U.S. women own just 32 cents in financial assets on the dollar compared to men. So when women make mistakes with their money, they often feel the impact more significantly than men do, according to Sallie Krawcheck, co-founder and CEO of Ellevest, a digital investment platform for women that recently raised $53 million in Series B funding, with women representing two-thirds of its investors.
“On a relative basis, women have less money than men,” said Krawcheck, who was the former head of Bank of America’s Global Wealth and Investment Management and was frequently referred to as “the most powerful woman on Wall Street.”
The disparity is due to many factors, from the gender pay gap (women earn 83 cents on the dollar compared to men) to different investment approaches. For example, men tend to have a higher risk tolerance when it comes to investing. In contrast, women are more attracted to goal-based investing and investing to make a positive impact. That’s great, explained Krawcheck, but it can also mean women simply aren’t as confident making decisions about where to put their money.
Krawcheck has made her share of money mistakes in the past too. And she hopes other women can avoid her missteps on their own financial journeys.
“Once you’ve had the kind of ‘can’t believe I had it’ career that I’ve had and see that [there are so many] women stuck in marriages because they don’t have enough money to leave and stuck in jobs that aren’t fulfilling, you know that you need to apply your experience and find a way to be part of the solution,” Krawcheck said.
Here’s what Krawcheck has learned:
1. Don’t outsource the management of your money to your spouse
Despite Krawcheck’s career on Wall Street right out of college, she left the management of her family finances to her husband when she was in her early 20s. The couple took on traditional gender roles, where he oversaw their money, and she was in charge of putting dinner on the table and planning their social calendar. That worked for awhile—until her first marriage ended in a divorce, and she realized she had a lot less money saved than she thought.
“I discovered my then-husband was having an affair with my now-ex friend, and it was the worst week of my life,” Krawcheck said. “On top of it all, I had to find out how much money I had, and I couldn’t even trust the person who had been managing it.”
Krawcheck’s advice is to get involved in your finances. Know what’s in your bank accounts and your retirement accounts, discuss your short and long-term financial goals, and review them periodically. “At the very least, make sure you’re keeping an eye on your retirement money and if you’re working, that you’re making deposits and getting the company match,” Krawcheck said. “Stay engaged in your finances together and don’t leave it all up to your partner.”
2. Never accept a job offer on a handshake
In her 40s, Krawcheck was offered what seemed like a dream job at a prestigious bank, but there was only one problem. There wasn’t a contract. The company’s management and HR department discussed Krawcheck’s compensation, bonuses, and benefits and they made a deal on a handshake. Then, just a couple months later, the CEO left the company, and there was no written record of the bonuses and other benefits that Krawcheck was promised. Over the years, her bonuses diminished in value due to company losses, and the stock shares that she bought to demonstrate her commitment to the company also went down. “I joke that I basically paid to work there,” Krawcheck said.
In hindsight, Krawcheck knows that she should have listened to her gut instinct when she had her doubts and should have requested the job offer in writing.
3. When seeking funding, pitch the right people
If you find yourself on an entrepreneurial path at some point in your career and seek out investors for funding, it’s important that you learn your audience and intentionally seek them out, Krawcheck advised.
She learned that lesson the hard way, spending too much time pitching the wrong people. In the case of raising funding for Ellevest, Krawcheck admitted that she wasted too much time trying to convince people that share a different world view about why it’s so important to equip more women with the right tools that will lead them to financial wealth. “You just can’t get over a lifetime of internalized biases and points of view in a one-hour meeting,” Krawcheck said.
Instead, find your people and speak to them, even if it seems unconventional or different. Krawcheck found most of the support for funding from women, who understood first-hand how important Ellevest’s mission is and why they should get behind it. “We took an unconventional approach for an unconventional company,” Krawcheck said.