The start of the New Year is always a great time to plan your finances. Making a solid financial plan should be at the top of your to-do list, as it can significantly impact your financial future as well as that of your children.
While financial planning is important for everyone, women tend to face unique economic and lifestyle challenges that require special attention. Women tend to live longer and earn less than men on average. Many, if not most women, are also responsible for the household budget. Additionally, they are examples for their children and tend to should the burden of aging parents and relatives as well.
As a working mom, the beginning of the new year is my favorite time to put my finances on the table and “get real” about our money situation as a family. This is especially important after the increased spending of the holidays. While some of us may want to avoid looking at your bank accounts right after the holidays, it’s better to tackle it and start on a fresh financial footing.
Here are 10 steps to making and implementing your financial plan this year:
Confirm your financial priorities
We all have financial priorities. What are yours? As a working woman, it’s important to identify your life priorities and goals, so you can devise the right financial strategy for you. Your financial priorities may be related to sending your kids to college, being comfortable in retirement and/or being able to care for your elderly parents. Decide what’s most important to you in terms of life and financial priorities first.
To Do: Make a list of your life and financial priorities. If possible, share this with your spouse or your accountability partner(s).
Learn to invest confidently
Even as a Certified Public Accountant, it took me a while to get comfortable with the idea of investing. For some reason, I felt that the investing industry was reserved to men, and that it failed to understand the needs of women. Thankfully, the investing landscape is changing for women. There are now a number of online investment options targeted to women specifically, and more women than ever are taking the lead in their finances.
As women, we have a lot of basic and natural skills that make us excellent investors, from managing our households to leading complex projects. However, we must commit to getting familiar with investments through classes, organizations or on our own, and invest more confidently.
To Do: Set some money aside every month as part of your budget to invest. When in doubt, consult with a financial advisor about possible investment opportunities that target your own financial priorities (see Step 1). You can also consult these online financial planning firms for women.
Plan for taxes
Very few of us think to plan for our taxes. You know what they say: “There are only two things that are certain, death and taxes!”. Planning for tax savings options allows you to save money, and headaches, in the long run.
To Do: Get clear on your upcoming tax payments, if any. If possible, set aside some money in your budget for your taxes. Consult a tax professional for the best options to save on your taxes.
Save for retirement
Retirement is very real, and can be planned well ahead of time. In order for you to enjoy it and have peace of mind as you get there, consider starting your financial planning efforts now. It starts with determining how much you will need in order to retire comfortably. You can use the help of a financial advisor for this, as well as to make a plan to save accordingly.
To Do: Do some research and get familiar with the following questions/concepts when it comes to retirement planning:
- What is your life expectancy?
- How much will you need to healthcare costs in retirement?
- When is it best to claim your Social Security benefits?
- How much of your nest egg can you withdraw next year?
Mind your spouse’s finances
Your spouse’s financial decisions can affect your own financial welfare. It’s important to discuss with them the financial plans they may have or decisions they may be taking. Not discussing finances with your significant other may lead to underfunded savings, financial mistakes and inaccurate budgets.
To Do: Have a money date with your spouse to plan your finances periodically. Pick a quiet time and place to discuss your budget, savings and retirement. Frequently ask questions, and create a common budget that takes into account your combined financial situation.
Get adequate insurance
Insurance is basically your backup in case an unplanned occurrence requires you to spend a large amount of money. The right insurance plan will protect your assets and safeguard your peace of mind too.
When you think insurance coverage, don’t just limit yourself to your car or home insurance. You may also want to think about:
- Health insurance
- Disability insurance
- Life insurance
- Business insurance
To Do: Do your homework and research the best insurance options for your particular circumstances and budget. If needed, consult with an insurance agent or advisor as to your best options.
Create multiple streams of income
Relying on one single income can not only be a source of stress, but also an obstacle if you happen to lose it. If you’re employed, consider pursuing a side hustle or starting investment funds that create additional income for you. If you’re a business owner, start thinking about ways to diversifying your income streams by offering varied products or services.
To Do: Brainstorm on additional ways you can create additional income. Try to implement at least one of these this year.
Prepare for long-term care
Having health insurance is one thing, planning for long-term care is another one. Start thinking about ways to prepare for long-term care, especially as a woman. Women tend to live longer than men and tend to have a higher rate of chronic illnesses, which also means that they also need more long-term care.
To Do: Start planning for your long-term care needs by doing the following:
- Discuss your options with an advisor
- Consider shared-care policies with your spouse if you’re married
- Consider a hybrid long-term care insurance policy that pay you and your family in either long-term care benefits or life insurance proceeds
- Consider opening a Health Savings Account (HSA): You can use your tax-exempt dollars to pay for long-term care premiums, under certain condition.
- If you’re single, research the best options for single women or consult with your advisor
Create your estate plan
There is another area that few think about as part of their financial planning efforts. However, it’s crucial as it allows you to plan for your assets after you are gone. This usually involves drawing out a will, and listing out all your assets ahead of time, with the help of an estate planner or advisor.
To Do: Start researching estate planning options and/or consult with an estate planner or advisor.
Plan early and review your plan frequently!
Last but not least, do not wait to implement the various components of your financial plan. The earlier you start planning your financial future, the greater the rewards! In addition, make sure to review your plan as frequently as possible, at least on a quarterly basis. Don’t forget to adjust it in cases of life changes, such as marriage, divorce, children, etc.
To Do: Set a timeline for implementing your financial plan, and delineate action steps as to how you can realistically tackle it.
Have you set your financial plan yet?
To Your Success,
The Corporate Sister.