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
Financial independence comes from respecting and appreciating money by taking care of it. How do you take care of money? There are four rules that you should follow:
Spending less means never buying something that you can’t afford. The big secret to achieving higher earnings is to stop creating debt.
Saving more means paying yourself first. Consistently put money in your bank account until you have enough to cover emergencies and any unexpected loss of income.
Put money in assets that will grow faster than inflation and taxes can take away. The biggest risk for women is that they will outlive their money. A portion of money earned needs to grow faster than inflation.
Give Generously to Causes You Truly Believe In
Give thought about where you want to make a difference and create a plan.
The goal for you is to have choices, to have freedom to live life on your terms, and to create a fulfilling outcome from your financial decisions.
Source: Barbara Stanny, Secrets of Successful High Earners
There is no best investment product for everyone. What is important is to determine your investment objective and needs, then assess which product is suitable for you. Do not rush through the process of investing. Take time to understand the product and consider whether it meets your needs before you finalize. Read all documents and forms before you sign anything. Remember that you may have to bear fees, expenses and/or investment losses if you change your mind about purchasing the product. There are also key questions that you should consider before committing to any investment product such as structured deposits, unit trusts, investment linked insurance and life insurance policies.
Investing can be confusing and difficult at times. Before you make any decisions, ask yourself these 10 helpful questions:
- What is my investment objective?
- How much can I afford to invest, after setting aside funds for daily needs and savings to provide for emergencies?
- Do I intend to invest in one single sum or fixed sums on a regular basis (e.g. monthly, quarterly, annually)?
- How much return on investment do I need, after taking into consideration the effects of inflation, to meet my investment objective?
- Does the product I am considering meet my investment objective and needs? Which benefits are guaranteed and which are not?
- What is the potential return offered? Is it realistic?
- When are the proceeds payable? Can I afford to stay invested for that duration? Do I need the proceeds earlier?
- Am I comfortable with the level of risk that comes with the product I am considering? How much losses am I prepared to incur? What are the potential losses in the worst-case scenario for the product I am considering?
- Have I read and understood all the information, including the prospectus / term sheet / benefit illustration and product summary, contracts, warnings, exclusions and disclaimers, terms and conditions, relating to the product I am considering?
- Are there alternative products that offer similar benefits and risks to those of the product I am considering?
Source: moneysense.gov, Key Questions You Should Ask Yourself before Buying an Investment Product
A seven-year study found single female investors outperformed single male investors by 2.3 percent, female investment groups outperformed male counterparts by 4.6 percent and women overall outperformed by 1.4 percent.
Why? The short answer is overconfidence. Men trade more, and the more you trade, typically the more you lose — not to mention running up transaction costs.
As women accumulate wealth, their focus often turns to their children; how can I help them and how will my money support them when I am gone. It’s easy to assume they will use it in ways that will better their lives and provide the security we want for them, but this can be “wishful” thinking. For more affluent people, trust is often an effective way to control distribution and even put stipulations on how the money can be used, yet this doesn’t always convey our wishes and desires. A “Whisper Letter” is written before your passing, and communicates to your children what your hope is for this money you are leaving behind. It’s not designed to control but to encourage your children to be more thoughtful in how they use this money. You might encourage tithing or investing; you may inspire them to save more or even to splurge a little bit. Giving your children some gentle guidance by using a Whisper Letter can provide both parties some guidance.
If you wrote a Whisper Letter, what financial philosophies and principles would you want to encourage?
A recent Fidelity study shows women are more cautious with their investing compared to men. With economic times a bit more weary this more conservative mindset seems to make the most sense, but remember avoiding risk all together can jeopardize your ability to grow your savings.
Apply these four tips to your investing strategy to find the right conservative/risky balance:
Diversify. Help dampen the impact of the market swing (either it is up or down) with a well thought out and strategic investment mix.
- Remember stocks offer the most growth potential. US stocks have consistently earned more than bonds over the long-term, despite ups and downs.
- Check In, but not too often. Periodically check your investment mix and make changes when necessary.
- Turn to a professional. Work with a trusted advisor to help you understand the investments you own or need to add to your portfolio.
Following these four tips will help you find that sweet investment spot that is oriented toward long-term growth, yet does not make you nervous when the markets go up and down.
Investing is about putting your money to work so that your principal (the amount you start with) increases in value. Your investments can make the difference between being able to achieve your financial goals or being forced to defer them.
Your investments include:
- Stocks and mutual funds that invest in stocks
- Bonds and mutual funds that invest in bonds
- Cash and cash-equivalent investments.
The first step in investing is to define your goals. By defining your goals, you can narrow your choices to the best investment that matches your goals. The next step is to have a complete grasp on the basics. You can start by going to the library and reading magazines and newspapers. You can also find it helpful to attend investment seminars that are being sponsored by reputable financial institutions. Finally, look for a Financial Advisor that can help you pick different investments. By finding a Financial Advisor, you get the expertise you need to make important decisions in your finances.
Source: Morris, A Woman’s Guide to Personal Finance
What role do you want your money to play in your life? As a natural multi-tasker, you must incorporate a process or routine that allows you to proactively manage your money so that no stone is left unturned and nothing falls through the cracks. Just as we create routines and a process in other areas of life, we must do the same with our money.
But the reality is there are many aspects to consider when managing your wealth. You’ve got your investments (stocks, bonds, mutual funds), insurance (life insurance, long term care, mortgages), lending issues, and estate planning. At times, it managing your wealth can feel overwhelming. That is why it is important to break everything down into a manageable system that works for you.