This Week In Your Wallet: How Women Are Changing The Economy… Again

This Week In Your Wallet: How Women Are Changing The Economy… Again

Is a future finally dawning in which every marriage will enjoy an equal division of labor, dads will no longer “babysit,” but parent, and just as many men will elect to step out of the workforce to stay home to care for children? Our economy — and the women and men in it — may well be on the cusp of just such a grand shift. Don’t believe me? Just ask Justin Wolfers who wrote in the New York Times: For centuries, “marriage was often a bargain in which a husband provided his wife with a steady income; in exchange, she oversaw the domestic sphere, providing meals, child care and a clean house.”

But fast-forward to 2021, and women now outnumber men in college enrollment three to two. A new record. (Women have now also edged ahead in medicine, law, and masters and doctoral degrees.) In other words, today, a woman is just as likely to be a high earner as a man, and all of this poses an interesting question for where our economy is headed. We know that college-educated women marry less often, they buck traditional gender roles more often, and that college graduates earn roughly a million dollars more over the course of their careers than high school graduates. Yes, the gender wage gap still persists, but women are edging ahead, more educated and empowered than ever before, and it could turn out to be one of the most transformative economic trends of our time. Stay tuned.

Flip Or Flop?

If the instability you’ve been seeing in the stock market and the white-hot prices you’ve been seeing for real estate have left you considering if it might be time to buy a place and flip it, it’s time to think twice. The profits on flipped homes have fallen to a 13-year low, with the average ROI down from 39% to 25.8%. This is due in part to fixer-uppers becoming more popular in general — “Over the last 10 years, millennials typically wanted houses that were ready to move into, but that’s changed to ‘OK, I can’t get exactly what I want, so I’ll go for a fixer-upper,’” writes Matt Levin at Marketplace. (Yes, even the market for homes with leaky roofs and rotting drywall is now competitive.) Would-be house flippers have been impacted by the same slim real estate market that the rest of us have, but for people who flip for a living, that shrinking profit margin can be especially worrisome, especially in an era when the cost of raw materials (and everything else) has skyrocketed.

If you’re considering a flip, first, start with a lot of research. Consider the fact that more people are likely to be staying in their current homes longer, because no one wants to swap a 3% mortgage rate for a 6% one. Then come prepared with a lot of patience, which you’ll need while waiting for supplies that are still experiencing delays, staffing shortages that virtually all construction firms are faced with right now, and extra cash, because you’re pretty much guaranteed to see your budget growing larger than you might have first put down on paper. And please keep in mind that the professional house flippers you’ve seen on TV can do repairs much, much more cost-effectively than the average buyer. (Ahem, you.)

Still Waiting For Godot… And Your Tax Return

If you’re one of the 21 million who is still waiting on the IRS to process your tax return and you need to call the IRS, be prepared to wait…and wait…and understand that you still may not be able to reach a real person on the other end. As in, at all. This tax season, the IRS answered just 10% of taxpayer calls, per Erin Collins, the National Taxpayer Advocate, in her midyear report to Congress. And if you were able to get through to someone, the average time a taxpayer spent waiting on hold increased from 20 minutes to 29 minutes, but that doesn’t account for the countless people who no doubt just gave up and hung up in frustration. The problems are many. The pandemic. Distribution and reconciliation of stimulus payments. Child tax credit changes. Overtaxed employees. The list goes on. But, writes Michelle Singletary in the Washington Post: “Calling customer service problematic at the IRS would be like saying the Titanic just sprang a small leak.”

But in the face of rampant inflation, many people are anxious about their financial picture, and desperately need those refunds to alleviate the financial strain. If you need to call the IRS for something that can’t be answered by any other mode of communication, there are some ways to navigate calling the IRS to increase your chances of making it through the hurdles. First, be prepared with all your documents including your current tax return, last year’s tax return, and any notices the IRS has sent you. Try to call when call volumes are lower, which is right at IRS opening or closing (7 A.M. to 7 P.M., in your local time zone). Also, if you’ve worked with a tax professional, it’s time to lean on them for advice and insight. While they may not be able to speed up the process with the IRS, they can certainly help you wade through any notices you might have. Also, there are local IRS taxpayer assistance centers that can help you sort out account problems — just search for your nearest IRS office and make an appointment. If it’s close enough, you could even go in person. And if you do end up calling, here’s something to watch while you’re on hold.

Peek If You Dare, Just Don’t Make Changes. Please.

Yes, you can check your 401(k) frequently. But that doesn’t mean you should. If you’ve been paying attention to, well, anything related to your finances these days, then you know that pretty much everyone’s 401(k) balances are taking a hit. With the S&P 500 down 21% since January, even those of us who only invest via our 401(k)s are now feeling the pressure to check those stocks with a frequency that would make even Jordan Belfort proud. And I know it’s a double-edged sword. The very technology that’s made it so incredibly easy for us to set-it-and-forget it, or invest with a few quick taps, is the very same tech that’s got us checking our apps every time we spy a headline we don’t like. Which is basically all the time. Unfortunately, even those seemingly innocuous peeks can be counterproductive and can put even the best investors at a disadvantage. Per two landmark studies from behavioral economists Shlomo Benartzi and Richard Thaler (who you’ve likely heard me reference on the HerMoney Podcast more than once) the more often investors look, the lower their long-term returns.

Conversely, investors who resisted the temptation to monitor the market earned significantly higher profits over time than those who checked even just once a year. For the average person, behavioral economists say, the pain of losing is more powerful than the pleasure of gaining. Consider the cliché “what you don’t know can’t hurt you.” As Benartzi said, “If you check often you will see losses more often, and you will be scared to invest in stocks.” Since 1929, the S&P 500 index has posted declines 46% of the time. If you’re doing the math, that means that those who check their balances daily will be subjected to bad news almost half the time they check. No, thank you. The next time you’re worried, keep in mind that science says you shouldn’t. Those who look less are likely to be less reactionary to their stocks, stay the course, and be better situated for long-term growth. So peek if you absolutely have to, but remember your long term goals.

Have a great week,

Jean

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