Whether by choice or circumstance, women often find themselves performing a one-woman show in their juggling act called life. Unfortunately, in their efforts to balance family, careers and community involvement, they often ignore an important aspect of their life: their finances. Instead of taking a hands-off approach, try these tips.
IGNORANCE IS NOT A DEFENSE: Your financial well-being is important, so take an interest in it for your own benefit. There is no need to be the resident expert about off-shore accounts or the merits of alternative investments. Nevertheless, it is reasonable for you to develop a working understanding of your family’s assets, liabilities, annual income and expenses. You should know which account is used to pay bills and which is used for savings. Initiate conversations with your spouse to understand your plan of action when either of you dies or if one of you becomes disabled. While it is perfectly natural for one spouse to take the lead on the family finances, you should always be ready and capable of serving as second in command if anything unforeseen happens.
CHALLENGE YOURSELF WITH INVESTMENTS: When it comes to women and investing, there is good news and bad news. The good news is women tend to be better investors than men in terms of developing an investment strategy and sticking to it. Diligence is the key in reaching any of your financial goals, and women have this down to a science. The bad news is women tend to feel less comfortable taking risks than men, and more apt to own conservative investments. Fortunately, the bad news has a relatively simple remedy: education.
People, in general, tend to be risk averse because of their unfamiliarity with the investments and discomfort owning investments that have the potential to suffer short-term losses in value. However, when those same people become more knowledgeable about investments and how they work, they are more likely to make different investment decisions and take advantage of other investment options.
This can have a profound impact in their returns over time, which directly impacts their progress toward financial goals. Make a point to subscribe to a business magazine, read a book or identify a reputable website to learn the basics. More importantly, seek help from a financial professional to help you navigate through unfamiliar territory.
PUT YOURSELF FIRST: For many women, this one is tough, but trust me - it works. Your family is important; however, there are ways to balance your needs with their wants. While it is tempting to forego increasing your 401(k) contributions because the kids always incur expenses related to extracurricular activities or college, you need to resist the urge to delay preparing for retirement.
Your high school and college age children will do more to help, if you require that of them. A summer job can go a long way to pay for school clothes, band and cheerleading expenses. And merit-based scholarships are a life saver in offsetting college tuition costs. Encourage your children to take more responsibility for themselves and the things they want to do. Increasing how much you set aside for retirement now reduces your dependency on your children in retirement later.
For the mothers who work in the home, there is a retirement option for you, too. Your husband can make spousal contributions to a traditional or Roth IRA for your benefit. Doing so creates a win-win situation as it allows you to simultaneously set aside money for retirement and increase your comfort level with investing.
Taking a more active role in your finances may seem daunting to many women at first, but over time you will be amazed by your ability to add one more ball to that never-ending juggling act.
Life is a journey. Plan for it.
Ashleigh Brooker, CFP, is the principal of A.J. Brooker Financial Associates in Columbia. Reach her at info@AJBrooker.com or (803) 724-1235.