Money Mistakes Women Make: How to Choose a Financial Advisor

Money Mistakes Women Make: How to Choose a Financial Advisor

It’s a man’s world. How often have you heard that? Especially if you’re a woman nearing retirement age, it’s probably something you’ve heard since childhood. It’s a phrase associated with many areas of life, but probably none more so than the world of finance and investing.

Recent studies have proven that women outperform men when they invest in stocks. So how can women harness more financial confidence, and make fewer money mistakes?

In a previous post, I talked about the values women attach to their money and how easily we can spend money without a second thought. But let’s ask ourselves, why have we made that expenditure, and is that money better used elsewhere?

I think we easily forget, and I certainly did, that there is always help available. But it’s hard to know how to move on from mistakes, and harder still to know how to choose a financial advisor.

Mistake #1: Thinking Investing is Complicated

With statistics showing that women are better at saving and putting money aside, finding a financial advisor to show you how to manage your funds so they can really grow is the next natural step. But if this is the case, what’s stopping more of us from reaching out? And why do so few women feel empowered enough to invest their money?

Well, it’s hard to challenge well-established narratives. The media has a vested interest in making investing sound complicated. After all, the more drama, the more copies of newspapers get sold. Front pages scream about the tumultuous crashes of the stock exchange, and TV is quick to portray visions of male-dominated throngs of Wall Street traders buying and selling stock on a whim.

But men like to take high risks, and they’re often overconfident in their ability to manage a portfolio, which in turn can lead to over-trading and high transaction costs. This is one of the reasons why Forbes found that women who tend to move towards longer-term and more varied investments are reaping the rewards. The study showed that men traded 45% more frequently than women, but despite that, women outperformed the men by nearly 1% every year.

So don’t think you can’t invest – you can, and you can do it well. There are many different types of investments you can make. And this may come as a surprise, but it doesn’t have to be complicated or high risk. Simple concepts like diversification of assets make it easy to comfortably invest.

Plus, the idea of ‘timing the market’ sounds very complex. It sounds like some kind of knowledge only people in the inner circle of investing could possibly understand.

However, the wisest investors know that one of the only things we can predict is that the markets are destined to fall and rise. Riding out market crashes like the one we’ve recently seen is a smart tactic that will likely see the value of your assets return with the next bull market.

Although a financial advisor cannot make any guarantees and money is always at risk, they can help you create a long term plan and stress-test your portfolio.

Mistake #2: Spending Recklessly

Live for today. While this sounds like an ideal philosophy for the happy and the care-free, I worry that this oft-used phrase can be very misleading. It can quickly lead to financial insecurity and regrets later down the line.

And this is something I’ve experienced first-hand. After my divorce, I questioned everything I knew. It felt like stability had just been an illusion. Spending money made me feel better, as it gave me that instant fix of endorphins I needed during that heightened emotional time. Besides, I certainly didn’t think there was much point in worrying about my future, when everything I knew had been ripped away.

How I wish I had thought about how to choose a financial advisor at that point in my life. I wouldn’t have had to spend so long rectifying my extravagant financial mistakes.

According to data gathered by Harris Interactive, nearly a third of women say that they’ve shopped specifically to lift their mood, and over half have shopped as a way to celebrate. Being aware of these triggers to spend money to make us happy in the short term and becoming more in tune with how our emotions affect our spending will certainly pay dividends in the long run.

During any significant life transitions such as a divorce, the death of a spouse or retirement, a financial advisor can talk you through your options and explain how you can see higher value on your returns than a last-minute shopping trip splurge or an extravagant spend. That in turn will pay dividends, both emotionally and financially.

Mistake #3: Not Knowing How to Choose a Financial Advisor

Managing your money, especially during transitions, might feel like a daunting task. Everyone will have their own opinion so talking to friends or family may just confuse you even more. Remember, everyone’s financial situation, future and current needs are different.

But you might be wondering how to choose a financial advisor and a quick internet search is likely to bring up several options.

A woman’s priority is finding someone who they can have a connection with, and who will fully understand their individual needs. Financial advisors look at all aspects of your life to ensure they provide the best advice for your current and future situation, so it’s imperative you feel you can build a transparent and trusting relationship with them.

Have a look at my FAQs for some of the important things to think about when moving towards getting finance advice. Remember, this is where your journey to financial confidence can begin. Advisors don’t choose you, you choose them. Use this really helpful article to consider questions you might like to ask them in your first meeting.

Make sure that the fit feels right. Ensure that you feel listened to and understood, and that all aspects of your life and your priorities are being considered. Be certain that your advisor’s picture of financial success matches yours.

Move Forward with Confidence

Having been on the other side of the fence myself, I know all too well how crucial it is for women to feel fully empowered about their financial decisions and investments, and the importance of finding a trusted financial advisor.

It’s easy to make mistakes, and with the right financial advisor it’s simpler than you think to put them right. If you’d like a helping hand, don’t hesitate to get in touch.


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