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Money can be stressful. That statement would be true for most people, considering you need money to pay bills, buy groceries, care for your family, and enjoy a higher quality of life. But, is money-related stress equal across the board? According to a new study on financial stress, money stresses out most millennials, but even more so for women. Why? The pay gap between men and women could be the culprit. Let’s take a closer look.
What is the gender pay gap?
It’s easy to stress about money, and even easier when you have less of it. This is where the gender pay gap comes in.
If two people do the same work and have similar experiences, they should bring home similar pay, right? While that might seem like common sense, the gender pay gap points out a colder reality: Women make less than men in most industries.
Specifically, when looking at the median earnings for men and women, women make 79 cents for every dollar a man makes. Once you look at the controlled gap, which factors in years of experience, location, title, and so on, women make 98 cents for every dollar a man makes.
This can look like progress, but the median gap points to a larger problem: Women still don’t hold anywhere near as many senior positions as men.
Why does the pay gap between men and women exist?
It seems like a total given that two people should make the same money for doing the same work. Despite this, both the controlled and uncontrolled gaps point out that pay equity isn’t the case in the United States.
As the median gap above points out, there’s a root issue leading to a lot of the wage disparity: Women don’t hold as many high-paying management positions as men do.
The issue of men holding more high-paying positions is often referred to as the opportunity gap, as it points out a blatant divide between the opportunities being seized by men versus women. For example, by late career (age 45+), 8% of men have risen to executive-level positions, compared to only 3% of women.
The reasons for the opportunity gap are numerous and difficult to pin down. Some suspect that a part of it stems from employers making assumptions about which types of roles women should be in, giving men advantages in position and pay based on their sex.
Another cause is that many women take more time away from work, resulting in a “wage penalty.” This time off can be for several reasons, like caring for a child or older family member.
Most parents in the US rely on the Family and Medical Leave Act (FMLA), which protects the employee’s job for up to 12 weeks after childbirth or adoption. During this time, however, typical household income drops 10% due to the parents needing to take time off to care for the child; the FMLA doesn’t require the employer to pay for the parent’s time off.
For families headed by a single woman, that income drops 42% as she often needs to reduce her hours before and after birth. This impacts the woman’s wages and career prospects when she returns to work.
It’s a messy situation with no single fix. Still, progress is being made; the median wages for women have improved 5% since 2015.
Millennial women have less money, more stress
In addition to opportunity and pay, there’s also a gender gap in financial stress. The recent study from Novi Money cited at the start of this post shows that millennial women face higher levels of financial stress and worse financial outcomes than millennial men.
Here’s what the study found:
- 51.9% of women say money is the most stressful thing in their life, versus the 43.2% of men that feel the same
- Women are nearly twice as likely to doubt their financial decisions when compared to men
- Men have 70% more saved up for retirement than women
- Men have 36% more in their checking accounts and 29% more in savings
The pay gap has likely led to women having less in their accounts, thus increasing the stress they experience concerning finances. Stress can adversely impact work performance, making it even harder to succeed. Fortunately, you can affect some change regarding stress and finances.
How to combat financial stress
The wage gap isn’t going to close overnight, but you can improve your financial situation and help alleviate some of that stress in the meantime. Here are some suggestions to reduce money stress:
1. Make a budget
A simple budget can help you establish healthy spending habits, ensure you (and your family) don’t overspend, and even lay the foundation for a healthy retirement. The stats might show that men have 70% more saved up for retirement, but a budget can lead to that gap closing one percentage point at a time.
2. Pay yourself first
Of all the money habits out there, carving out a portion of your earnings for your financial future yields the most fruitful results. Saving builds your financial foundation for your rainy-day fund, then in your IRA or 401k. While you may have conflicting priorities, including providing for your family, find a way to start saving, even in small amounts, to help you feel more steady and confident.
3. Practice mindfulness
While not usually tied to money, mindfulness and meditation can be effective ways to stay in touch with what’s important to you and to keep a level head when work and finances get stressful. What’s more, meditation doesn’t take a lot of time, and mindfulness has been proven to reduce overall stress and boost your general well-being.
4. Stay informed
Knowledge truly is power in the fight for financial equality. Assess your financial condition by knowing what you own (your savings, investments, and house value, if applicable) and what you owe (your credit card, mortgage, and other debt).
Seek more guidance from a financial advisor who can assess your situation and help you develop a plan. Develop a habit of looking at your finances at least once a year to keep tabs on growth and where you could improve.
5. Sharpen the saw
Keep up with your continuing education, as your most valuable asset could very well be your career. Research your pay potential and make sure you’re being fairly compensated.
Furthermore, stay current with your skills and know your options to strengthen personal marketability. Consider taking a course on negotiation skills, one of the most important skills in business and life.
Closing the pay gap between men and women
Take steps today to gain financial confidence on your own terms. Waiting on society, companies, and the government to push things in the right direction could discourage you.
Instead, take charge of what only you can change. Develop mindful spending habits, build your career and assets, and push for what you’re worth.