Money Management Tips For Women
Women are quickly surpassing men as the most affluent demographic in the United States. With more money in our pockets and less time to properly manage it, women need a basic tool kit to effectively grow their wealth. Here are 5 things every woman should know to be financially savvy.
1. Maximize retirement savings. Women need to know that after they reach 5o, there is a catch-up option to increase the contribution to their retirement account. For example, for a traditional IRA, that would mean an extra $1,000 a year or an extra $5,500 if you have a 401k plan. Most women will need to retain up to 85% of their pre-retirement income to remain comfortable through retirement so boomers, especially, should make use of this option if they possibly can.
2. Diversify, Diversify, Diversify! We have all heard the adage about not putting all our eggs in one basket, and its good advice. How does one figure out how much to put in stocks, bonds and money markets? Many people will ask you, What is your risk tolerance to describe how they should figure out your asset allocation. A much easier way to think about it is to take out a sheet of paper and create 3 columns. The first should represent money that you need for the next 1-3 years. This money needs to be in money markets, CDs, or a savings account. The second column is money for the next 3-5 years which should be in short to intermediate term bonds. The third column is money that is long term savings in which you can afford to take some extra risk. We suggest a diversified portfolio of stocks.
3. Multitask your investments. According to a recent study conducted by our firm, CAIM LLC and thepollingcompany/womantrend , most women preferred lower risk investments. 60% of women have thought that investing in equities was a good idea, yet 60% were not confident about investing in equities. Women should consider using high quality dividend paying stocks for their allocation to stocks. These stocks not only offer appreciation in price, but also provide a stream of income, hence the multitasking. They offer benefits in both up and down markets. While the price will rise in an up market in a down market the investor can at least capture the dividend and use it to buy more stock at a lower price, or have a supplement to your income.
4. Look abroad for opportunities. Some of the fastest growing markets are overseas. 80% of world GDP actually comes from outside the United States and currently about 46% of worldwide growth is coming from emerging markets. While these stocks tend to be higher in risk, even a small allocation to international companies is beneficial to a well diversified portfolio. As these companies are faster growing, they also have the potential to rise higher in value.
5. Build your team. Women are more educated than ever before and are starting to make more money. We are experts and highly knowledgeable about our particular areas of expertise, but may not be experts at everything. The work life balance is a constant struggle and thats when we need to call in the team to help keep our lives functioning smoothly. Have a team in place of an accountant, estate planning attorney and an independent investment advisor who acts as a fiduciary. An investment advisor, who is also a fiduciary, is required to always act in the best interest of their clients. By adhering to these basic ways of managing money, a woman can gain greater security both emotionally and financially.
By adhering to these basic ways of managing money, a woman can gain greater security both emotionally and financially.