The following is an excerpt from Diane Bourdo’s book, Rewriting the Rules: Telling Truths About Women and Money, which she co-authored with Hallie Kraus, her colleague at The Humphreys Group.
It’s safe to say that gender equality has never been more talked about than it is today. There is a lot to be hopeful about, between the #MeToo movement, the #TimesUp initiative, and the wave of abusive men losing their influence and strong women stepping into their power. In addition to changing the way we view and handle sexual harassment and assault, these movements have also prompted honest discussions about pay inequality, and for good reason: Despite a fair amount of progress, women still only earn about 79 cents for every dollar a man makes. Countless advocates have dedicated their time to push for policies intended to close the gender income gap, and it’s still worth fighting for — researchers say the gap likely won’t close until at least 2059.
But the income gap is not the only thing hampering women’s financial mobility. Lurking beneath it is another disparity that, in some ways, is even more alarming: the wealth gap. We believe tackling gender differences in wealth is just as important as tackling gender differences in pay, so we’re taking the first step in doing just that. Allow us to explain why it’s a myth to think that closing the income gap is all women need to achieve economic equality.
We know the wealth gap exists, but what exactly are we talking about? The most recent data comes from the Federal Reserve, which revealed that in the United States, the median wealth for single women is $3,210, while single men have a median wealth of $10,150. This means women own 32 cents for every one dollar owned by men. That’s it — 32 cents. And just like the wage gap, the wealth gap is even worse for women of color. Black and Latina women own just pennies on the dollar compared to their white female peers.
This is important because, at the risk of stating the obvious, a person’s wealth — their assets (cash, investments, and real estate) minus their liabilities (credit card debt, student loans, and mortgage debt) — determines how well they withstand a financial emergency. In fact, many economists believe that measuring wealth is a much more accurate picture of how one is doing financially because wages only indicate how much money is coming in; wealth measures how much has stayed in. When an unexpected medical bill or car repair arises, it’s wealth that we tap into — and men are able to tap into literally three times as much.
There’s no doubt that the income gap contributes to this difference in wealth, but it is not the sole reason the disparity is so high. Another significant element is single parenthood. Women are more likely to shoulder the responsibility of raising children on their own. If you have kids, you know parenthood does not come cheap. Between 2000 and 2012, child care costs increased by 24% and medical care costs increased by 21%. This happened during a time when the median income in the United States actually declined.
As a result of rising costs and lower incomes, women — particularly low-income women — are increasingly likely to take on debt to cover their expenses. JP Morgan Chase compared the accounts of men and women following a large, unexpected medical payment and found that one year after the payment was due, women experienced a 14% increase in their revolving credit card balance, while men experienced an increase of just 3%. And that was just a credit card — when looking at women’s liabilities overall, their median debt was 177% higher than the median debt for men. Mariko Chang, a leading researcher on the wealth gap, calls this the “debt anchor” because debt payments so clearly weigh down a person’s ability to build a financial safety net.
Lastly, the wealth gap is further exacerbated by the limited access women may have to employment benefits, government benefits, and tax breaks that facilitate wealth-building, due to their employment status. In our book, my colleague, Hallie, and I talk about how women are more likely to work part-time jobs, which often inhibit them from participating in 401(k) plans and accessing health insurance. In addition, women are incredibly underrepresented among the wealthiest Americans, who receive the most generous tax credits, deductions, and exemptions. The top 1% receive $95 billion in federal tax benefits, which is more than 26 times the bottom 20%, who receive $3.6 billion — and women are overrepresented in that bottom 20%.
It’s easy to get discouraged by all of this evidence. We understand that creating positive change may seem daunting, as the causes for the wealth gap are systemic, societal, and largely beyond our control. But are there actions we can take, even on a small scale, that will help alleviate the wealth gap and give it the attention it deserves?
In Our Experience
In November 2017, Reese Witherspoon, a savvy and successful businesswoman, gave a speech in which she proudly owned her ambition. She refused to label “ambition” as a dirty word, and further, she asked, “What if all women were encouraged to be a bit more ambitious?” We would add, “What if all women were encouraged to be a bit less apologetic?” Yes, we have all heard the word, “ambitious,” used in the pejorative with regard to women, but we need to change the narrative. Women need to be more open and less apologetic about wanting to succeed financially, make a good living, and accrue assets.
More recently, Jessica Knoll, a novelist in Los Angeles, headlined her New York Times op-ed, “I Want to be Rich and I’m Not Sorry.” Her words are music to our ears. She covers a lot of ground and points out the differences between how boys and girls are socialized. “I have always wrestled with what has been expected of me as a woman versus what I expect of myself. The conflicting messages of millennial womanhood: to be ambitious but never bossy, strong but skinny, honest but polite, supportive of my fellow sisters’ success while the culture gets off on girl fights. Only in fiction have I been able to create women who aggressively seek money and power the way men seek money and power.”
Our Advice to You
One way you can start owning your financial empowerment is to check out the Consumer Financial Protection Bureau (CFPB). The CFPB is a government agency that makes sure American banks, lenders, and other financial companies treat their customers fairly. The CFPB website offers a wealth of resources and information, including guides on securing different types of loans, understanding the ins and outs of student loans, and detecting financial frauds and scams.
If the wealth gap strikes a chord with you, consider supporting a community loan or nonprofit organization that is tackling the issue, such as the Northern California Community Loan Fund. This organization (and others like it) provides financial products, sound advice, and community involvement to create economic opportunities and revitalize low-income communities.
We also encourage you to lift up and support your local female entrepreneurs. Use their services, buy their goods, and frequent their enterprises. In the big picture, this may seem insignificant, but it makes a world of difference to that business owner. Building a business is one of the quickest ways people accumulate wealth, and your financial support — at any dollar amount — will play a part in that. If you would like to learn more about the wealth gap, watch this four-minute video to see Robert Reich and a colleague walk through “the why” behind the issue and explore what can be done on a policy level to reduce it.
Diane has dedicated her life’s work to helping women make smart financial decisions. For nearly 30 years, she has developed investment management and financial planning strategies that allow her clients at The Humphreys Group to create lives that reflect their values. Diane is also a passionate champion of women; nothing is more gratifying to her than seeing a client discover, and step into, her financial power. She is the co-author of the book, “Rewriting the Rules: Telling Truths About Women and Money,” released in 2018.
Diane is one of the foremost experts in facilitating conversations about the non-numerical aspects of money. She has served as a mentor at the FPA Residency Program, contributed to Golden Gate University’s Financial Life Planning program, and participates in pro bono events that provide financial planning to underserved communities. Diane is a CERTIFIED FINANCIAL PLANNER™ Professional, holds a B.A. in English Literature from the University of Wisconsin–Madison, and an M.B.A. from the University of California, Berkeley. She is an inspiration to women in the industry and has played an instrumental role in developing a new generation of female financial planners. To learn more about Diane and The Humphreys Group’s work, visit humphreysgroup.com.