WOMEN HAVE VARIOUS FINANCIAL GOALS AT DIFFERENT STAGES OF THEIR LIVES. BUDGETING, SAVING AND INVESTING SHOULD BE CONSIDERED. ROCHESTER AREA FINANCIAL EXPERTS PROVIDE A FEW WAYS YOU CAN CREATE A BUDGET, PLAN SAVINGS GOALS AND DETERMINE INVESTMENT STRATEGIES.
FOR YOUNG WOMEN
Women’s goals for budget and savings can vary at different life stages. Brittany Schultz, paraplanner for Kari Douglas of Echelon Wealth Services, a private practice of Ameriprise Financial Services, explains that young women in their first jobs might have savings goals for things like a home, a wedding or retirement. She notes they might want to create a budget, establish an emergency fund and build credit.
Deb Wolf, account executive at Foresight Investment Services at Foresight Bank says, “It’s important for young women to be able to manage on their own and to open the door to great-paying job opportunities. There is still a wage disparity for women, and that may make it more challenging to be able to afford the necessities of life and to also be able to save. Young women may need to be even more cognizant in their approach to budgeting and saving than their male counterparts.”
FOR WOMEN WITH OR WITHOUT KIDS
Wolf notes, “Women with families have a balancing act that they need to perform for 20-plus years. In the early years of growing your family, it is critical to find balance between what is needed…and what is wanted for your growing family. Establishing your family values and goals early can help guide families to successful saving and investment. It can also prepare you for when your children are college-aged and for your empty-nesting days.”
For women without children, Wolf suggests, “Set up those values and align your financial choices to ensure that you will be able to meet your goals. Not having your own children doesn’t mean that you won’t have children come into your life or other special people that you will count as family. Yet, not having children may mean that you may be able to have additional freedom to plan for an earlier retirement or choose to do some of those life events that may have been put off longer into the future if you did have children.”
FOR WOMEN WHO ARE RETIRED
“Women who are retired need to make certain that they understand their finances,” suggests Wolf. “Often, women are the ones that manage the family finances, but rely on their spouses to make the ‘big’ decisions. If their spouse passes away, they may be emotionally bereft, but it’s important not to also be financially out of touch and unable to understand or not want to understand the important facts of their financial life. Women of this age need to make sure they are also visiting with their spouse’s investment advisor. Always make the effort to attend the review meetings, ask questions, get clarification and be part of the investment decisions.”
Wolf explains, “Most of our lives will be spent in making the effort to save for emergencies, for a home or for college or for retirement. However, we will change gears as we approach retirement and will need to turn our attention to how best to position our funds to ensure that we can fund what can become a 30- or 40-year retirement vacation. We may become more risk averse as we approach retirement.”
CREATING A BUDGET
Schultz offers a few suggestions to consider when creating a budget. She recommends reading books such as “The Total Money Makeover,” by Dave Ramsey. “Think about your goals, what’s important to you and what you want to spend your money on,” suggests Schultz. “(Meet) with a financial advisor no matter what stage of life to create a custom plan for you based on your goals and life stage.” Wolf agrees, noting, “When setting a budget, be sure that it is consistent with your values and supports your longer-term goals.”
Brittany Johnson, office manager at Altra Federal Credit Union, says, “For women who are making their way into the workforce, budgeting and savings are particularly important. Financial obligations such as housing expenses, utility bills and student loan payments are now something they are responsible for. This can seem a little overwhelming, but having a budget and sticking to it can help ease some of those stresses.”
“When completing a monthly budget,” Johnson recommends, “It is important to factor in all monthly expenses. These expenses can include car payments, insurance, gasoline and maintenance of your vehicle. In addition, budgeting for things such as entertainment and clothing can decrease your chances of overspending.”
Schultz suggests accounting for every dollar you spend for about three to six months to determine where the money is going. “Based on that, you can create a budget and plan to stay within your budget. For saving money, set up auto transfers either directly from your paycheck or checking account to your savings, and pretend the money isn’t there. With retirement savings, plan to put at least 50 percent of any pay increases toward your retirement plan. Always keep an emergency fund!”
THE IMPORTANCE OF SAVINGS
Johnson suggests saving money throughout life. “It is important for young women to start thinking about saving money. Due to unforeseen events and circumstances, it is recommended that an individual has six months’ worth of expenses in savings.”
Johnson recommends, “Putting away even a small amount each month and determining your wants versus your needs will also help in saving money. Is it more important to have a new pair of jeans or to put money in savings for emergencies that may arise in the future?” First Alliance Credit Union’s blog offers basics of a budget plan, tips to avoid overspending, how to pay off your credit card debt and ways to create healthy financial habits. In addition, First Alliance Credit Union has Rochester Savings Challenge campaign going on to encourage people to save.
When considering investment strategies, Wolf says, “Start! There is no investment strategy in the world that will work better than simply to open an account and begin. Take advantage of the time-value of money. It’s a great opportunity to have a long time horizon to retirement, but it’s important to take advantage of that horizon, as it’s possible to achieve a great retirement with smaller amounts, if started in your early savings years.”
Wolf also suggests contributing to your employer’s retirement plan. “Don’t leave money on the table. Take advantage of your employer’s retirement plan. At a minimum you should contribute enough to get the full match from your employer. If you have a 401(k) or a 403(b) plan at work and your employer offers to match a particular percentage of what you contribute to the plan, do it. It’s money that you will not otherwise have.”
If you are given a wage increase, Wolf suggests, “Do the same for your savings and investing accounts. Designate a portion of the increase to you. You are paying yourself when you save money. Pay yourself first.”
Regarding taxes, Wolf suggests working with your tax preparer to determine a “break-even” withholding amount so you owe nothing in taxes and the government doesn’t owe you. Schultz says, “It’s important to know the most beneficial way of saving for yourself. For example, determine what would be most tax-efficient for your retirement plan—traditional 401(k) versus Roth 401(k).”
With these suggestions in mind, you’ll be well on your way to working on your budgeting, savings and investing goals.
Alison Rentschler is a Rochester-based writer and editor.