Stretched to the max

Women are disproportionately vulnerable in today’s unstable economy

While economists and pundits argue about the semantics of recession vs. economic slowdown, many women are feeling the real-life effects. While men’s wages remain the same, women’s have decreased … and women are more likely to lose their jobs when the economy’s unstable. In addition, women’s economic stability is disproportionately threatened by poverty, funding cuts to government programs and a historic pattern of discrimination.

Adding in the rising costs of gas, food and health care makes it even tougher to get by. And when you add an ex-husband who’s stopped paying child support …you’re telling the story of Jen Peterson of Cottage Grove.

Making ends meet
Peterson’s struggle began when her ex-husband’s child support payments quit coming. He is currently working, but is not earning enough to make payments. “I understand that he is in a hard spot, but it’s hurting my family,” Peterson said.

Recent changes to child support enforcement have worked in favor of many noncustodial parents. In 2005, Minnesota law changed to consider the income of both parents in setting the level of support; moreover, federal budget changes greatly reduced state enforcement funds. With eight of 10 single-parent families headed by women, families lose out when child support is not enforced. “I thought [child support enforcement] was bad before, but now it is really bad,” Peterson said. “Honestly, I don’t see an end in sight.”

Though Peterson and her husband both work a full-time and part-time job each, the current economic downturn has made it difficult to survive even on this income. In fact, Peterson used part of her economic stimulus check to begin a home-based web business, which she hopes will supplement their income. Rising costs have forced Peterson to make tough choices, including removing her youngest child from daycare, opting to not buy certain medications and visiting the local food shelf.

The toll on women
Peterson’s struggle with child support reflects the holes that exist in Minnesota’s public programs largely utilized by women. In addition, women are more likely to face gender discrimination. Statistics show that women are more likely to be unemployed during a recession, yet they are less likely to receive unemployment benefits.

Because women are more likely to work low-wage, part-time jobs, they often do not meet the eligibility qualifications for unemployment benefits. They are also more likely to see their earnings decline. While most men have seen their wages stagnate, women have seen their median wage fall 3 percent.

While not all women are losing jobs, many are facing other obstacles. Amy Brenengan, from the Office on the Economic Status of Women, reports that during a recession “the cluster of job areas with a majority of female workers often see fewer job losses during recession because they are often low-wage service oriented jobs that do not go away. But within those jobs women may be hampered from advancement because of losses employers incur in the mid- to high-range positioned jobs. The rungs on the ladder disappear.”

In addition to job loss, women are more likely to suffer disproportionately from falling wages because they earn less than men. A full-time, year-round female worker earns 77 cents for every dollar earned by a full-time, year-round male worker Yet, women are still paying the same prices for food, health care and energy as men, which make it difficult for women to build assets. According to a Harvard study, the median net worth of unmarried women was $12,900, compared to $26,850 for men. The study cited the wage gap as the primary cause for this inequity. Women are also less likely to be eligible for employee benefits and employment-based retirement plans such as a 401(k).

Financial literacy
Peterson did not expect to fall victim to this recession. She was gainfully employed and building personal savings. But now, “We are one unexpected expense away from disaster.”

So what can women like Peterson do to avoid or alleviate financial hardship? Shawna Faith Thompson, financial literacy manager at WomenVenture, an economic development agency that assists women in achieving their own economic success and prosperity, said that education and long-term financial planning is the key to financial stability. In the past, WomenVenture focused on business and career development for women but as of late it has come to see a need for financial literacy. “We can find … their passion or help them start a business but if they cannot manage their personal finances, it’s all for nothing,” Thompson said.

Thompson advises women to start by understanding their finances. “Sometimes [women] let others do “the money part” in a relationship. I encourage my clients to have open conversations about money and its place in relationships and life. It is healthy for us to be involved in the creation of a budget, spending and savings plan,” she said. Thompson advises women to educate themselves about the options available to them and not panic. “The best financial decisions are made when things have been researched, terms are understood and when you are not in an elevated emotional state,” she said.

First and foremost, a long-term financial plan is important to the future of women’s lives. Women are likely to live longer than their male counterparts; therefore, they need be sure they invest their money, specifically in a retirement plan. And it is not enough to invest; women should educate themselves about investment options and which plan best suits their goals and values. “At some point in their lives, women are going to have to manage their own finances,” Thompson said. “They need to know how they can grow their assets once they have them.” She suggested that a good way to begin educating oneself is to work with a financial planner.

Life after a pink slip
For those facing immediate financial difficulty or job loss, things are more difficult. However, it is not hopeless. “If you lose your job, you should immediately look for ways to reduce your spending,” said Rachel McDonough, a financial planner with Merrill Lynch. She suggested that a woman in that situation “switch to a budget that focuses on meeting your mandatory expenses and reduce discretionary spending. You should also make sure that you handle your benefits and severance package carefully. Work with a financial advisor to decide what you should do with your 401(k) or other employer-sponsored retirement account and how you will address cash flow issues.”

Moreover, women should begin by developing a budget that tracks their income and expenses. Their budget should include a contribution to savings as an expense, even if the contribution is as little as $10 a month. Thompson advises that equally important is to avoid creating more debt. “Sometimes we opt to open new lines of credit to pay off existing debt. This is not an effective debt reduction strategy,” Thompson said. “Pay on time and pay more than the minimums whenever possible with the goal of paying it off and living debt free.”

Surviving emotionally
Thompson also advised women to take care of themselves. “In an economy like this, the pressure is coming down on women. While it’s important to educate yourself, it is also important to have fun.” She suggests that women should find creative ways to be economical. For instance, host a swap party where friends and neighbors bring clothing and other items to trade, or become active in your community. The latter is exactly what Jen Peterson did. In 2003, Peterson founded the Twin Cities Area Chapter of ACES (Association for Children for Enforcement of Support), an organization that educates and supports custodial parents dealing with difficult child support issues and advocates for better child support laws. While the organization hasn’t solved her problems, the feeling that she is doing something to help and support women in similar situations has bolstered her emotionally. Additionally, she is running for the Cottage Grove city council this year, in hopes of creating social change. In the meantime, Peterson said that she will “Pray, pray hard.”

A light at the end?
While the current recession is disproportionately affecting women, there is a brighter side. Currently, Congress is being encouraged to take steps to alleviate the hardship that women will face. Sen. Edward Kennedy (D-Mass.) acknowledged the effects of recession on women in a recent report and the Institute for Women’s Policy Research testified to Congress on the impact of economic downturn on women. In fact, Amy Brenengen ruminates that the recession may be part of a renewed interest in pay equity: “Because everyone in the workforce is suffering, people are paying more attention to workforce issues, which will allow us to broaden these issues beyond the immediate impacts of the recession and toward economic equality for all.”

Advice from a pro
Financial advisor Rachel McDonough’s advice about how to keep your finances in order when the economy’s uncertain includes:

1. Boost your emergency fund. The Certified Financial Planner Board of Standards recommends keeping three to six months’ worth of expenditures in a liquid, interest-bearing investment (such as a money market mutual fund). With relatively high unemployment rates, and continued economic turbulence, it’s a good idea to be prepared in case your income stream is interrupted.

2. Think twice about taking on additional debt. Although current market conditions may provide an opportune time to make a significant purchase, don’t take on additional debt burdens without considering how much stress you’re putting on your budget.

3. Maintain a disciplined investment strategy. Don’t fall into the trap of making investment decisions based on emotions. Work with your financial advisor to allocate your assets and diversify to reduce risk. Have a plan and stick to it! Financial planning can address both short-term and long-term goals. Keeping your long-term goals in sight can relieve anxiety over what happens in the financial markets on a day-to-day basis.

4. Get advice from someone you trust. Whether you’re a novice investor or a sophisticated veteran, this is a great time to seek professional advice on your finances. However, not all financial professionals are created equally. Make sure you’re taking advice from someone who has demonstrated competence and integrity.

Grabbing the brass ring
Women are particularly vulnerable to risky credit lending programs, particularly subprime mortgages. The American Dream of homeownership is a powerful one. Because women have fewer savings they become targets for subprime mortgages, which require little money down but higher monthly payments. Although their credit scores are often equal to or in some cases better than men, they are still 30 to 40 percent more likely to carry a subprime mortgage loan. Women often fall victim to risky lending practices, not only because they are more likely to lack financial literacy skills, but also because they are offered subprime mortgages at a higher rate than men. Insecure lending programs are often what push women over the edge, forcing them to choose between feeding their families or paying off debt.

There is no shortage of information about women and finances on the web. Some of our favorites:

To read the Kennedy report on women and the recession, go to and search for “Taking a toll.”

To learn more about these issues in depth, we suggest: The Institute for Women and Public Policy Research A site that offers games, tools and calculators, and articles on a variety of money-related topics.

This site uses a blog format to offer commentary from 400+ women. This link offers women’s perspectives on the current economic climate.

These three books provide useful information from a variety of perspectives.

Women & Money: Owning the Power to Control Your Destiny by Suze Orman. The well-known money guru targets her advice to women, including a concrete plan for how to remake your financial life in five months.

On My Own Two Feet: A Modern Girl’s Guide to Personal Finance by Manisha Thakor and Sharon Kedar. Though this book is aimed at women in their 20s and 30s, it’s a thorough and readable guide for women of all ages.

Kiplinger’s Money Smart Women: Everything You Need to Know to Achieve a Lifetime of Financial Security by Janet Bodnar. A practical approach to a woman’s finances at various life stages.

Assoc. for Children for Enforcement of Support (ACES), Twin Cities Area Chapter
Jen Peterson, 651-458-9482 or