Bashful Path to Female Bankruptcy
The unrelenting expansion in bankruptcies does not discriminate on gender – you either have the money or you do not. Naomi Wolf, author of Give Me Liberty: A Handbook for American Revolutionaries, recently shed light on the underbelly of those suffering severe financial pain in this economic crisis…middle-class women.
How bad is it for middle class women?
“A new report shows that a million American middle-class women will find themselves in bankruptcy court this year. This is more women than will ‘graduate from college, receive a diagnosis of cancer, or file for divorce,’ according to the economist Elizabeth Warren.”
Wolf explores multiple factors in trying to explain this phenomenon. Surprisingly, higher education levels does not appear to prevent a higher percentage of bankruptcies in this large demographic.
If education levels are not a contributing factor, then what is? Here are some Wolf’s findings:
1) Awash in Debt: One explanation for the extra debt reliance is many of these positions occupied by this class of women are lower-paying, which requires women to tap credit lines more frequently. Also, many women have been targeted by luxury-goods manufacturers and credit-card companies. Repeated contacts by the marketers have led to more women succumbing to the consumerism messages shoveled to them.
2) Credit Card Legislation: Wolf makes the case that financial credit card legislation introduced in 2005 disproportionately negatively impacts divorced wives because credit card companies get priority in the repayment line over critical child support payments. In other words, child support payments go to the credit card company rather than to the child, thereby creating an undue financial burden on the female caregiver.
3) Skewed Emotional Beliefs about Money: The biggest issue regarding the emotional connection to finances is working-women “find it embarrassing to talk about money.” The article even acknowledges that many current generation women earn more than previous generations, but financial security has largely not improved because of the “money taboo.” I discover this taboo dynamic in my practice all the time. Part of the blame should be placed on the financial industry’s use of endless acronyms as smoke and mirrors to confuse and intimidate clients on the subject of money. I believe the better way to financial success is to empower clients through education and understanding, not deception and misinformation.
Wolf goes onto explain some of the confused financial thought processes held by this segment of women:
- Negotiating salary increases is difficult for these women because it makes them feel “unfeminine.”
- This class often fails to save because they falsely assume marriage will save them financially.
Unfortunately, the lack of financial literacy and dependence on the spouse leaves these women vulnerable to divorce and widowhood.
Working Class Women Better Prepared
Interestingly, Wolf’s findings point to working class women being much more financially literate and prepared in part because they have erased the notion of a knight in shining armor saving the day from their financial responsibilities. Bolstering her argument, Wolf references the success of the micro-finance programs being instituted to lower-class, working women in developing countries.
How do middle-class working women break this negative financial cycle? Wolf delivers the medicine directly by directing these women to break the “social role that casts middle-class women as polite, economically vague, underpaid, shopping-dazed dependents.” Opening their eyes to these issues will not erase all of the contributing factors, but women will be better equipped to deal with their financial problems.
From my perspective, there is no quick fix for immediate financial literacy. For those interested in learning more, I encourage you to read my article on personal finance, What to Do Now? Time to Get Your House in Order.
Regardless of your financial knowledge maturity, like any discipline, the more time you put in to it, the more benefits you will receive.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, but at time of publishing had no direct positions in any company mentioned in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.