Top Financial Issues Women Face
Financial problems are the most common contributor for stress and the illnesses that come along with it. As a Financial Professional I often give educational workshops to women on topics that are very specific and targeted to an issue or concern. These have included areas such as budgeting, social security, retirement and financial planning. This month I was asked by a very dear friend and client to speak to a group of her friends on the top financial issues that women face. Since I am so passionate about educating women and could talk forever, I narrowed it down to the 5 that I hear and see most often. If you find yourself relating to these problems, I have offered a few suggestions that I hope will help.
Problem: The biggest hurdle women face is being able to reach old age without depleted resources. We often sacrifice our goals and dreams by putting the needs of others ahead of our own (i.e. college, house repairs, gifts, family vacations or even the occasional loan).
Solution: Follow the “Golden Rule” of personal finance and pay yourself first. If you want to help other people you must first help yourself. Set aside 10 to 15 percent of your earnings into a savings or retirement account. Whatever you do, don’t touch it. Remember, you can finance college, vacations, etc but you can’t finance retirement.
Problem: We have been taught to find a “knight” to take care of us and that the government will provide for a secure and prosperous sunset.
Solution: We are starting to become the masters of our own financial destiny by being more aware of where we are financially, where we want to go and how we can get there. If you feel intimidated or don’t know where to begin, find a local investing group or financial professional who will educate you and assist you in building a long-term plan.
Problem: We are the nurturers and nesters so we leave the financial investing, retirement planning, budgeting and liability management to someone else.
Solution: Don’t wait until a life changing event like death or divorce to become involved. The time is now, get involved.
1. Net worth Analysis. This will consist of all assets and liabilities including bank accounts, loans, investments, insurance, real estate, inheritance, etc.
2. Create a budget. Identify spending habits and all sources of income and liabilities.
3. Set Goals. Define short, mid and long-term goals such as paying off a credit card, buying a car, planning a vacation or preparing for retirement.
4. Review quarterly. Sit down with your spouse or partner and financial professiona to determine the current “state of the union”.
Problem: We don’t prepare properly for the unknown. Consider that 90% of all women will be solely responsible for their finances at some point in their lives (Trendsgroup, 2006) either due to divorce, widowhood or never marrying. According to the 1999 US Census over one third of marriages will end in divorce (try 50% in Arizona). The average age of a widow is 58. Two thirds of people over the age of 75 will suffer an illness or disability; since we tend to live longer, most of these individuals will be women. Women over 70 are twice as likely as men to live in poverty. (Source: US Census 2000).
Solution: Be proactive.
• Understand your family’s total Net Worth and gain copies of all statements before you begin divorce/separation proceedings. These will come in handy if assets mysteriously disappear or are not disclosed.
• Make sure there is enough insurance coverage. Proper insurance planning and coverage is especially important for women, who will by and large work fewer years, accumulate less retirement/pension benefits and live longer than men.
• Build a retirement plan to ensure you are prosperous in your retirement years. This should include several means of income (Social Security, Annuities, Pension, Savings, etc.). Take the time to understand how and when you will receive income.
Problem: We don’t have our “ducks in a row” when planning for the worst. Consider all of the issues you face without a document that specifically states your intentions; probate, miscommunications, family conflict, etc. We all perceive and remember things differently. Why leave your intentions open to misinterpretations when you can record exactly what you want in an estate plan?
Solution: Determine the necessary estate planning tools that you will need to ensure your wishes are followed just in case you become incapacitated or pass away. Review your beneficiary designations once a year and the estate planning documents every three to five years. A few estate planning tools to consider include, but are not limited to:
• Living Will and Last Will and Testament
• Beneficiary Deed
• Transfer on Death Designations for Bank and Brokerage Accounts
• Power of Attorney (General, Medical and Mental)
• HIPAA Authorization