Rita Silvan, editor-in-chief of Golden Girl Finance, speaks with Leslie McCormick, co-author of Bank on Yourself: Why Every Woman Should Plan Financially to Be Single, Even If She’s Not.
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GGF: Leslie, the book you co-wrote with Ardelle Harrison is jam-packed with great advice for women—whether they’re single or not.
Leslie: Thanks!
GGF: The statistics in the book are pretty eye-opening: 90 per cent of women will have to manage their own finances at some point due to divorce, widowhood or being single. Yet, as a society, we seem to be in denial about it. Why?
Leslie: As a society, in families and in schools, we don’t talk about money matters. Because women tend to be risk-aware (not risk-averse), we’re not necessarily comfortable jumping in and taking some risks to grow wealth. The lack of knowledge leads to a lack of confidence. Ask women how knowledgeable they are about finances and 31 per cent will say they are, compared to 80 per cent of men.
GGF: The Vanier Institute estimates that 41 per cent of marriages will end before their 30th wedding anniversary. And the average age at which women in Canada are widowed is 56. How can women plan for singlehood while still being in a committed relationship?
Leslie: It starts with each partner needing to be informed about the financial position of the household. Women need to be part of the decision-making process. Not everyone needs to drive the financial bus, but everyone needs to be part of the navigation team. When a situation arises where you have to manage the finances, you’ll have the confidence. You don’t want to add financial stress on top of the emotional challenges that come from a divorce or death. Baby boomer women can expect to outlive their male partners by 10-15 years. You’ve got to have a strategy. I would say that having a personal credit card and bank account in just your name is important, so you have access to funds when you need them.
GGF: Carrying large debt has become normalized, especially in large cities like Toronto and Vancouver where real estate prices are very high. How important is it to pay off all debts before retirement?
Enter to win one of 5 free copies of Bank on Yourself: Why Every Woman Should Plan Financially to Be Single, Even If She’s Not by Canadian authors Leslie McCormick and Ardelle Harrison.
Leslie: Debt needs to be used wisely where it can accelerate the growth of net worth. However, consumer debt is a problem. I’m an advocate of retiring debt free even if it might involve downsizing or generating rental income from a basement apartment.
GGF: You caution readers about relying solely on RRSPs due to the level of taxation on income and the potential clawbacks to OAS. Is there a “rule-of-thumb” for no longer investing in a RRSP?
Leslie: There’s no “rule-of-thumb. However, you should figure out your marginal tax rate when you’re working vs. when you retire. If the rate is higher when working, then it makes sense to contribute to a RRSP. But, in a low-income year, don’t contribute because you’ll likely pay more tax when you take the money out then the tax break you got. For tax efficiency, it’s best to have a mix of registered and unregistered accounts.
GGF: Taxes are often the highest lifetime expense for most people. What are some of the unique disadvantages single women face in terms of taxes and what are some strategies to mitigate them?
Leslie: A single person will pay more tax than a household because singles can’t benefit from income splitting in retirement. Annuities can make sense as one income stream, although you do have to fully understand the ins-and-outs of them. When you buy an annuity with unregistered funds, they can be very tax efficient since most of the money coming back to you is considered return-of-capital and is not subject to tax. There are also some mutual funds that have a return-of-capital structure. Ideally, in retirement, you should have at least three different income sources, such as government pensions, company pension, RRIFs, rental income, dividend income etc.
GGF: You make a provocative statement that a single woman should take a man with her when shopping for big purchases.
Leslie: That’s from Ardelle’s personal experience as a single woman. She calls it “borrowing a husband but always giving him back”. Ardelle found that she got better prices and better terms by having a male with her. It doesn’t necessarily have to be man but having a buddy can help. They can see an opportunity or a detail that you missed. Two heads can be better than one.
GGF: What are some of the most common financial traps you see women fall prey to?
Leslie: The biggest one is abdicating financial matters to the husband. In my experience, a majority of women do it. This puts them at a significant disadvantage. Be informed where the finances are at. Be part of the conversation. Be involved. Run a scenario where you will be alone and totally responsible for financial matters. What will your retirement look like in that case?
GGF: Do you think all these cautionary tales of older women suffering financially spur younger women to take ownership of their financial health or does it paralyze them?
Leslie: My hope is it spurs action. Ignorance is not bliss. Having more examples of women being successful and financially independent will inspire others. Know where you’re at financially by doing an inventory. Then, set goals and track to them. Don’t become a statistic. Own it. Plan for it.
GGF: Why is tracking important?
Leslie: If you have a financial plan but it’s just collecting dust on a shelf, then you don’t know if you’re on track. You’ve got to keep the plan alive and make sure the plan has “tolerance bands”. As long as your income, spending, and investment returns are within the bands, you’ll meet your goals. If those numbers change, it’s time to review the plan.
GGF: What have you learned from your female clients over the years?
Leslie: I’ve learned a lot from my client’s experiences. The one thing that transcends occupation and income level is diligence. The ones who achieved financial independence made it a priority over a long period of time. It takes a long time to build wealth; it doesn’t happen in six months. The decisions we make in our 20s and 30s are very important. Starting in our 50s is a harder job.
GGF: Who are some women you admire in how they handle their financial lives?
Leslie: My parents are a great example. Diligence and a strong work ethic allowed them to pay off their mortgage even when health issues impacted my father’s ability to work in his prime earning years. Today they enjoy a comfortable retirement. I was also struck by Arlene Dickenson’s personal story of being a single mom and picking herself off the economic floor through sheer grit.
GGF: In the book, you recommend that we should each have a personal motto. What’s yours?
Leslie: Family, adventure, hard work.
GGF: What do you wish your younger self would have known about money?
Leslie: I wish I had been less rigid about sticking to a formula. My husband came across an investment property in Muskoka. We hadn’t yet bought our principal residence and I had a rule that you have to buy the home first. The Muskoka cottage would have been a great investment and financially we could have done it.
GGF: If there’s one key message you’d like readers to take away from your book, what would it be?
Leslie: Be informed about your financial position.
GGF: Thanks Leslie!
Leslie McCormick is the co-author, with Ardelle Harrison, of Bank on Yourself: Why Every Woman Should Plan Financially to Be Single, Even If She’s Not. She is a Senior Wealth Advisor with a Canadian wealth management firm. McCormick is also the founder of plansingle.com, a source of financial education and community for women to share their financial story.
