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)
Meet diversification, patience and consistency.
Any investor would do well to call on three friends during the course of his or her financial life: diversification, patience and consistency. Regardless of how the markets perform, they should be a part of your investment philosophy.
Diversification. The saying “don’t put all your eggs in one basket” has real value when it comes to investing. In a bear market, certain asset classes may perform better than others. Ditto for a bull market. If your assets are mostly held in one kind of investment (say, mostly in mutual funds, or mostly in CDs or money market accounts), you could be hit hard by stock market losses, or alternately lose out on potential gains that other kinds of investments may be experiencing. So there is an opportunity cost as well as risk.
This is why asset allocation strategies are used in portfolio management. A financial advisor can ask you about your goals and tolerance for risk and assign percentages of your assets to different classes of investments. This diversification is designed to suit your preferred investment style and your objectives.
Patience. Impatient investors obsess on the day-to-day doings of the stock market. Have you ever heard of “stock picking” or “market timing”? How about “day trading”? These are all attempts to exploit short-term fluctuations in value. These investing methods might seem fun and exciting if you like to micromanage, but they will add stress and anxiety to your life, and they are a poor alternative to a long-range investment strategy built around your life goals.
Consistency. Most people invest a little at a time, within their budget, and with regularity. They invest $50 or $100 or more per month in their 401(k) and similar investments through payroll deduction or automatic withdrawal. In essence, they are investing on “autopilot” to help themselves build wealth for retirement and for long-range goals. Investing regularly (and earlier in life) helps you to take advantage of the power of compounding as well.
Are diversification, patience and consistency part of your investing approach? Make sure they are. If you don’t have a long-range investment strategy, talk to a qualified financial advisor today. Please let us know by posting your comments on our Financially Savvy Women Fanpage.
Women avoid risk more than men; this can come back to bite them
Perhaps it comes down to both genes and social upbringing – women feel greater pain when they lose money than men. The result is that women tend to shy away from stocks more than men do. This makes intuitive sense because stocks are more volatile and unpredictable — on average – than bonds or cash. Perversely, it’s the wrong direction for women; they need higher exposure to stocks than men do. Women live longer than men; stocks broadly should continue to outpace inflation over long stretches of time vs. bonds and cash. Inflation is the enemy of all retirees and is especially corrosive to women due to their relative longevity.
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.
Wealth is defined as a measure of the value of all of the assets of worth owned by a person, community, company or country. It is the found by taking the total market value of all the physical and intangible assets of the entity and then subtracting all debts. Wealth is expressed in a variety of ways. For individuals, net worth is the most common expression of wealth, while countries measure by gross domestic product (GDP) or GDP per capita. This is just a general definition of wealth; each individual definition of wealth varies between person to person.
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.
With all the banks and credit unions as well as a growing number of other banking options to choose from, how do you choose which is best for you?
Type of Bank
| Commercial Bank
- Full range of services (including online)
- Many branches with ATMs
- High fees
- Less personal service
| Credit Union
- Low fees
- You have a say in setting policy
- Need to meet membership requirements
- Limited access to ATMs
| Savings and Loan
- Lower fees than commercial banks
- Personal service
- Some weekend hours
- Fewer branches than commercial banks
- Limited ATM access
| Virtual Bank
- Higher interest on deposits
- Banking at your own convenience
- No personal contact
- Mail non electronic deposits
- Fees to use ATM
| Brokerage Firm, Mutual Fund, or Insurance Company
- Low cost or free checking
- May provide loans against investment balances
- May require high minimum balances
- High fees
Most of these institutions offer the same basic services; the key things to consider when you make your choice are the costs of banking, the hours and locations most convenient for you, and customer service.
Source: Morris, A Woman’s Guide to Personal Finance
A financial plan is a written document that spells out where you are in your financial life, where you want to be, and the investment strategies you will implement to reach your goals. A substantial financial plan should include an emergency fund.
What is an emergency fund?
An emergency fund is money that is set aside to be used in the case of an emergency, such as the loss of a job, an illness, or the death of a spouse.
Why have emergency funds?
An emergency fund increases financial security by constructing a safety net of funds that can be used to meet emergency expenses as well as reduce the need to use high interest debt.
How much should I be saving?
It is suggested that you save enough money to cover 3 to 6 months of expenses in a liquid account.
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
Talking about money with your partner is tough. Eventually, we all have to do it. Don’t try to negotiate about money before airing your feelings; otherwise, negotiations will always break down. Here are some tips to get started with talking to your partner about money:
- Find an appropriate and stress free time when money is not a loaded issue (don’t use tax season for example).
- Articulate your concerns and fears about your partner’s money style. After you express your concerns, acknowledge what you admire about their methods.
- Talk to your partner about your goals for the future, short and long-term.
- Share your hopes and dreams.
- Contemplate making a shared budget or a spending plan together by merging your hopes and the goals.
- Set up a time to have the next talk. Aim for weekly conversations in the beginning, then monthly ones.
Source: Mellon, Men, Women, and Money