According to the Women's Philanthropy Institute, because women tend to live longer than men, they will be responsible for the majority of the estimated $41 trillion that will pass to the next generation in the next 50 years. Women control 60 percent of U.S. wealth and represent 40 percent of Americans with gross investable assets of more than $600,000.
Still, a question many women ask themselves is, "What does retirement mean to me?" It may mean spending more time with your family, traveling the world, starting a business or simply leaving a financial legacy to your loved ones. Whatever your goals, now is the time to start planning your strategies for achieving them.
Creating a good financial plan is like having GPS for your future. It will help you set a course from where you are to where you want to be. But even if you lose track of your path, you can always reroute! Follow these simple directions to get closer to your financial goals.
Develop a picture of your current financial situation.
Before I offer clients any financial advice, I ask a simple question: "Do you know where all your money is going?" You see, unless you tell your money where to go, your money will always dictate your financial destiny. Put a purpose to each dollar you have, and always live below your means. Did you know that 75 percent of millionaires live in a house that is worth less than $300,000? Heed the words of Thomas Jefferson: "Never spend your money before you have it." For more ideas on how to save, try these Moms' Money-Saving Tips.
Be prepared for a rainy day.
One thing I have found to be true: The more financially prepared you are, the fewer "emergencies" happen. Build a contingency fund equal to six to 12 months' worth of your net income. It may take you a while to build it, but once you have it, you'll be able to sleep at night without worrying about unforeseen events wiping you out. Find out Your Family Budget Personality.
Manage your debt.
Create a plan to get out of debt, and make every effort to follow through on it. Look around your house; perhaps you see a few items you can sell on eBay or Craigslist to pay down debt. Employ a "snowball" strategy: List all your credit cards; put the card with the smallest current balance at the top and the one with the largest at the bottom. Pay the minimum amount on all the cards except the one at the top. Use a portion of every paycheck to pay the one on the top of the list. Once you get rid of that one, focus on the second one. All the money you were using to pay that first credit card, now use it on top of your minimum amount on your second card until that one is paid off, and so on. Be diligent; it works! Every dollar counts, so check out our list of The Best Grocery Coupon Websites and Apps.
Transfer your liability.
It's not unusual to be hesitant when it comes to insurance, to feel that it's a waste of money when you aren't seeing any benefit in return. (And if you're truly fortunate, you'll never need it.) However, sometimes the questions isn't if, but when a calamity will strike. A wise man once said, "You may never know if you did something right, but you will always know when you did something wrong." That's the case with insurance. It can safeguard your financial future, and that of your loved ones, so make sure you have the right coverages in place. Avoid these Financial Planning Missteps.
Create a plan for your retirement.
Although we can create perfect plans in our mind of how our retirement will look, chances are we may not know how to get there. Don't worry—you aren't alone. A good financial planner can help you anticipate just about any circumstance. There are many things to consider other than just where to put your money. You must consider tax implications, tax brackets, required minimum distributions, Social Security, Medicare and, of course, legacy. You don't have to be an expert on each one of these, but you definitely need to know someone who is. The sooner you see a financial planner, the better. Anyone in her 20s who truly understands how personal finances work can easily end up a millionaire.
Since you will most likely be among those controlling the majority of wealth when you reach retirement age, make sure you don't outlive your money. Don't worry if you don't have much experience in the investment area. A good adviser will care for you, your needs and your family. To get more involved in your family's finances, learn these Money Lessons for Moms.
Raul Jacobs is a financial advisor at Waddell & Reed Financial Advisors in Chicago.