Manage your money, survive divorce or widowhood, and plan for retirement.
Be Actively Involved in Your Finances
Studies reveal that many women are insecure about managing money. Many others are too willing to take a backseat approach to their finances, allowing someone else -- a husband, partner, or parent -- to take control. Whatever your age, marital status, or level of financial knowledge, you can't afford to remain in the dark about your money.
Here's how to take charge.
Take a Hands-on Approach
One of the greatest threats to your financial well being, particularly when you are part of a couple, is not being directly involved in financial tasks and the decision-making process. Some of the things that can happen when a woman is uninvolved in the couple's finances include finding out after her partner leaves or dies that she is deeply in debt or that savings are inadequate to sustain her in retirement. In an acrimonious split, an estranged spouse or partner could drain accounts before you could find them.
It's crucial that all women who are part of a couple know at least:
* what your joint assets are and where you have accounts
* what your joint debts are
* whether or not bills are current (being paid on time)
* whether or not you are behind on filing your tax returns or paying taxes
* what insurance policies you have
* where important financial records are kept
* where your safe deposit box and key are, and
* the usernames and passwords for online or phone access to accounts.
If someone is currently managing your money, insist on being included in all financial activities and decisions.
Expand Your Knowledge
If you're avoiding the things you should be doing -- budgeting, shopping for better interest rates, and investing, for example -- because you don't feel like you know how to manage your money, make it your goal to learn.
Here are some ways to gain financial planning knowledge:
Read articles and books.
There are enough books on personal finance to fill a small library. Make your first books ones that give a broad overview of personal finance, such as Personal Finance for Dummies, by Eric Tyson (Wiley), and The Busy Family's Guide to Money , by Sandra Block, Kathy Chu, and John Waggoner (Nolo).
Include in your reading list some books that are both informative and inspirational, such as Women & Money: Owning the Power to Control Your Destiny, by Suze Orman (Spiegel & Grau)Suze Orman's FICO® Kit Platinum. Once you have an understanding of the basics of personal finance, move on to books devoted to a single topic, such as insurance, investing, or retirement planning.
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Reputable personal finance and investing sites typically provide free information. Sites such as www.Bankrate.com , offer visitors a huge collection of information, much of it geared toward those new to personal finance and investing. MyMoney.gov, at www.mymoney.gov, links visitors to hundreds of finance-related sites. There are also a number of personal finance blogs, whose authors give the subject a personal touch. Find them by doing an online search for "personal finance blogs."
Request free information.
All or most credit unions and investment companies offer members and prospective investors educational materials. Nonprofit credit counseling services also provide materials on budgeting, debt management, and saving. (Counseling is typically free. Visit the National Foundation for Credit Counseling, at www.nfcc.org, to find a counseling agency.) If your employer offers a 401(k) or similar retirement plan, the plan administrator should be able to provide you with information on investing and retirement planning.
Take a class.
Community colleges and university extensions sometimes offer personal finance classes. Credit counseling agencies typically offer free money management classes; if the agency is also a HUD-certified housing counseling agency, they are likely to offer first-time homebuyer classes, too.
Plan for Break-up,Divorce and Widowhood Need a Divorce Lawyer?
Depending on which statistics you read, approximately 50% of couples divorce and the average age of widowhood is 56. If you are part of a couple, you need to prepare for life without your partner.
Know your finances.
Do not wait until you are a widow or in the middle of a divorce or break up to figure out what you have, what you owe, and where everything is.
Establish a credit history in your own name.
Establish credit accounts and loans jointly, or open some individual accounts in your own name. If you divorce and resume using your maiden name, and you and your husband had a good credit rating, notify creditors and the three national credit reporting agencies (Equifax, Get Equifax Credit Watch Gold 3-in-1 Now!, Experian, at www.experian.com, and Transunion, at www.transunion.com) of the change.
Check your credit reports each year for mistakes or unusual activity; you're entitled to a free one from each credit reporting agency every 12 months. (To learn more about credit reports, how to get them, and how to establish good credit, read Mr. Dangerfield's article about Credit Scoring.)
Make sure assets are in your name, too.
Your home, investments, and other assets should be in both names. This is particularly important if you don't live in a community property state, or if there might be a question about whose money purchased the asset.
Know what policies and accounts name you as beneficiary.
This would include, among other things, life insurance policies and retirement accounts. Not knowing who to notify if your mate dies could mean losing out on significant income or benefits.
Discuss life insurance.
An adequate policy could allow you to keep your home and maintain your lifestyle if your partner dies. A "term" life insurance policy (one that provides protection for a specified period of time -- say, ten years) can provide a lot of coverage for a relatively low premium -- if it is purchased while the insured is still relatively young and healthy. (To learn more about life insurance, Read Mr. Dangerfield's article "Are You Taking Care of your children?Aboujt insurance policies here.)
Have an emergency fund.
Some experts advise women to put away some cash in their name only. Whether or not you let your partner know about it is up to you.
Women who become divorced or widowed often have to reenter the workforce, but their prospects and income may be limited if they don't have marketable skills and experience. To remain employable, keep up with advances in workplace technology. And consider working part-time, even if you don't have to.
As uncomfortable as it may be to think about divorce, breakup or the death of a mate while you are still happily joined, doing so can help you avoid a dramatic change in lifestyle after your partner is gone.
Plan for Longevity
On average, women outlive men by six to eight years, and many women live decades longer than their mate. But rather than planning for longer life, many women are not saving enough. According to a recent study, women invest more conservatively, start saving later, are more likely to be in and out of the workforce, and on average earn less than men -- all factors that reduce retirement income.
To avoid outliving their money, women must manage their finances with a longer life expectancy and perhaps lower earnings in mind.
Establish Your Own Retirement Plan
Even if you have a partner who assures you that he or she is saving enough for both of you, implement your own retirement plan. Depending on your employment situation, do one or more of the following:
* Invest earlier. Start investing as soon as you can. If you begin investing just 2 years earlier, you will increase your nest egg by 18%.
* Max out contributions to an employer-sponsored retirement plan, such as a 401(k). At the very least, invest more than you currently do.
* Don't cash out your 401(k) when you leave a job. Doing so forfeits 20% or more of the account's value in taxes and another 10% in an early withdrawal fee.
* Establish a Keogh, solo 401(k), or SEP IRA if you are self-employed. Contribute to a traditional or Roth IRA, if you qualify. Establish a spousal IRA if you do not have earned income and meet other qualifications.
* Take advantage of catch-up provisions that allow you to save more than the usual maximum if you are age 50 or older.
* Delay retirement. Working two more years can increase projected retirement income by 135%.
Consult a financial adviser for help choosing the best retirement plan for your situation.
Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages www.beingbrokesuckstoday.com and is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment SMG Publishing and Taboo Dangerfield Publishing
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