On International Women’s Day this year, we had the honor of speaking to a group of professional women about financial planning strategies they can implement today. We wanted to share with everyone an overview of what we covered as so many could benefit from taking these simple strategies.
Think about your life as it is now and compare it to your vision for the future. This will help you prioritize what’s important to you and how you envision your eventual retirement. Do you see yourself relaxing with friends and family? Or are you starting a small business or traveling the world? A conversation between you and your advisor will help you examine the challenges ahead and form your strategy.
No matter what your vision is, here are a few concepts that will help get you started.
Strategy #1: Develop a Strategy and Start Identifying Goals
Developing a financial strategy can seem daunting, but it doesn’t have to be. Start by thinking about your vision for your future. Have you thought about when you may want to retire? Do you want to retire early? Or are you okay with working until you’re eligible for Medicare? Do you want to pay for your children’s college education? Or maybe you’re considering private school. Do you want to purchase a home? A new car? Donate to charity? Leave money for your heirs? Prioritize your goals, and start building your savings strategy from there.
Strategy #2: Get Started and Save First
Regardless of your financial situation, one of the most important things you can do for your future self is to start saving for your goals today. Get in the habit of paying yourself first and make investing part of each paycheck a consistent habit (automatic withdrawals are great for this). Even if you start small, you can always increase your contributions as your financial situation changes. Every little bit helps. Thanks to the magic of compound interest, time is one of the best assets you have when investing.
What you earn – less what you save = is what you will spend… So SAVE FIRST!
Here are some savings vehicles that may be available to you right now:
Employer-Sponsored Retirement Plans: 401k/403b/457
Individual Retirement Accounts (IRAs): Traditional IRA/Roth IRA
Investable Savings Account: Brokerage
Self-Employed Retirement Accounts: i401k/SEP
Education Savings: 529s
Health Savings: HSA/FSA
Strategy #3: Invest like a Woman
It’s a common misconception that women prefer a “hands-off” approach to their financial lives. Rather than being timid with money, today’s women investors are taking appropriate and calculated levels of risk. Women may trade less than men, but research shows that when it comes to investing, men tend to be overconfident in their abilities. Specifically, men trade 45% more than women, and this tends to reduce their overall net returns (an effect that is compounded by the higher taxes, commissions, and fees that may result from trading).1 What does it mean to invest like a woman? It means taking healthy, age-based risks and investing for the long term.
Investing involves some level of risk, and investment decisions should be based on your goals, time horizon, and risk tolerance, which your advisor will discuss with you. The return and principal value of investments will fluctuate as market conditions change and maintaining the course with a plan will ensure you’re on track to be successful and reach your goals.
Strategy #4: Build a Support Team
7/10 women feel like there’s not enough time to focus on their investments. Confident investors are only as strong as the support team around them. Wise advice from an advisor will save you time and keep you on track to achieve your investment and retirement goals. Regular check-ins can help you adjust your strategy, especially if there’s been a change to your goals, dreams, life, or retirement vision.
By extension, a wider support team comprised of estate, tax, and legal professionals work in conjunction with your advisor to help you pursue the financial future you have in mind, no matter what life throws your way.
Strategy #5: Build a Budget
For those who may not be used to following a budget, it can be a critical planning tool. There’s a simple rule we like to follow and it’s called the 50/30/20 Rule.
50% of your monthly income should be spent on your Needs like rent/mortgage, groceries, utilities, gas, and insurance. The rule of thumb for rent or mortgage is to spend no more than 30% of your monthly income on rent or housing. Example: Monthly income is $5,000 (30%) = $1,500 should be your budget for housing each month.
30% of your monthly income should be spent on your Wants. Wants include dining out, clothes, shopping, vacations, gym memberships, entertainment, subscriptions, and other non-essential purchases.
20% of your monthly income should go to your Financial Goals and straight into your savings or investment accounts.
It’s never too late to become an empowered and engaged investor. Adopt the mindset of a learner. Stay curious and keep having conversations whenever you can about wealth management, financial strategies, and investing. Take advantage of the resources available to you to learn everything you can. And most importantly, don’t be afraid to ask questions of the experts in your life. Your advisor’s goal is to help you build the financial life you envision and the future you deserve. We want you to decide when you retire, not when the money says you can retire. That’s empowerment!
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Are you ready to build your financial team? Let’s talk about your vision for retirement – (410) 823-5442 or firstname.lastname@example.org.
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