Women face unique financial challenges that affect their future whether they are experiencing divorce related issues or not. If you are a woman who wants to step away from financial anxiety, one of the first ways is to understand the issues you might be facing. Our first three parts of this article series focused on Dollars (factors that affect women’s earning capacity), Decisions (women’s historical experience with financial decisions), and Dialogue (the unique financial language spoken by women). Diversification*, as outlined in this fourth article, presents an additional challenge – but only as something to be understood, acknowledged and embraced.
To diversify financially is a technique used to manage investment risk by using a mixed and wide variety of investments within a portfolio. It is sort of the ‘not all your eggs in one basket’ philosophy combined with the ‘don’t just stick it under the mattress’ attitude. It is a way to use different types of investment vehicles that will, hopefully, provide you with higher returns without higher risks. Now that we have the technical stuff out of the way, we should understand how this is a technique that is important for women to understand and why it does not come to us naturally.
By nature, and with good cause, women are more worried about running out of money over their longer lifetimes than men tend to be. Because of this, women generally move toward more conservative investments inside their accounts. These tend to be investments with fixed, steady returns that exhibit fewer stock market fluctuations like a Certificate of Deposit (CD). Our last article pointed out the male –specific language of Wall Street, so it is no wonder women worry about making investment decisions without fully understanding their options. Unfortunately, choosing to invest with less risk tolerance can inhibit asset growth in a positive market and women sometimes miss opportunities to join in on positive returns as they sit”safely” on the sidelines. Now, add a divorce to the picture, and it is easy to see that an account transferred to a woman through the divorce settlement might not be allocated or invested in the most appropriate way for her needs and goals. There are lots of pieces to a divorce transition and reviewing and reallocating an investment account might not be the first thing on your list.
But maybe choosing someone to help you should be. In ambiguous or negative situations, women’s emotions tend to default to fear. And what experience could be more negative or ambiguous than a divorce?! Fear leads to procrastination. Working with an experienced Certified Divorce Financial Analyst who is empathetic to a woman’s particular needs and issues can help move you forward. Hopefully, it will be someone who can help you close the confidence gap for making important financial decisions. Take advantage of advisors who will help you diversify your investments post-divorce and they will help you diversify your future opportunities as well!
Carrie D. Wilson, CFP®, CDFA™
- 2006 Allianz Women, Money, and Power Study Focus Groups and nationwide online survey conducted by Larson Research and Strategy
- 2007 Allianz Women, Money, and Power Study Phase II
*Diversification does not guarantee against loss. It is a method used to help manage investment risk.
Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Divorce Financial Help is not affiliated with Clark, Waters & Hardy, LLC.
NFPSI is not affiliated with either Divorce Financial Help or Clark, Waters & Hardy, LLC.