Are You Prepared For Change?

You love enjoying your financial security; you’ve established your career, you earn a nice income, and you’ve already paid for a home and college tuition’s. However, drastic changes like disability, illness, job loss, divorce, or aging parents can blindside you and your finances. You need to prepare yourself for unexpected changes to protect the financial security you already worked hard for.

Facing Disability, Illness, or Job Loss:

The greatest costs you retain when you become disabled or ill are medical provider charges. These charges include hospital, doctor, and medication bills. It pays to have health insurance especially if you can obtain reduced rates through your employer’s group plan. You may consider disability insurance if it pertains to you. Researching and picking the right insurance for you will provide the coverage that will protect you from paying high medical bills out of pocket.

Losing a job is always a drastic and immediate change. You need to develop some risk management like setting up an emergency fund that will cover all expenses while you are between jobs. Also, think POSITIVE. A job loss can lead to a new career, or a better position in your field of expertise. You may also decide to take some time off to travel, spend time with your family, or try out a new hobby during this time.

(Morris, A Woman’s Guide to Personal Finance)

financially independent woman

It’s All in Your Hands

A Post-Divorce Action Plan

You have just gone through one of the most challenging and difficult periods that a woman can experience in her life – a divorce. While many things may still be in up in the air, one aspect of your life that you should make sure you’re in control is your finances.

Financial planning for divorced women is not that much different than financial planning for married couples. Several basic elements are the same. However, the differences offer both good news and bad news. The good news: you can make plans and decisions based solely on your needs and goals. There won’t be miscommunication or conflicting ideas. The bad news: it’s all in your hands. Any mistakes will be your own and a poor decision can’t be salvaged by the income or assets of a partner.

The following post-divorce action plan offers a few things worth considering:

One way to counter the bad news is to find a trusted professional to seek advice from.

After a divorce, friends are often split between spouses. Financial representatives can be the same way. If you lost yours in the divorce or never had one to begin with, it’s a good time to consider finding a professional who can help you make sound financial decisions for your new life.

To find one, start simply. Ask friends or acquaintances who it was that helped them when they went through a divorce. The attorney who handled your divorce may also be a good source for a referral. It’s important to have someone help you who has previously assisted or – best of all – who specializes in helping divorced women.

Selecting the right financial professional for you is a critical step. After all, this person will be helping you with the important financial decisions you now have to face.

Long-term care insurance may become even more important post-divorce.

Long-term care policies are designed to cover the costs of care if you are unable to care for yourself because of age or if you become ill or disabled. Long-term care is especially important for women because they typically pay more for it than men do. The reason is simple: women typically live longer than men and usually require longer care during those additional years.1

A woman’s retirement is usually more expensive than a man’s.

The reason that women usually need long-term care insurance more than men is the same reason that retirement income planning for women may be more important. Women live – on average – 5 to 10 years longer than men. Eighty-five percent of people over 100 are women.2 This means a woman’s retirement savings must, on average, be stretched out over a larger number of years.

While, in general, retirement planning for a single person is easier in many ways than for a couple, remember … you can no longer rely on a spouse’s financial resources if a mistake is made. It’s important to review your social security estimates, any pensions you have and your retirement assets. You can then compare that to the kind of lifestyle you would like to have during retirement.

Because retirement may be more expensive, you may want to make an employer-sponsored retirement plan a larger deciding factor in any job search. Also, you may decide that you must retire at a later date than you had originally planned.

Update your beneficiaries and consider using a trust to help manage your assets. People often forget to update the beneficiaries of their life insurance and retirement accounts after a divorce. If not changed, your ex-husband may stand to inherit a large portion of your assets. Also, the estate laws give certain breaks to married couples that are not available to a single person. Establishing the proper type of legal trust may be a way to pass along more of your assets to your heirs, rather than to the IRS.

Finally, after you have moved on from your divorce there may come a time when you consider remarriage. It’s important that you understand the financial effects this may have. If you were married longer than 10 years you may be collecting or entitled to 50% of your ex-husband’s social security benefit. If you remarry you will no longer have that right. While you will become entitled to your new husband’s benefit, you must know if your new husband’s benefit will be lower or higher, and how that will affect your retirement.

Remarriage can also lead to blended families, blended assets and blended income. Your new husband may have his own family from a previous relationship. A financial professional can help the two of you prepare for this blending that satisfies the financial needs of each of you, as well as your new family.

While it’s all in your hands, partnering with a financial professional can help you move on to the next phase of your life with a more solid plan for your financial future.

1. http://www.wife.org/long-term-health-care.htm
2. http://www.time.com/time/health/article/0,8599,1827162,00.html

4 Money Blunders That Could Leave You Poorer

A “not-to- do” list for the new year & years to follow.

How are your money habits? Are you getting ahead financially, or does it feel like you are  running in place?

It may come down to behavior. Some financial behaviors promote wealth creation, while others lead to frustration. Certainly other factors come into play when determining a household’s financial situation, but behavior and attitudes toward money rank pretty high on the list.

How many households are focusing on the fundamentals? Late in 2014, the Denver-based National Endowment for Financial Education (NEFE) surveyed 2,000 adults from the 10 largest U.S. metro areas and found that 64% wanted to make at least one financial resolution for 2015.

The top three financial goals for the new year: building retirement savings, setting a budget, and creating a plan to pay off debt. 1

All well and good, but the respondents didn’t feel so good about their financial situations.

About one-third of them said the quality of their financial life was “worse than they expected it to be.” In fact, 48% told NEFE they were living paycheck-to- paycheck and 63% reported facing a sudden and major expense last year. 1

Fate and lackluster wage growth aside, good money habits might help to reduce those percentages in 2015. There are certain habits that tend to improve household finances, and other habits that tend to harm them. As a cautionary note for 2016, here is a “not-to- do” list – a list of key money blunders that could make you much poorer if repeated over time.

Money Blunder #1: Spend every dollar that comes through your hands. Maybe we should ban the phrase “disposable income.” Too many households are disposing of money that they could save or invest. Or, they are spending money that they don’t actually have (through credit

You have to have creature comforts, and you can’t live on pocket change. Even so, you can vow to put aside a certain number of dollars per month to spend on something really important: YOU. That 24-hour sale where everything is 50% off? It probably isn’t a “once in a lifetime” event; for all you know, it may happen again next weekend. It is nothing special compared to your future.

Money Blunder #2: Pay others before you pay yourself. Our economy is consumer-driven and service-oriented. Every day brings us chances to take on additional consumer debt. That works against wealth. How many bills do you pay a month, and how much money is left when you are done? Less debt equals more money to pay yourself with – money that you can save or invest on behalf of your future and your dreams and priorities.

Money Blunder #3: Don’t save anything. Paying yourself first also means building an emergency fund and a strong cash position. With the middle class making very little economic progress in this generation (at least based on wages versus inflation), this may seem hard to accomplish. It may very well be, but it will be even harder to face an unexpected financial burden with minimal cash on hand.

The U.S. personal savings rate has averaged about 5% recently. Not great, but better than the low of 2.6% measured in 2007. Saving 5% of your disposable income may seem like a challenge, but the challenge is relative: the personal savings rate in China is 50%. 2

Money Blunder #4: Invest impulsively. Buying what’s hot, chasing the return, investing in what you don’t fully understand – these are all variations of the same bad habit, which is investing emotionally and trying to time the market. The impulse is to “make money,” with too little attention paid to diversification, risk tolerance and other critical factors along the way. Money may be made, but it may not be retained.

Make 2016 the year of good money habits. You may be doing all the right things right now and if so, you may be making financial strides. If you find yourself doing things that are halting your financial progress, remember the old saying: change is good. A change in financial behavior may be rewarding.

Citations.

1 – http://denverpost.com/smart/ci_27275294/financial-resolutions-2015-four-ways-help-yourself-keep

2 – http://tennessean.com/story/money/2014/12/31/tips-getting-financially-fit/21119049/

House and glasses on papers

When Mediation is NOT the best choice.

As a woman it’s easy to let your feelings of guilt, desire for closure and avoidance of conflict to undermine your divorce process, especially when engaging in mediation. When the emotions are running high you may be better served with a lawyer who can intervene when you are not making the best decisions for your future.

In mediation while the lawyer can suggest steps you should take to clarify financial values they can’t do more than just suggest. You may need someone to take you by the hand and lead you to the path that is best for your future. Remember in most cases it’s not just YOUR future it often includes your children as well.

Remember that it’s important to speak to a financial advisor, before, during and after a divorce, as lawyers are legal representatives, not financial ones? Please let us know by posting your comments on our Financially Savvy Women Fanpage.

Avoid Holiday Spending

Despite meticulous planning, the holidays are the time when most consumers do the most damage to their debt loads by buying presents for family and friends now and figuring out how to pay for them later.

Here are some tips to help you avoid overspending during the holiday season.

Get over the guilt

Are you buying that gift because you haven’t spent enough time with that recipient? Are you trying to make up for something you’re feeling bad about? It’s important to ask yourself if spending a surplus of money on a gift is really going to help you achieve the goal of gift-giving in the first place.

Set a budget, spend within it

It is crucial to establish a budget BEFORE you go shopping. Don’t spend more than you can pay back in one month. You’ll still have to pay your regular bills just like the other 11 months of the year plus all those added holiday expenses.

Always pay for purchases with a debit card

If you can’t pay with debit, you can’t afford it.

Don’t let a gift put a value on you

Consumers value themselves based on their spending choices. People become consumed in what they believe they’re expected to purchase. Think about what you can afford. What is the meaning and value behind your gift? The gift may not cost much, but may be worth more to the recipient than the price.

Put meaning into your gift

Donating to a charity of your choice in a loved one’s name is a fantastic way to show you care while staying within your budget. Research a charity or organization that holds special meaning to your recipient and honor them while helping somebody else in need.

Start the New Year right

Create a monthly expense budget and examine what you’re actually spending each month. Set your spending and saving goals early in the year.

Did you put these tools to use during your holiday shopping? Did you implement any other money saving tools? I’d love to hear back from you.
Source: Keltie, 5 Tips to Avoid Holiday Overspending

Many women feel they don’t know enough…

…to make smart financial decisions

They assume they must understand every aspect of their investments and financial plan in order to make a decision. Nothing could be further from the truth. We all delegate to professionals who have an expertise that we don’t have the time or the inclination to perfect, the same holds true with your financial life. While we do not suggest you simply “blindly” trust any professional you work with the reality is you do not have to know how to build the clock you just need to know how the clock works and can impact your life.

Types of Relationships; Which One are You?

The Big Spender
The Big Spender has no problem spending money if the purchase seems right. They view money as a vehicle for bringing themselves and others happiness. Big spenders view life as endless possibilities; they enjoy life and what it has to offer. The downside is that they overspend when they are upset or bored.

The Saver
The Saver is the polar opposite of the big spender. The saver believes in saving money at all costs. They keep track of all monies earned and spent and are extremely cautious with their finances. Many positive aspects come from pinching pennies. The positive aspect of being a saver is that they tend to have a nice emergency savings cushion, good credit and very little debt. On the negative side, extreme saving tends to come from a fear of never having enough, which means that the saver probably denies themselves things that they want and even need.

The Entrepreneur
The Entrepreneur gets a thrill from overextending and stretching financially. They make investments in a business or a beach house even if it means eating canned soup every night for dinner. Thrill-seekers tend to be free-thinking entrepreneurs; they view life as a game and money as the playing pieces.
When you’re a thrill-seeker with your money, your financial journey is exciting. Living with this thrill-seeking mindset means that each day is a new adventure. However, this mindset can be risky. If anything goes wrong, this spender could potentially lose a lot of money.

The Security-Craver
If you’re a saver and find yourself constantly checking your balances to make sure you have enough, you crave the security that you feel money offers. You aren’t afraid of spending money like The Saver; you take your time making a commitment to purchases, especially large ones. While this type of spending has its definite advantages, like the fact that you probably won’t find yourself in financial trouble, the urge to check and recheck your safety net can become overwhelming.

The Idealist
The Idealist views money and consumerism as unsavory and the root of many of the world’s problems. They prefer to dedicate themselves to innovative pursuits that don’t focus on money. The Idealist most likely ignores their finances and pays for necessary items quickly; afterwards, they jump back into their own agenda.

The Idealist spender tends to notice simple pleasures. However, this mindset is often impractical. They enjoy life, but forget that they need money to enjoy some aspects of it.
Source: Payoff, 5 Different Types of Money Spenders

Talking to Your Children about Money

Ask any child where money comes from, and the answer you’ll probably get is “From a machine!” Even though children don’t always understand where the money comes from, they understand at a young age that they can use money to purchase things they want. Start teaching your children how to handle it wisely as soon as they show interest in it. The lessons you teach your children about money will provide a solid premise for making their own financial decisions in the future.

There are four lessons that you can teach your children about money: learning to handle an allowance, opening a bank account, setting and saving for financial goals, and becoming a smart consumer.
Lesson 1: Handling an allowance
An allowance is usually a child’s first experience with financial independence. Your child can begin developing the skills to saving and budgeting for the things they want. It’s up to you to decide how much to give your child based on your values and family budget.

*A rule used by many parents is to give a child 50 cents or 1 dollar for every year of age.*

Here are some things to keep in mind when dealing with allowances:

  • Set some boundaries. Talk to your child about the types of purchases you expect, and how much of their money should go towards savings.
  • Stick to a consistent schedule. Your child’s allowance should be given on the same day each week with the same amount.
  • You may also consider giving an allowance “raise” to reward your child if they handle their allowance responsibly.

Lesson 2: Bank Accounts

Taking your child to open an account is an easy way to introduce the notion of saving money.
Many banks have programs that provide activities designed to help children learn financial basics. Here are some other ways you can help your child develop good savings habits:

  • Help your child understand how interest compounds by showing him or her how much “free money” has been earned on deposits.
  • Allow your child to take a few dollars out of the account occasionally.
    • Your child may lose interest in saving if they never see money coming out of their account.

Lesson 3: Financial Goals

Children don’t always see the value of putting money away for the future. How can you get your child excited about setting and saving for financial goals? Here are a few ideas:

  • Let your child set his or her own goals to give some incentive to save.
  • Write down each goal, and the amount thatmust be savedon a regular basis to reach that goal.
    • This will help your child learn the difference between short-term and long-term goals.
  • Put a picture of the item your child wants to an item that can represent their goals like a piggy bank.

Your child will learn to make the connection between setting a goal and saving for it.
Finally, don’t expect a young child to set long-term goals. Young children may lose interest in goals that take longer than one or two weeks reach. Over time, your child will learn to become more disciplined in their savings.
Lesson 4: Becoming a Smart Consumer

Children are constantly tempted to spend money, but not wisely. Your child needs guidance from you to make smart purchasing decisions.

  • Set aside one day every month to take your child shopping. This will encourage your child to save up for something he or she really wants rather than buying on impulse.
  • Just say no. Teach your child to thoroughly consider purchases by explaining that you will not buy them something every time you go shopping.
  • Show your child how to compare items based on price and quality. Take them grocery shopping and explain why you are purchasing a certain item over another.
  • Let your child make mistakes. Eventually, your child will learn to make good choices even when you’re not there to give advice.

Do you know what your Estate is worth?

Estimating what your estate would be worth if something happened to you is the only way to judge whether you should be making estate plans:

To get started consider the following major elements of your estate:

  • Real estate
  • Personal property (cars, furniture, electronics, art)
  • Value of any retirement plans (including IRA’s)
  • Bank accounts
  • Life Insurance policies you own
  • Stocks, bonds, mutual funds and annuities

Understanding what you are worth and what you own is a crucial step in planning for your future.

Renting Vs. Buying a Home

It is time for you to look for a new home! Where do you start?

Start by defining you goals. Consider where you want to live, the features and amenities you are looking for, what you can afford, and a realistic date for having the money you will need.  Another decision you will consider is whether you are renting or buying your home. Purchasing a home is a huge investment; you will need to take the time to weigh the benefits of renting versus buying a home.

 

Renting Your Home Buying Your Home
  • The initial cost of renting is usually lower than making a down payment on a house
  • You probably will not pay property taxes and upkeep directly
  • With no money tied up in real estate, you should have more savings to invest
  • You run no risk that the value of your property will go down
  •  You can deduct the interest on your mortgage and your local property taxes on your tax return
  • You build equity as you pay off your mortgage
  • You may be able to borrow against your equity and deduct the interest payments on the loan
  • Your house may increase in value and you may make a profit should you decide to sell

 

Source: Morris, A Woman’s Guide to Personal Finance