I’m a big proponent of financial empowerment for everyone, but women in particular have a lot to do.
While women are responsible for 85% of all consumer purchases and 90% of household financial decisions, many still don’t feel financially confident: 63% of women say financial information can be overwhelming and difficult to understand, and only about half say they make investment decisions on their own, according to E-Trade data .
It might be an adjustment to think of your financial future as something unique, separate from your partner or your family. But in the end, you can be your best friend when it comes to financial empowerment. Take 30 minutes to think about what you will need over the next 30 years and learn about your choices so you can make confident decisions about your (financial) future and that of your family.
Hit close to home
Traditional financial planning tends to assume that income will increase at a steady rate each year, but our financial lives as women can often follow a non-linear trajectory. Consider caregiving: More women have left the workforce today than at any other time in the past 33 years to care for children and/or aging parents during the pandemic.
But taking a break from work can mean losing salary and career opportunities not just today, but later, as well as wealth-building opportunities like stock-based compensation or company pension plans with contributions. counterpart. It’s a tough question to answer, but how will your choices today affect your cumulative and future earning potential? And how will your money affect your future security?
Plan for the best, prepare for the worst
Since women so often take over for others, family and life events tend to have an outsized impact on our financial prospects. Rather than being caught off guard, think about some of life’s most predictable “unpredictable” events and how you can start to better prepare yourself:
· Caregiving: If you need care, don’t be afraid to take advantage of flexible working policies or alternative care options and ask for help. Outsource if you can, but if you decide to take a break from your job, set up a regular schedule reminder for virtual networking check-ins to keep your professional connections warm. Also, be sure to discuss a savings plan with your family. If you are caring for a child, consider starting a 529 College Savings Plan to help offset future college expenses.
· Retirement: Only 39% of women are convinced that they will have enough resources to last until retirement. Make sure you fully understand the retirement plan options available to you and take advantage of any employer matches. Save early and often, automate your savings whenever possible, and increase your savings each time you receive a raise or bonus. If you own company stock through an employee stock purchase plan (ESPP) or equity compensation program, make sure you have a strategy around that to build your future.
· Losing a loved one: The loss of a loved one is perhaps one of the most traumatic events we face, but because women live an average of five years longer than men, many women can outlive their male partners. It’s all the more reason to save for your golden years and make sure you have enough money set aside to give you a one year “no decision” buffer should the worst happen.
· Divorce: While it doesn’t happen to everyone, divorce is a common life event that can be a cataclysmic emotional and financial drain, often leaving women to juggle their own financial security as well as the needs of children and parents. older parents. While no one wants to plan for the worst-case scenario, be sure to set aside some retirement and emergency savings today that can help you stay afloat in emergencies like this.
The financial challenges we face as women can have a ripple effect on our financial success throughout our lives. One way to give yourself more power over your financial future is to start adopting smart habits today that can help prepare you for whatever life throws at you. Here’s a good way to start:
1. Start the conversation. Talking about money can be daunting, but it’s important to take an active role in managing your family’s assets. Discuss your retirement plan, asset allocation, future estate planning, and financial protections for your family (like life insurance). Remember details such as usernames and passwords for online financial accounts, and create a circle of trust of loved ones or finance professionals to support you.
2. Cover the basics. Your financial future starts with your financial present, so make sure you stay financially healthy today. Create an emergency fund with 3-6 months of living expenses. Pay off high-interest debt first. Automate your savings and monthly payments if you can. Factor healthcare costs into your retirement strategy and talk to an advisor about long-term care insurance, annuities or other strategic investments.
3. Establish your own credit history. Your credit score plays a major role in the financial opportunities, interest rates, and credit card rewards you can achieve. You can build a positive credit history by using credit cards strategically, paying your utility bills on time, and making regular payments on student loans and mortgages. Avoid canceling credit cards or requesting multiple credit cards at once and aim to stay below a 30% utilization rate.
4. Make your workplace work for you. More and more companies are taking steps to help women plan for their financial future, whether through planning tools, professional advice, or emerging benefits like student loan repayment. More and more employers are also offering flexible work options that can meet your family’s needs. Ask your employer what they might offer to help you build a more secure financial footing.
It’s important to take care of yourself and your family, but it’s even more important to do so with a realistic view of how life’s twists and turns may affect your expected income, possible work interruptions for family needs and planning for your retirement and legacy. .
Along with taking care of others, be sure to take care of your own future needs as well. Taking even small, simple steps like these today can go a long way in helping you stay strong and take control of your financial future with confidence.
Kate Winget is Head of Company and Participant Engagement, Morgan Stanley at Work.
This article has been prepared for informational purposes only. The information and data contained in the article were obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or warranties as to the accuracy or completeness of information or data from sources outside of Morgan Stanley. It does not provide personalized investment advice and has been prepared without taking into account the individual financial circumstances and goals of those who receive it. The strategies and/or investments discussed in this article may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate specific investments and strategies, and encourages investors to seek the advice of a financial advisor. The suitability of a particular investment or strategy will depend on the investor’s individual circumstances and objectives.
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Investors should consider many factors before deciding which 529 plan is appropriate. Some of these factors include: the plan’s investment options and the historical investment performance of those options, the plan’s flexibility and features, the reputation and expertise of the plan’s investment manager, the plan’s contribution limits and federal and state tax benefits associated with an investment in the plan. Some states, for example, only provide favorable tax treatment and other benefits to their residents if they invest in the state’s qualified tuition program. Investors should determine their home state’s tax treatment for 529 plans when considering whether to choose an in-state or out-of-state plan. Investors should consult their tax or legal advisor before investing in a 529 plan or contact their state tax division for more information. Morgan Stanley Smith Barney LLC does not provide tax and/or legal advice. Investors should review a program disclosure statement, which contains more information about investment options, risk factors, fees and expenses, and possible tax consequences.
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