Money Mistakes Women Make

If you are a woman, there are some money mistakes you simply can't afford to make.

Unfortunately, financial adviser Ray Martin sees women making these same financial missteps over and over again. He visits The Early Show to talk about them and offer simple solutions.

Anecdotal evidence and official surveys both show that even money-savvy women make financial mistakes and a common thread runs through the errors.

"When it comes down to their money and financial matters," Martin says, "many women are not as confident as they should be and are far too trusting for their own good. As a result, sometimes they can end up in bad situations."

For one reason or another, women simply do not control their finances as tightly as they should. They tend to allow others to make financial decisions on their behalf (or decisions that impact their financial standing) and they often don't know enough about the decisions that have been made.

Two findings from Charles Schwab illustrate this point:

• When asked, "How involved are you personally in managing your investments?" 31 percent of men said "very involved" compared to only 13 percent of women. The majority of women reported being "somewhat involved" (42 percent) or "not very involved" (16 percent).
• 41 percent of women surveyed in December said, "I do not have the time and energy needed to manage my investments because of commitments like home and work."

Here are some glaring mistakes that women make:

Not Saving for Retirement
Even if you're a stay-at-home mom, you can and should be saving for your retirement years. You can't count on a spouse's pension or 401(K) to support you. On average, women live longer than men, thus they need more money in their golden years. Unfortunately, women also tend to have smaller retirement funds than men because 1) they get paid less and 2) they take time off to care for children and even parents and, as a result, stop contributing to a 401(K).

Solution: If you don't work outside the home but your spouse does, you can open a spousal IRA. Your husband can contribute $3,000 a year to the account, which is in your name. This is key.

Detached from Family Finances
A recent Oppenheimer survey found that women are far less likely to play a leadership role in setting long-term financial goals such as choosing investments, planning for retirement or shopping for insurance. But if something should happen to the person who does handle all of this for your family, you would be left with a lot of questions.

"Today's two-earner family with kids can have over 20 different financial and credit accounts, each with a unique account number, user ID and password," Martin says. "If the worst happens to the person controlling all access and activity of these accounts, you can't imagine the stress and anxiety caused to the survivor."

Solution: Become more involved in your family's finances. Know what accounts you have. Sit down with your spouse and create a list of accounts, how much money they contain, and any necessary contact info or passwords for the accounts.

Allowing Spouse to Control Joint Credit Cards
It's fairly common for husbands and wives to sign up for joint credit card accounts. And sometimes, parents will open cards, which they then give to their high school or college student. Remember: While a joint account means that both of you can use the card, it also means that you both are responsible for paying the bill. If your husband or child runs up a huge debt that you can't pay, it's going to hurt your credit report, even though the charges aren't yours.

Solution: Keep close tabs on any card that carries your name. Don't allow your spouse to handle the bills solo; be sure you also see and examine the credit card statements. Make it a habit of discussing large purchases with each other.

Having a Credit History
Yes, it's true - there are plenty of women out there who don't have their own credit cards.

"Women who suddenly have to go it alone know the importance of having their own credit and a credit rating," Martin says. "All too often, a sudden loss or broken relationship can thrust a spouse without a credit history into a world that requires a credit history to survive financially. The mistake of trusting fate and that nothing bad could ever happen can put a woman into a position of having no access to a credit card or the financial means to get one with reasonable terms."

Solution: Before the need arises, apply for at least one credit card in your own name and use it on a regular basis. Keeping a credit account in use and current will help to build a credit history that could be very useful one day.

Blindly Signing Tax Returns
If your husband or accountant typically handles the taxes and you simply sign the annual return, you're making a grave error. If your name is on the return, you are responsible for any mistakes or fraud, even if you know nothing about it.

Martin says he recently met with a new client - a divorced, retired woman. In talking about her tax return, she was surprised to learn that her accountant had claimed enough deductions to reduce her six-figure income to the 25 percent tax bracket. She had no idea what deductions her accountant was claiming. To make matters worse, she assumed that he would be responsible for mistakes, not her. Wrong!

Solution: While you don't need to understand HOW your accountant (or your husband!) prepared your taxes, you do need to make sure that your income has been reported correctly, and that all of the claimed deductions are accurate. Check returns for these details and ask questions when necessary.

Not Questioning Financial Transactions
Like an accountant, you hire a broker to help you make wise financial decisions. But your broker should never be allowed to make a final decision without running it past you first.

Martin says he knows of a woman who trusted her broker a bit too much. She asked him to buy an S&P Index Fund for her portfolio. When she reviewed her financial statement, she discovered that he had purchased a fund with an annual expense of 1.5 percent (it's possible to buy a fund with expenses as low as .18 percent). When she called to sell the fund, she was told she would have to pay penalty.

Solution: Make it clear to your broker that he or she is not authorized to buy or sell anything without talking you through the details. It's your responsibility to ask questions. No question is dumb; it's your money.

Not Hiring Your Own Financial Adviser
Not all women need to hire a financial adviser separate from their husbands. However, if you feel as though your family adviser is not looking out for you both, equally, or for some reason you don't feel comfortable asking the family adviser questions, then find a different adviser to whom you can turn.

"Sometimes, there are issues that relate uniquely to an individual (marital separation, tax returns, etc) that cannot be addressed jointly and in these situations, it is advisable for some woman to hire their own financial advisers to represent their unique interests," Martin says.