THIS IS THE SECOND ARTICLE IN A TWO-PART SERIES FOR WOMEN | WEALTH | WELLNESS
In part 1 of “Ladies, Let’s Talk About Financial Organization,” we discussed why focusing on financial organization is important. Knowing what you have and understanding what you need gives us the confidence to develop a financial plan which, ultimately, leads to peace of mind. Studies show that women tend to focus more on financial goals than men… This article discusses developing an action plan which will help organize your finances and get women more focused on their financial goals.
Know What You Have
Let’s start with the basics of knowing what you have. Whether you list these on a paper, an Excel spreadsheet or go ahead and dive into a software program or cloud-based program, it’s important to list anything that will help you create a budget or financial statement. Include the name of the account/asset, ownership or title of the account, the institution it’s with, who the beneficiaries are and the value of the following:
Bank Accounts
• Checking
• Savings
• Money Market
• Certificates of Deposit
Investment and Retirement Accounts
• Brokerage
• 401(k), 403(b), IRA, Roth IRA, SEP IRA, Simple IRA
• Health Savings Account
Debt
• Mortgage
• Auto Loan
• Student Loan
• Credit Card(s)
• Personal Loan
Other
• Real Estate
• Trust Accounts
• Business Interest
• Property
Once you’ve compiled and organized this list, you’ll be able to create a Balance Sheet showing your assets and liabilities. Next, you’ll be able to dive into the details and focus on your income sources, your monthly expenses and any short-term or long-term debt you are paying. This forms the basis of your budget. I like to create a budget for my household spending and then go deeper with a long-term savings plan.
Understand What You Need
Most important is an emergency fund to help with unexpected expenses and living expenses for at least six months. I’ve encouraged my daughters to have enough money set aside in case they lose a job, (endure a pandemic) or have an unexpected life emergency, such as needing a new air conditioning unit.
Most people do not plan to work their entire life and have given some thought to an age or stage of life where they could see themselves retiring. Most often, this long-term savings goal is accomplished through your employer-sponsored retirement plan if offered, or an Individual Retirement Account (IRA). Your financial advisor or CPA can advise you on the type of IRA you need. On employer-sponsored retirement plans such as a 401(k), at the very least you should be contributing an amount equal to the employer match and at best, you can contribute the maximum allowed, which changes annually. As a young woman, I didn’t understand the nuances of retirement accounts and was embarrassed to ask about them. ASK…your employer wants you to participate and if you start contributing to a retirement plan early, you’ll never miss the money.
Another saving strategy for long-term goals is a taxable investment account which helps you grow your money over time. Understanding the basics of investments, along with the beauty of compounding interest, is a great place to start. The right wealth advisor will explain all of these things, help you with an investment strategy designed to meet your specific goals and help you understand your risk tolerance. When you feel comfortable, put the investment plan into action. If you have an investment account, you should review the prior year’s performance at least annually with your wealth advisor or portfolio manager and make any adjustments to asset allocation or risk tolerance based on your current and future needs.
Annually, review prior year spending and see if there are areas of duplication or things you aren’t using. It’s easy to sign-up for apps that are auto-renewed, and you should review these at least once a year to make sure you are using and need what you are spending money on.
Build a team to help you navigate your decision-making. A recent McKinsey Report stated, “Females are more likely to seek professional advice and less likely to feel confident about their own skill at financial decision making. Female decision makers tend to be less risk tolerant and more focused on life goals. In seeking an adviser, they tend to place more emphasis on a personal fit and are more likely than males to identify a life event as their motivation to seek guidance.” I like to surround myself with a team that understands my needs and my goals, including a wealth manager, corporate trustee, banker, attorney, insurance agent and CPA. Rarely do I make a decision without running it by at least 2 of these professionals.
The Peace that Comes with Knowing
Defining real-life goals helps women visualize what our future can be and the peace of having a plan when life throws you a curveball. As a woman, I’ve experienced a few curveballs and I know what it means to feel prepared. If something in this article resonates with you and you’d like to speak with an Argent wealth advisor, reach out to me or click here. Someone will be in touch with you.
If you could benefit from financial planning or need advice related to management strategies, please contact any of Argent’s professionals at 888.678.8970. We’ll be glad to help however we can.
