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Financial planning for women should focus on lifestyle changes

Achieving your goal of financial security requires a plan that evolves with your life.

Are you optimistic about your financial future? Do you have retirement fears? Everyone may feel pessimistic and financially insecure from time to time. But the research shows that women tend to feel worse about financial matters than men. But it doesn’t have to be that way.

Men and women have differing views about their financial future*

If you want financial security, you need a financial plan. And that plan needs to address all your financial needs and adapt to any lifestyle changes you may face in the future.

Starting out – a four-step plan to help reach important savings goals

Regardless of where you are in your life, the foundation of your plan involves the four steps below. You can always revisit these steps and make changes when your lifestyle changes. And remember to always pay yourself first.

  1. At a minimum, you should contribute enough to your workplace retirement plan to earn the full employer match.
  2. If you have outstanding credit card debt, pay it off.
  3. Create a cash reserve of at least three to 12 months’ worth of essential expenses.
  4. Increase your retirement savings and then begin investing to meet other long-term goals such as buying a house or saving in a child’s 529 college savings plan.

Adjust to your lifestyle changes – marriage or partnership

If you are entering a committed relationship, make sure you and your partner are in agreement when it comes to finances and individual roles and responsibilities.

  • Communicate and set savings goals together – be open and honest.
  • Make an inventory of all your debt and how you plan to manage it in order to help protect your credit rating.
  • Discuss expectations for work, income and financial responsibilities.
  • Determine how bank and credit card accounts will be managed.
  • Discuss any plans for growing your family.

Starting a family

Having children can be an enriching experience. It also requires you to take on a whole new set of responsibilities. If you are planning on starting a family, make sure you review your financial plan and family goals.

  • Reevaluate your budget to consider new expenses: housing, day care, health insurance and other needs.
  • Help protect your growing family with life insurance, a will, a trust (if appropriate) and savings.
  • Start to plan ahead with a 529 college savings plan.

Changing careers

You will probably work numerous jobs over your career. As you do, it is important to take advantage of any savings opportunities that are offered, and to keep track of any savings accounts held at previous employers. And if your career changes significantly, it may be time to update your financial plan.

  • Enroll in your workplace plan and contribute enough to receive your company’s matching contribution (if available).
  • Consider options for savings plans still with previous employers.
  • Review health insurance, as well as life and disability coverage.
  • Adjust your budget as needed (health care, commuting, moving, etc.).

Divorce

Most marriages do not end in divorce, but many sadly do. If you find yourself in this situation, it is important to consider the financial implications and plan accordingly.

  • Protect your credit.
  • Don’t ignore taxes and health insurance.
  • Understand Social Security benefits.
  • Update ownership and beneficiary information on all accounts.

Elder care

Women often find themselves as primary caregivers for friends or other family members. If you find yourself in this situation, it is important to carefully manage your finances. Long-term care is one of the most overlooked aspects of financial planning and the costs are rising.

  • Review the living situation of your loved one(s) and the impact of long-term care.
  • Agree on roles and responsibilities.
  • Get health and legal proxies in place.
  • Determine the additional costs that may impact you.

Retirement

With advancements in health care, it is quite possible that you will spend 30 years or more in retirement. And women live longer than men, five years longer on average. As you approach retirement, you will need to review your financial plan.

  • Look at all your financial resources to determine whether you can afford to retire.
    • You might consider delaying retirement.
    • You might consider a new career or part-time work.
  • Decide when you should file for Social Security.
  • Make sure you register for Medicare at age 65 and determine what type of coverage plan best meets your needs.

A financial plan is not something that is written in stone. It requires that you periodically reassess your financial situation relative to the changes in your life. A successful plan will help you manage your short-term finances and help give you financial confidence, while staying focused on your long-term goals.

* Based on a study by Edelman Financial Engines research in partnership with America Saves Week, Bipartisan Policy Center and Funding Our Future, conducted January 2021.

 

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