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Why should women take an interest in their own financial wellbeing?

Posted By Marilynh / October 15, 2013 / 0 Comments

As L’Oreal so aptly puts it: “Because you’re worth it!

We all try to lead a balanced lifestyle by looking after all the important factors in our lives – health, fitness, home, family, love, career etc. but many of us ignore our own financial wellbeing.  See below the circle of life chart most of you would have been introduced to at some stage of your life.

circle of life

It is our experience that far too many women do not have a clear financial plan in place. There are many reasons why they choose not to take action until a life-changing event forces them to address their own financial needs.

Two of the main reasons are:

  • They are completely overwhelmed and confused by all the media reports and financial ‘jargon’
  • They have made the choice to leave their retirement planning up to the pension fund manager, their husband or partner who they trust will take care of their financial and retirement needs.

Although, having said that, we are finding that more and more women are wanting to understand and have control over their own ‘financial destiny’. WE SALUTE YOU!

The good news is… taking control of your financial needs and destiny does not have to be overwhelming, complicated, time-consuming and costly.

All you need to do is:

Step 1: Make the Time

We recommend that you make financial planning a priority in your life. Once it is in place it will be easy to revise on a regular basis. Our suggestion is to clear your calendar, even if just for an hour or two, so you can focus on this important aspect of your life.

Step 2: Have a Bucket List

Ask yourself: “How do I want to live the rest of my life? What is most important to me? What do I want to accomplish in the next 10, 20 or 30 years?”

We suggest that you start small – think about what you want to accomplish over the next two or three years. This will be the beginning of your Bucket List. It could include holidays you’d like to take, relationships you’d like to improve, adventures you’d like to have or any other important items. Your Bucket List should be as personal as possible – it should reflect who you really are.

Step 3: Put a plan in place with the assistance of your financial planner

  • Ensure you have an up-to-date Will in place that reflects your very own wishes
  • Ask your financial advisor to summarise your current financial situation
  • Together with your financial advisor, assess if there are any areas which should be addressed to accomplish your Bucket List dreams and wishes
  • Create your own practical and achievable plana plan that is flexible enough to adapt when your life circumstances change.

An example of a Financial Plan Structure that can easily be revised and adjusted on a regular basis:

EMERGENCY FUNDS – Should equal 3 – 6 months’ income
School fees
Medical costs
Other unexpected expenses

MEDIUM TERM SAVINGS – 2 – 5 year savings plan
Overseas holiday
University fees for children
Wedding for children/yourself
New car
Deposit for your own home or investment property

RETIREMENT PLAN – 5 years and longer
Pension fund savings
Retirement Fund
Taking advantage of tax benefits in planning for your retirement

IF ALREADY IN RETIREMENT – 20 years plus
Your retirement savings should provide you with an income for life; preserving and growing your capital is important.
While you are in retirement you will still need to make provision for:

  • Emergency funds
  • Medium term savings such as Holiday savings and replacing your car

More recently most people prefer staggering their retirement. In this instance, you will have to continue to revise your retirement  plan.

Step 4: The Rinse and Repeat Step

Revise your financial plan annually.  This is the step most people overlook. They put a plan in place and forget about it, and only when a life-changing event affects their financial wellbeing do they revise their plan. The value of revising your financial plan on a regular basis will ensure that you achieve the goals you set out for yourself. The reward – a feeling of being in control of your financial wellbeing, financial freedom and empowerment!

Step 5: Enjoy The Journey

Part of the joy of having put together a successful financial plan is that you know that you are taking care of yourself and your loved ones. Ensure you build little rewards in your plan for yourself – “Because you’re worth it!”

Think of your financial planner as your financial coach – someone with whom you want to develop an open and trusting relationship. Your planner needs to understand your fears, concerns and what you wish to accomplish during your lifetime. He or she should help ease the burden of your day-to-day decision-making so that you can concentrate on other areas of your life. By aligning yourself with a financial planner, you will have someone who can guide you on a successful investment and retirement journey.

Some interesting facts:

With scientific progress, we will all be living longer and will need a healthy retirement fund to continue living a comfortable lifestyle long after retirement. It is a common fact that women live longer than men. In 2012, people aged 65 years and over constituted 5.9% of the population.  Of these 1,151,510 were male and  1,713,627 were female – 48% more women!

And no, buying an awesome pair of shoes is not an emergency. Emergency savings are one of the most important things that you can have to protect your family. You know it’s that little nest egg – you can ‘break the glass’ in case of emergency.

Although the average South African household is still headed by a man, the number of women breadwinners is on the increase.The 2011 Census revealed that women were the breadwinners of 15% of these households. These statistics do not include single mothers and single women.

I’ve spent $40,000 on shoes and have no place to live. I will literally be the old woman who lived in her shoes.” – Carrie Bradshaw, Sex and the City.

Compound interest is the eighth wonder of the world. SHE who understands it, earns it … SHE who doesn’t … pays it.” – Albert Einstein.

Have you ever bought a garment on sale only to find it still in your cupboard two years later, the tag still attached and the dress mysteriously shrunk? Some of us are emotional shoppers! Imagine what the value of all our emotional shopping expeditions could add up to taking Einstein’s ‘Compounding Interest’ into account.

Example 1: Just curbing on an emotional spending spree of R1,000per annum for 5 years, the capital value after 20 years with growth of 10% will be R29,900.

Example 2: R250 worth of retail therapy a month invested over 20 years at 10% growth will be R191,424.

The only constant in our life is change.  Our life journey is unpredictable, without any warranties or guarantees – let’s be prepared for the unexpected.

Author:  Michelle McKay

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