Financial planning is about more than just investing, but the same skills that make women better investors can also serve them well when it comes to financial planning. Because women face different challenges at various stages in life, there’s no “one way” to do things. But here are a few helpful financial planning tips for women in the earlier stages of life.
Just Starting Out/Early Career
When you’re just starting out, your main priorities should be learning to live within your means and planning your long-term financial goals. If you’re able to spend less than you make, and you save or invest the rest, you’re well on your way to financial success.
One roadblock to future success can be debt, so you want to remove that overhang as soon as possible. If you have student debt, high-interest debt, or any other type of debt, taking steps to pay that down as quickly as possible will accelerate you on the path to financial freedom.
Now is also the time to set your financial goals, whether it be short-term, medium-term, or long-term. Goals might include buying a house, saving for retirement, or buying a new car. Whatever the goal, you can begin planning and working toward it now. How do you work towards these goals that may seem like a long way down the road?
Start investing early. For example, retirement may seem a long way off, but starting early is the key to success later in life. According to Centers for Disease Control and Prevention (CDC) data, in 2019, the average life expectancy for women was 81.4 years. Your expected long life means that you may need to provide for a longer retirement. But in reality, it’s an opportunity to have more time to build up a comfortable retirement plan. By starting early, you’re taking advantage of the compounding that will benefit you later in life.
When you begin investing, what’s the best way to do it? Invest like a woman. Forget about trying to time the market or putting all of your eggs in one basket in an attempt to strike it big. Instead, opt for a strategy like automated investing where you invest fixed amounts at regular intervals. Rather than investing everything at once and hoping that you pick the right time to buy, buying at regular intervals results in dollar-cost averaging and allows you to not worry too much about the ups and downs of the market.
In addition, find a financial advisor. It’s doesn’t have to be a professional, just someone from whom you can learn. While you can learn from searching online, having an actual person to talk to, with their depth of experience, can be a much more valuable tool than an internet search. Have them give you their thoughts on investment ideas and your financial situation. By involving another person, your knowledge can grow exponentially. Take advantage of those people out there with more experience who can help explain investments or guide you in your finances. An advisor isn’t just for rich people—it’s for anyone who wants to learn.
By this point in life, the odds are that your income is higher than when you first started out in your career. Hopefully, you are on a firm financial foundation, because if you are, this is the point in life when you can make serious headway towards your long-term financial goals. If you work for an employer who offers a 401(k), you should try to max out your contribution to the retirement plan. If you’re not eligible to contribute to a 401(k), check to see if you’re eligible to contribute to an IRA (where the contributions might be tax deductible) or a Roth IRA (where the contributions aren’t deductible, but eligible future withdrawals are tax-free).
If you are married, even if your spouse is the one in charge of your finances, it’s important for you to have a clear understanding of the family’s finances. If a traumatic event occurs (death, disability, divorce, etc.), that’s not the ideal time to try to figure out what’s going on. If you’re the one in charge of the finances for your household, consider sitting down with your spouse and going over the family’s finances so that spouse is aware of how things stand. It’s important that both spouses understand the goals and how you’re progressing towards them.
If you have children, this is the time when you’re beginning to think about college, and how you’re going to pay for it. Thankfully, there are investment accounts specifically designed for saving for college. A 529 plan is an investment account that offers tax benefits when used to pay for qualified education expenses for a designated beneficiary. The money compounds tax-free, and if it’s used for qualified expenses, you never have to pay taxes on the growth.
In addition to providing for your children’s education, you’ll also want to have a guardianship provision in place in case anything happens to you or your spouse. In addition to naming a primary guardian, be sure to name a secondary guardian in case the primary one predeceases you or is unable or unwilling to take care of your children.
If you have people dependent upon you and your income, you’ll also want to make sure that you have adequate insurance. While life insurance can provide for them if you were to pass away, long-term disability insurance can provide partial income so that bills can continue to be paid if you get too sick or injured to work.
Finally, just because you may no longer be new to the world of finances doesn’t mean that you shouldn’t reach out for help when needed. Whether it’s someone who’s been through similar situations as you’re going through, so they can speak about their experience, or a professional financial advisor, don’t let your busy life keep you from getting trusted advice on managing your financial affairs.
No matter what your stage of life, it’s always a good idea to have someone to advise you on your finances. Whether you opt for a professional or a trusted friend, having someone to give you clear, objective advice is a key step on the journey to financial independence and security. Find someone that you’re comfortable with and let them help you on your financial journey.
About Chase Investment Counsel
Chase Investment Counsel is a family and employee-owned boutique wealth management firm that offers personalized investment services. Our clients include career professionals, those nearing or in retirement, and families experiencing financial transitions such as generational wealth transfer, widowhood, divorce, or sale of a business. Chase’s active, disciplined investment management team is focused on selecting individual stocks and bonds targeted to each investor’s specific financial goals and risk tolerance. Established in 1957 in Charlottesville, VA, Chase Investment Counsel manages approximately $300 million in assets.