A woman’s guide to financial planning — for every stage of life

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As women, we have unique needs and challenges when it comes to managing our money. 

According to data gathered in 2018, a working woman earned only 81.6 cents for every dollar her male counterpart earned. Further, the median annual earnings for women were almost $10,000 less than for men. 

Because we typically earn less than our male counterparts, it’s even more important that we understand how to capitalize on our money’s potential to the best of our ability. 

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Most personal finance information has been tailored to the male demographic, so to be able to feel confident about your finances, no matter your age, relationship status or field of work, is vital. Having confidence in your financial situation as a woman will help you stress less and enjoy life more regardless of where life takes you. 

In this article, we’ll explore financial planning for women throughout stages of life many of us or our friends may encounter over the course of a lifetime.

Financial Planning as a Single Woman in Your 20s

If you’re just starting out in your career, there are many ways to set yourself up for financial success in the future. 

The first building block to achieving financial success is to set up a budget, or spending plan, that fits your needs. A budget doesn’t have to be boring, cut and dry, or rigid, but rather can be viewed as a way to make your money work for you and your short- and long-term goals. 

There are several different budgeting methods, but one of my favorites is the tracking method. 

First, you need to know what income you have coming in (net income, which is after all taxes and deductions) so you can understand how much money you can spend each month. 

Then by syncing your accounts to an online system, such as Savology, you’re able to see what you’ve spent your money on and when. A lot of these programs will automatically categorize your spending for you, so you just need to sign in to take a peek and make sure it’s categorized correctly. 

Once you’ve linked your accounts to an automated system of your choice, you can then start to track your spending over the course of the next month or two. From here you will have a better idea of where all your money is going and if there’s anything that doesn’t look right. A lot of times there will be subscriptions or other expenditures that you didn’t realize you were still paying for. 

After you’ve set up your system and gone through your expenses for a few months, you can then determine what needs to be eliminated or cut down. By taking your net income and subtracting your fixed expenses, such as rent/mortgage, car, student loan payments or any other fixed expenses, you will determine how much money you have leftover to use towards variable expenses such as groceries, alcohol and bars, dining out and shopping. 

This is when you can focus on the budgeting aspect. Tools like Mint, Savology as well as other automated systems may allow you to set budget limits for categories so you can track your spending progress as the month progresses. From here you can look at your spending trends as the months go by and adjust your categories accordingly. 

Why budgeting? The great thing about learning to set up a budget early on in your career is that you will be more capable of being able to set and reach short and long term goals, stay out of consumer debt and plan for an emergency. 

Once you have a budget set up, you can start setting money aside in an emergency fund, which is ideally 3-6 months’ worth of expenses (or more) in the event you were to lose your job or have a large unexpected expense come up. 

From there you can start to set up sinking funds, which are savings accounts designated just for a specific goal such as home, vacation, car, etc. This way you aren’t dipping into your emergency savings when you need to spend money in one of these other areas. 

Another important piece to consider in your early 20s is setting up a retirement account if you haven’t already. 

Once you’ve started working after college you can set up a Roth IRA and start funneling post-tax money into it. The great thing about Roth IRAs is that they allow you some flexibility for taking money out for a first time home purchase or education costs. It’s easier to automatically have your money sent to investments before you can get your hands on it and spend it, so I recommend doing this as soon as you’re able before you get too used to extra money in your bank account. 

Roth IRAs can be set up on many different platforms, but Fidelity and Vanguard are very user friendly and each has their own low-cost index funds to consider. 

If you’re worried about setting up your own investment account, you can also consider using a robo-advisor platform such as Betterment, Ellevest, or Wealthfront. In addition, you can seek out a financial advisor who can help assess your financial situation and lead you in the right direction. 

Your Career & Financial Planning as a Woman

Once you start a job at a company that offers employee benefits, it’s time to learn more about what this means for your financial future. 

Many companies will offer health, dental and life insurance, but also have perks that you may not have realized such as counseling, financial coaching, and health coaching. By taking advantage of these perks that are offered through your company you can save on any money you would have spent out-of-pocket on these same benefits. 

When you sign up for an employer-sponsored health plan you may also have access to a Flexible Spending Account (FSA), or Health Savings Account (HSA), which allow you to nominate dollars pre-tax for qualified medical expenses. Utilizing these accounts will lower your tax liability for the year. 

In addition, it’s likely that your employer will offer you an employee-sponsored retirement plan in which you can contribute pre-tax dollars. This means that this money will be withheld from your paycheck and automatically put into your retirement account through work. The great thing about these types of plans is they help you automate your savings and reduce your taxable income at year-end tax time. 

As soon as you’re able to do so, start contributing into your retirement plan through work so you can take advantage of compound interest. If your employer offers a match, which many do, be sure to invest the amount needed to qualify for the match. A match is free money from your employer that you don’t want to pass up. 

What about when you earn a raise or get a promotion at work? First off, congratulations! This is a huge accomplishment and one you should celebrate. 

But before you get too carried away, make sure you don’t fall victim to lifestyle creep. Lifestyle creep is when you start making more money and you automatically start upgrading your lifestyle to match your new income. It could be purchasing a new car, buying a nicer or larger home, updating your wardrobe, etc. By falling victim to lifestyle creep you will be reducing your chance to save and invest more money when you get the opportunity. 

Related: Financial Advisors for Women Business Owners

How to Have the Money Conversation With Your Partner Before Marriage

So now you’ve gotten engaged. Another congratulations is in order! 

Whether you’re already living together, thinking about moving in together, or waiting until you’re married to do so, it’s important to have a money conversation before you get too far down the line. Money is one of the most common reasons why couples argue, and also one of the main reasons couples end up getting divorced. 

There are a few things you will want to discuss with your partner about money. The first is whether they tend to be a saver or a spender. If one of you is a spender and the other is a saver, then that will likely be a contention point in your relationship. Understanding each other’s unique money story, including how money was viewed within your family as you grew up, as well as how you tend to handle stressful situations will help you understand why each of you is the way you are when it comes to saving and spending.

Another important thing to discuss is what your short- and long- term goals are as a couple and how this will affect your finances. By having these types of conversations before you get married you’ll be better prepared to handle disagreements about finances as time goes on.

SPONSORED: Find a Qualified Financial Advisor

1. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes.

2. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

Most personal finance information has been tailored to the male demographic, so to be able to feel confident about your finances, no matter your age, relationship status or field of work, is vital. Having confidence in your financial situation as a woman will help you stress less and enjoy life more regardless of where life takes you. 

In this article, we’ll explore financial planning for women throughout stages of life many of us or our friends may encounter over the course of a lifetime.

Financial Planning When Your Married

Now that you’ve discussed your money stories and goals for the future, it’s time to determine how you want to manage your finances as a couple. 

Do you want to have separate accounts and split bills down the middle? Do you want to have separate accounts and a joint account to pay bills out of? Do you want to fully combine your finances? 

Whatever you decide, both partners need to be on board in order to set yourself up for a successful financial future. Whether you decide to split or combine finances, you may want to use an app such as Ask Zeta, a tool designed specifically for couples and families, to link all of your accounts. This way you’ll have a good overall picture of your finances as well as the micro view of what’s coming in and what’s going out each month.

Regardless of what system you choose to pursue, communication is the biggest factor in determining if you’ll be able to keep the peace and meet your financial goals together. Setting up regular money dates, a specific day and time in which you will review your finances, will ensure that you are on the same page regarding your goals, budget, bills, debt and any other financial pieces that need to be discussed. 

Regular communication will help you see your finances from the other person’s point of view and ward off disagreements before they have the chance to get out of hand. 

Financial Planning for Divorcing Women

If you find yourself in the situation of divorce, then handling your finances can become a bit more complicated. 

According to this survey conducted by Worthy in partnership with the Association of Divorce Financial Planners (ADFP), 3 of 10 women were not familiar with retirement savings and 4 of 10 were not familiar with investments pre-divorce. Now is the time to get educated on your finances and work to maintain a sense of control over your money as much as possible. 

It’s as important now to create or keep tabs on your budget as it has even been, but also know that there will likely be unexpected expenses that come up during the divorce process that you will have little control over. The important thing is to control what you can, and not make any major or unnecessary purchases in order to conserve cash throughout the process.

There are several steps to take through the divorce process to help you maintain financial stability including: 

  • Figuring out health insurance if you will no longer be covered by your spouse
  • Separating out and closing joint bank accounts
  • Applying for a new credit card only in your name
  • Updating your beneficiary information
  • Creating a new estate plan 

You will also want to take a look at your retirement plan to determine what needs to be updated to meet your retirement goals. Keep in mind if you have been married 10 years or more you will be eligible to collect on your spouse’s social security benefits at retirement. 

Going through a divorce can be emotionally, mentally and physically draining and can also drain your bank accounts. If you’re not already working with your own financial coach or financial advisor now is a great time to seek advice from a trusted professional as you navigate this complex process.

You may want to hire a financial advisor who is a Certified Divorce Financial Analyst (CDFA) with the experience to help navigate common and complex financial issues that arise in a divorce.

And once you’re through the divorce process, a financial advisor who specializes in serving divorced women may be an ideal guide to help you feel confident and optimistic for your future.

Financial Planning for Widowed Women

As of 2019, there were approximately 11.4 women widowers living in America. Although it’s not surprising to most that women tend to outlive men, half of widows over the age of 65 will outlive their partner by 15 years or more. 

If you find yourself in this situation, it will undoubtedly be some of the most difficult days, weeks and months of your life. Losing a partner is incredibly difficult, and having to face decisions alone, many of them financial, can seem completely daunting. 

The most important thing is to take care of yourself and your own needs first, and take baby steps when it comes to any financial check lists you need to get through to avoid overwhelm. 

When it comes to managing your finances as a widow, there are several things you need to take into account. 

The first is to go through your finances and do a quick audit of what you’re paying for that you no longer need (such as any subscriptions that your spouse had that you won’t be using) and make sure there aren’t any bills you may have missed or coming due that aren’t already on autopay. You’ll also need to evaluate any benefits you’ll be receiving, such as social security, and how that factors into the new monthly income you have to live on.

After you have a handle on the day-to-day financial situation, you can then move on to the bigger picture. 

If your spouse racked up any debt, you’ll have to determine if you’re liable for it. If debts include federal student loans, they are forgiven, but some private loans may not be. If you have co-signed on the debt or are a joint account holder (not an authorized user) you will likely be responsible for any debt your spouse had acquired while you were married. 

You’ll also need to figure out what financial accounts your spouse had and how you’ll be transferring the assets or closing the accounts out if applicable. It’s recommended however that you keep a joint bank account open for at least a year after your spouse’s passing to be able to deposit any checks in their name that come to you. 

If your spouse had life insurance, you’ll need to decide what to do with the benefit, although you don’t need to decide right away. In the meantime you can transfer the benefit to a savings account and then consult with a trusted financial advisor on what makes the most sense when you’re ready to do so. 

Your advisor can also help you evaluate your own retirement plan and what may need to be adjusted as you move forward on potentially less income.

While grieving, you may want to get everything done as quickly as possible, or may lack the energy to even open the mail. It’s important to not rush into any financial decisions and consider having a trusted financial professional in your corner who can help you navigate this new and uncertain time.  

Retirement Planning for Women

Because women typically live longer, yet earn less over their lifetime, retirement planning for women needs to look differently than it does for men.

As women tend to be the primary caregivers for their own children as well as aging parents, they are likely to spend an average of 12 years outside of the workforce. This in turn means losing hundreds of thousands of dollars in lost wages and social security benefits over a lifetime. 

So what does this mean for you? 

Lost wages mean you could have less to put into your retirement account over your working years. This, coupled with less social security benefits, means you could have less to live off on in retirement. 

By taking this into account, women can plan early to set themselves up for a retirement in which they can live comfortably. Although it can be hard to plan for whether you’ll take time off when having children or who will take time off work to care for an elderly family member, it’s important to start thinking about it and plan as soon as possible for your future. 

By meeting with a qualified financial advisor you can assess where you are financially and where you want to be when you retire. By saving and investing consistently you can meet your financial goals in the future.

Wrap-Up

Because women tend to earn less over their lifetime and invest more conservatively than men, it’s important to take our unique needs and challenges into consideration when it comes to financial planning. Whether you choose to manage your money on your own or hire a financial professional, these tips by each stage of life will help you move towards your financial goals.

This article originally appeared on Wealthtender.com and was syndicated by MediaFeed.org.

SPONSORED: Find a Qualified Financial Advisor

1. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes.

2. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

Most personal finance information has been tailored to the male demographic, so to be able to feel confident about your finances, no matter your age, relationship status or field of work, is vital. Having confidence in your financial situation as a woman will help you stress less and enjoy life more regardless of where life takes you. 

In this article, we’ll explore financial planning for women throughout stages of life many of us or our friends may encounter over the course of a lifetime.

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Crucial lifestyle factors to consider when you set financial goals

Crucial lifestyle factors to consider when you set financial goals

“How much do you cost?” is one of the most important questions I ask my clients when advising them on the structure and planning of their wealth. 

As I explain in my book, Wealth Actually, you may have $10 million in the bank but still not feel it will enable your happiness. The amount of your wealth is irrelevant if you don’t understand your costs. 

When you think about wealth decisions through the lens of your costs, you’ll be better equipped to avoid the kind of spending that dilutes your resources and decreases the chances you’ll be able to accomplish your long-term financial goals. 

Here are 10 factors to consider when determining what you cost:

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Real estate can become your largest unnecessary cost because wealthy people often buy properties as a way of benchmarking themselves against others. 

It’s true that a home is an investment that will gain value, but you won’t see that benefit until you sell the property. Excessive personal real estate spending should be viewed as a form of consumption that can punch a hole in your wealth, not as an investment. 

As you climb the ladder of real estate consumption, properties and expenses begin to multiply. The flat in London leads to a house in Southampton or an apartment in New York, each of which carries a tax bill, utility costs, and maintenance expenses.

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Education expenses begin well before college. Nanny or childcare expenses come first, followed by lessons in a variety of skills, sports and vocations. 

In most major cities, private day schools run in the $30,000–$40,000 range each year. At the high school level, boarding schools are at least $50,000 annually. 

Private college today costs as much as $70,000 a year for undergraduate studies. 

It’s perfectly fine for wealthy individuals to bankroll their children or grandchildren’s education, so long as they remember it’s an immense financial commitment. 

To help their children develop good financial habits for their children, I know some wealthy people who require their kids to assume responsibility for part of tuition.

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As a person ages, medical expenses may be needed to lead an active lifestyle: hip and knee replacements, pacemakers, eye surgeries and hair transplants are common.

Lifesaving expenses such as cancer treatments aren’t usually budgeted for, but they should be, especially since second opinions from the Mayo Clinic aren’t cheap.

Insurance can be useful in navigating medical expenses, but if you have a deep pocket, the medical community and the government will want to stick their hands in it. 

Long-term care insurance can also help in mitigating future financial risk, but be wary of policies containing carve-outs that won’t help your individual situation.

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Many people see personal care expenses as part and parcel of their professions, especially those in glamour industries such as athletics, music, or acting. 

I have a friend in New York who pays for $80 hair blowouts every other day. Seriously. 

When it comes to body image, the pressure is intense. 

Wallis Simpson is credited with saying that you can never be too rich or too thin, and judging by what is popular on television and Instagram, that’s 100 percent true. 

Americans invest millions every year into gyms with the hope of getting fit. 

If looking and feeling good is important to you, account for it in your spending.

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The wellness obsession extends into nutrition and eating. Many companies have figured out that people are willing to make good nutrition a cornerstone of their lives. 

I’m a strong believer in fresh food, but look at the price tags. 

From organic products to $10 superfood smoothies, the daily food bill is increasing. 

Additionally, there is a feel-good philanthropic aspect to the modern marketing of health foods. You feel you’re doing good by buying at the local farmers’ market instead of the nearby supermarket, and you pay a premium for that decision. 

Compounded over time, that additional expense adds up.

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Entertainment can have escalating levels of expenditure. This can include tickets to Broadway shows, luxury suites at stadiums and country club memberships. 

There’s nothing wrong with spending money on enjoyable activities, unless those activities are accompanied by addictive behaviors that destroy wealth. 

Gambling is a particularly dangerous form of entertainment because many people cannot control their gambling behaviors and habits. 

Collectibles are another form of entertainment that can carry a hefty price tag. It’s fine to collect things you enjoy, from rifles to cars to comic books. Some collections may have investment attributes, but they’re typically nothing more than expensive fads.

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Clothing may not seem like a significant expenditure, but it can bust budgets. 

Case in point: I have come across people who earmark $50,000 a month for wardrobe acquisitions to project their status and wealth. That goes quick when women buy a $7,000 dress to wear once, or men stockpile $5,000 Savile Row suits. 

Celebrities and professional athletes, for example, feel they must project an image that enhances their careers and brands. Clothing expenses are rationalized as necessary. 

That’s fine when money is plentiful, but what happens if the income dries up? 

To look good without creating obsessive and destructive long-term spending habits, a measure of self-control and management is vital.

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If you are wealthy and want to experience different cuisines, that can be one of the great joys of life, so long as every meal isn’t of the high-end variety. 

Dining is also a social event, but not every meal needs to end with you picking up the entire tab. True friends do not need you to try to impress them in that way. 

Some foodies and wine aficionados let their hobbies turn into business ventures by purchasing a restaurant or vineyard they have no business owning. 

You may think the intelligence and savvy that already brought you success and wealth can be applied to a restaurant or a winery, but that is often a fallacy.

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Wealth can open the door to exceptional vacations and remarkable travel experiences.

Travel can be educational or provide much-needed relaxation, but like many expenses, globetrotting becomes problematic if it becomes excessive. 

People who overindulge in luxurious travel lifestyles are often indulging in escapism as much as anything else, but that escape is eating up their resources. 

However, if you do plan to travel, it makes sense to do it while you’re healthy. Traveling with health challenges is less enjoyable and can be an expensive proposition. As people age, there’s typically a decline in their energy level, curiosity, and tolerance for inconvenience. Travel experiences may not be as rewarding in later years.

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As people graduate to higher levels of wealth, upgraded forms of transportation can be among their most pleasurable and destructive expenditures. 

Private air travel is the billionaire’s crack. I think many wealthy people would send their kids to a public school before they’d give up flying private. 

Cars represent far more than transportation, and this is especially the case with the wealthy, where they’re a collectible or serve as a status symbol. 

Boats are fun and enjoyable, but remember this adage: the two best days for a boat owner are the day they buy the boat and the day they sell it.

This article was syndicated by MediaFeed.org.

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Featured Image Credit: boggy22.

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