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Women and Financial Planning: 5 Steps to Consider

Women and Financial Planning: 5 Steps to Consider

Women represent the largest proportion of influence over wealth. They own more than half (51%) of all U.S. personal wealth and they’re on track to inherit two thirds of the wealth ($22 trillion) by 2020.*  Therefore, it seems logical that women take a more dynamic role in making decisions about their finances and planning for their retirement. There is no time like the present to take the wheel in driving your financial future, rather than ending up in a crisis situation as a widow or due to an unexpected divorce and not having the foundation you need to make smart decisions about your finances.

Here are a few steps you can take to ensure you are on the road to a thriving financial future:

  1. Create your goals. It is difficult to build a roadmap toward financial success, unless you know what you are working toward.  Two of the most vital goals on everyone’s list should be to establish an emergency fund (3-6 months of expenses) and to begin saving for your retirement, whether it be through your company’s 401(k) plan or an IRA.

    Some other goals to think about are:
    • Saving for a new car or a new home
    • Saving for kids’ or grandkids’ college tuition
    • Saving for vacations/travel
    • Gifting to heirs during your lifetime
    • Leaving heirs an inheritance

  1. Create a budget. A good rule of thumb is to allocate your income into thirds: one-third toward living expenses, one-third toward paying taxes and one-third toward saving/investing. Make a list of your fixed expenses every month (rent/mortgage, utilities, food, etc.). Look at your discretionary spending such as eating out, clothing and entertainment expenses.  If these equate to more than one-third of your income, can you trim down some expenses?  The most important aspect when creating your budget, however, is to make sure you are paying yourself first!  It is crucial that you include your long-term goals in your monthly budget and set up a systematic savings and investment plan toward each of these goals.
  2. Investment options and asset location. With your goals and budget created, it’s time to decide how best to invest your money and let it grow over time. With so many investment options these days, it can be overwhelming to decide the right place to invest your money.  One key factor to consider as you are making these decisions is knowing your risk tolerance.  How much risk are you comfortable taking?  Diversification into different asset classes, such as equities and bonds, is one of the main components to minimizing risk. Therefore, finding the right asset allocation where you feel comfortable is essential. Along with choosing investments, it’s also important to decide where to hold these assets.  For retirement savings, for example, choosing between a Traditional and a Roth IRA will impact when you pay taxes.  Traditional IRAs allow for saving money on a tax-deferred basis, which means you pay tax as you pull money out in retirement. A Roth IRA means you are paying taxes on the money now, allowing that money to grow and then pulling those earnings out in retirement tax-free.  With so many decisions to make, don’t be afraid to seek expert advice.  A financial advisor can assist in helping you determine the best investments, asset allocation and account types to best serve your needs.
  1. Monitor your finances. Much like going to the doctor for an annual check-up, it is an excellent idea to check in on your financial health on an annual basis. By periodically evaluating your goals, budget and investments, you can make adjustments when necessary and ensure you are staying on track to accomplish the goals you established.  As you near retirement, we also recommend reading SVA Financial Group’s eBook, A Retirement Roadmap for Women, which is geared specifically toward empowering and educating women as they prepare for retirement.
  2. Estate planning documents. Sometimes the road toward financial success has some unexpected twists and turns. It is important to plan for those unanticipated events by having documents in place that clearly state your wishes.  There are three documents that are important to have drawn up.  The first document is a Healthcare Power of Attorney. This names someone to make healthcare decisions on your behalf in the event you aren’t able to make them for yourself.  Second, a Financial Power of Attorney names someone you trust to act on your behalf for financial matters.  Finally, a will allows you to name guardians for your minor children, as well as naming where you want your assets to go if something happens to you.  Depending on your situation, a trust document may also be recommended as part of your estate plan. An estate planning attorney can give you advice and help draw up all of these documents.  

While planning for a strong financial future can seem overwhelming at times, remember to take a few basic steps to lay out a roadmap for yourself.  Working collaboratively with a financial advisor can help enhance and add expertise to the development of your roadmap.  By taking ownership of your financial future and putting in a little hard work now, you will reap the benefits in the long run.

*Source: Bank of Montreal’s Wealth Institute

All information herein has been prepared solely for informational purposes only and opinions are subject to change. Past performance is not indicative of future results and all investments involve the risk of loss of principle. For information on how these general principles apply to your situation, consult an investment professional.

Article Topic Expert: Kelly Lagore

Kelly is a Financial Consultant with SVA Plumb Wealth Management, LLC. Through consistent financial planning, Kelly works to help clients achieve their financial goals, whether it be saving for college, planning for retirement, or wealth preservation for the next generation. She enjoys the personal relationships she develops with clients and works to build a strong level of trust with them.

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