Part of being financially savvy is planning for life’s unexpected events. Two experts offer tips for women to better control their financial futures.
“By 2030, at least two-thirds of the nation’s wealth is actually going to be in the hands of women,” said Nina Mitchell, a senior wealth advisor and partner at Bridgewater Wealth. “So whether we’re ready or not, women need to really have no choice but to be engaged in their own finances for themselves, as well as for the next generation.”Here are some tips on how to do just that.
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Start saving as soon as possible Mitchell says the key to building wealth is to start saving as early as possible.
“And remember: compounding is your friend,” she added.
Mitchell gives an example of someone who starts saving at the age of 25. For 10 years this person puts away $5,000 a year, until the age of 35, and lets the money compound at a rate of 6 percent. When the saver reaches 65, that amount is worth about $380,000.
Compare that scenario to someone who starts saving at a much later age: 55. This saver does the same thing, putting away $5,000 a year for 10 years at a compounding rate of 6 percent. At the age of 65, this person’s savings is worth about $66,000.
“Saving early, no matter how little it is, is important,” Mitchell said.
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Automate your savings
It’s one thing to know you should start saving, and it’s another to actually do it.
The way to approach it, Mitchell says, is to practice “intentional wealth.” First, be aware of what you’re making and what you’re spending, as well as your assets and liabilities.
Next, prioritize your goals: Are you saving for retirement? College? A home?
Once you establish what it is you want, lay out a strategy to achieve your goal. Mitchell says setting up an automated system is a fail-proof way to build savings.
“It’s the idea of paying yourself first. The more that you can automate things, the more consistently you’re going to get things done,” she said, adding that there are a number of online tools and apps that help keep track of spending and saving. “Dedicate a fixed amount each month and invest systematically. Don’t think about it; just make sure that you’re doing it on a consistent basis. It’s your everyday actions, making savings a habit.”
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Set up an emergency fund
Establishing an emergency fund is essential, says Dawn Doebler, senior wealth advisor and director of education at Bridgewater Wealth. And she’s not talking about setting aside a few dollars for a rainy day. Doebler and Mitchell recommend seven to 12 months of saved living expenses. “A lot of times, people will give you the guideline of three to six months, but we find that women [in the D.C. area] have higher incomes and higher expenses, so we really want to make sure you have a substantial amount of money,” Mitchell said.
Doebler added, “In the event that you’re laid off, your emergency fund can become your paycheck.”
Make sure the money in your emergency fund is liquid and not tied up in securities.
“It needs to be something that you can get at immediately,” Mitchell said.
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Understand and maximize your benefits “People get a package and then they forget about it,” Mitchell said about employee benefits. She says women should brush up on the policies offered in the workplace and know their options for saving and for taking an unplanned leave of absence.
Her advice is to make sure you are at least matching your employer’s contributions to your 401K, and find out if your benefits include things such as long-term disability. If for some reason you lose your job, do you have severance?
Mitchell suggests setting up a meeting with human resources to more fully understand the ins-and-outs of your benefits package.
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Look into your disability and life insurance
Doebler says looking into your disability insurance is important, especially if you are a single parent.
“Disability happens a lot more often than we might realize, and often times it doesn’t occur because of an accident — it occurs because of physical ailments. Fifteen percent of disability claims are because of cancer,” she said.
Doebler adds that the coverage offered by employers usually only covers 60 percent of your income. Making up for the missed pay, especially for women, is important.
“We as women do a lot in the home. We drive, we cook, we pay the bills, we do the gardening, and if we become disabled, we have to pay other people to do that for us,” she said.Review your life insurance and make sure it’s not just covering your salary, but also any debt you might leave behind. “It’s just the idea of having that protection, that safety net,” Mitchell said.
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Consider your own stash of cash
Doebler and Mitchell say if you’re in a marriage and you end up getting a divorce, ideally everything is split 50/50. However, things don’t always work out so seamlessly.
“Technically, if you have a joint account, the spouse can take all of the funds out of the account, and unfortunately, we see that,” Doebler said.
Because of that, it’s always a good idea for women to keep an extra stash of cash on the side. This doesn’t have to be a secret: your partner should be involved in your savings plans. But both advisors stress that it never hurts to have something in your name only.
“We would always say that it’s probably best that women have their own separate account, because you just never know in terms of that curveball,” Mitchell said.
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Start talking
Both Doebler and Mitchell say one way women can take more ownership of their finances is to start talking.
“Money talk tends to be taboo in our culture. Money is one of those areas where we really don’t talk about it very much,” Doebler said.
Sharing personal experiences helps to encourage and empower other women.
“We really want the women to be engaged, and we want to empower them with financial knowledge,” Doebler said.
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WASHINGTON — Part of being financially savvy is planning for life’s unexpected events, whether it’s the loss of a job, the loss of a spouse or an illness — but many women aren’t prepared.
The tides are turning, but statistics show that more women take a back seat in the handling of household finances to their male partners. Nina Mitchell and Dawn Doebler of Bridgewater Wealth say all too often women come to them for financial advice when they’re in a crisis.
“And if you’re in crisis, you don’t have a lot of choices,” said Doebler, a senior wealth adviser and director of education at Bridgewater.
That is why the Bethesda-based investment firm launched Her Wealth, an initiative that aims to educate and empower women to take control of their wealth through articles, resources and events.
“By 2030, at least two-thirds of the nation’s wealth is actually going to be in the hands of women,” said Mitchell, a senior wealth adviser and partner at Bridgewater. “So whether we’re ready or not, women need to really have no choice but to be engaged in their own finances for themselves as well as for the next generation.”
