Are you prepared?

Written by: Stacy E. Akaka, CDFA^TM

Many women, often reluctantly, either through divorce or death of a spouse, find themselves the sole financial decision maker in their homes.  Other times, women choose to stay single.  According to statistics from the National Center for Women and Retirement, 9 out of 10 women will be the sole financial decision maker at some point in their life. With such high odds, there is no option of not being prepared.

While financial planning is not gender-based and the strategies are the same for men and women, there are unique financial circumstances women will face.  Women tend to live longer, and therefore will need more assets to cover cash flow needs for a longer period.  Simultaneously, women frequently earn less money than men.  Women also tend to be the family caregiver, taking time out of work to care for children and/or elderly parents.  This leads to a situation where women need to save more with less income to meet that need.

Women should understand their financial situations and work with their financial advisor to be prepared.  Getting started is often the hardest part, so here are the first steps to get engaged in your financial situation.

• To begin with, start by having a conversation with your spouse.  Discuss your shared financial goals.  If your spouse has been the primary financial decision maker, make sure you understand and agree with your long-term financial plan.  The plan also needs to protect the remaining spouse in the event of any changes.

• Take a financial inventory.  Learn what institutions hold your financial accounts, and the passwords.  Also know the location of your estate planning documents, the lawyer who drafted them, any insurance policies and the agent who wrote them and a general understanding of your tax situation.

• Understand your household income and expenses.  It’s important to know not only the expenses, but also how a loss of income could impact your household budget.

• It is important to recognize you have multiple goals and competing priorities such as saving for retirement, children’s education and caring for aging parents.  It is possible to address multiple goals with prioritization and planning and to know how to continue to meet these goals if you were to lose your spouse.

• It is possible to work through these steps as couple but having a financial planner who can act as a knowledgeable expert who is unbiased about your situation, can prove to be valuable.  In this role, the planner will work to understand your concerns and priorities to better align the management of your investments and your financial plan to meet your unique, personal goals.  It is important to note, that if you work with a financial planner, they should engage both you and your spouse in the investment process, identifying goals and in communicating strategies to implement and not just one of you.

As a decision maker in your home, it is your responsibility to your loved ones, to know your financial situation.  Once you understand your financial situation, you will be able to identify your goals, prioritize these goals, prepare a plan and have the discipline to stick with it.