has umpteen dollars in credit-card debt. That is just not a great way to start any relationship.
So as you get [physically] naked, you want to get financially naked with each other. And interestingly enough, for some people, that’s actually much more frightening — getting financially naked. But one of the biggest reasons… for divorce is money arguments. And what studies have proven is that couples that argue about money have much, much, much higher rates of divorce down the line.
And so, having money conversations, and being really open about the finances and how you each manage money and how you can work together is a must that you need to talk about before you get married. It’s like the conversation of whether or not you want to have children. Those are all really important things to make sure that everyone’s on the same page.
A lot of conversations around women gaining financial independence tend to ignore the realities of lower-income women or women of color, and speak to an audience of white, upper-middle class or wealthier women. Sheryl Sandberg, in her book “Lean In,” for example, has become emblematic of this problem. How can we keep the conversation more inclusive when we’re discussing financial independence and planning? Is the next generation of women starting to bring this to the fore?
I 100 percent agree… that the conversation about money, getting savvy about money, is something that all women need to know, regardless of age, background, cultural [background], religious [background], income, socioeconomic status, working mom, nonworking. Every woman needs this information [and] every woman deserves this information, because financial illiteracy impacts all of us, no matter whether you’re Sheryl Sandberg or you are on welfare.
And what I have seen, over these last 15 years — the number of mistakes that women have made has nothing to do with how wealthy they are. It’s just that individuals who are wealthy have a little bit more flexibility in being able to recover from those mistakes. And so my hope is that women are seeing — younger women are seeing their sisters and their mothers and their grandmothers and learning from the mistakes that they’ve made and are committing to not following in those footsteps, so that they make the effort and they take the time to educate themselves about money.
Something that I think we can all agree [on] is: Where would I be if I knew more about money? Where would I be? And I think every woman would say they’d probably be better off… And so when I think of this money issue, I don’t necessarily think of this as black or white, rich or poor, old or young. I see it as a pervasive problem across all of those different categories.
And my hope and my dream and my passion is that we bring this education to women wherever they are in their lives, whether they’re getting out of college or looking to retire, so that they can make better decisions. And those decisions impact not only themselves, but… their children and their communities. so those are really important pieces.
But my hope, and I think it is happening, I think younger women are waking up to the fact that younger women really are waking up to the fact that this is really important stuff. It really is.