Women need financial freedom to ‘live on their terms,’ advisor says. These 3 strategies can help

When it comes to managing money, women face unique challenges.

Women tend to live longer than men, which means they need their money to last for a longer period of time, according to Kamila Elliott, a certified financial planner and co-founder and CEO of Collective Wealth Partners in Atlanta.

Many women also tend to take time out of the workforce to care for children, parents or significant others, noted Elliott, a member of the CNBC Financial Advisor Council. Being out of the workforce for any period of time can impact women’s financial security and retirement, she said.

Working with a financial advisor can help women plan through those challenging times.

“I think it’s important for women to feel empowered, and part of feeling empowered is having the financial resources and having financial stability,” Elliott said.

Elliott, who served as the first Black person to chair the CFP Board of Standards, said the industry is working on educating women starting at a younger age about “how fun finance and budgeting and investments can be.”

Still, women of any age can get ahead financially by pursuing several strategies, Elliott said.

Research has shown there is still a gender pay gap that results in women having lower earnings. That can impact how well women are able to invest for retirement as well as other goals, Elliott noted.

Women can help narrow those gaps by negotiating their pay, especially when they start a new role, Elliott suggested.

New pay transparency rules effective in some locations can work in women’s favor, she noted, by eliminating the need to disclose current salaries and showing the compensation ranges roles may provide.

Women may be holding back from investing their money for a couple of reasons, according to Elliott. They may feel investing is overly complicated or they may not have the funds to invest.

Yet when women do invest, they actually tend to perform better than men, she said. A 2021 Fidelity Investments study found women’s returns tend to surpass men’s by 40 basis points, or 0.4%, according to an analysis of annual performance across 5.2 million accounts.

Today’s market volatility can be an opportunity particularly for those who are 10 to 30 years from retirement, since they have the time to ride out those ups and downs, she said.

As average market returns bounce back, that can result in meaningful progress over time, Elliott noted.

To feel empowered, women need financial resources and financial stability. That means having an emergency fund is “critical,” Elliott said, with three to six months of your monthly operating expenses in a liquid savings account.

Beyond that, Elliott works with clients to also create a “financial freedom account,” which can help provide a financial cushion to make changes when they feel stuck in a relationship, job or living situation.

“It gives them freedom to live on their terms, do what they want to do and empowers them to make right decisions for them and their family,” Elliott said.