women-and-wealth-614x676Last week, GoGirl Finance sponsored the “Women and Wealth Seminar”, hosted by LadyDrinks, and World Financial Group at Pranna in New York City. As well as being an excellent networking opportunity, the event’s primary goal was to educate women on the importance of taking control of their financial lives.

Fradel Barber, Director of Expansion at World Financial Group, led the event, emphasizing from the outset that women are less likely than men to actively plan their finances. Despite the fact that women hold more than half of the country’s private wealth and make the majority of a household’s purchasing decisions, they tend to push financial decisions to the side, often relying on someone else – a spouse or a parent – to handle them.

Fortunately events like this break down the barriers and encourage women to take the helm.

A key part of getting on top of one’s finances is considering how to handle both immediate, and future, financial issues and decisions. As such, Fradel directed attendees into smaller groups, facilitated by representatives from World Financial group, to discuss questions such as:

  1. What would you do if you had a $5k emergency?
  2. Do you see money as a taboo subject?
  3. What are your top two financial goals and how long will it take for you to achieve them?
  4. What is your definition of retirement?
  5. After everyone had deliberated and shared stories, Fradel reconvened the group to highlight the most important things women should be cognizant of when addressing their finances.

Things to Consider When Planning for the Future

  1. Longevity: Not only do women live longer, but a majority of women will also spend time out of the workforce raising children meaning they have to play catch up with retirement savings.
  2. Rising Costs: With the rising costs of food, education and just about everything else, it’s important to realize that your money will need to grow over time just to support your current lifestyle.
  3. Market Uncertainty/Volatility: Women need to invest to grow their assets. Even though market uncertainty may scare people, investing in the stock market – for example, via mutual funds – is still one of the best methods for creating wealth.

Fradel then encouraged everyone to concentrate on four cornerstones as their framework for planning for the future.

4 Cornerstones for Planning Your Financial Future

1. Growth:

Everyone (not just women) should be looking to grow their assets to at least keep up with inflation. This is because with the rising costs of all goods, known as inflation, $100 won’t buy nearly as much 20 or 30 years from now as it does today. To ensure your money has the same buying power in the future, investments need to keep up with, or hopefully surpass, the rate of inflation.

One easy way to get a feel for how quickly your money can grow is to use the “Rule of 72.” If you divide 72 by your expected investment returns, you’ll get the number of years in which you can expect your money to double. So, if you expect 4% returns, your money will double in 18 years but if you expect higher returns of 9%, your money will double in just 8 years.

2. Safety:

But be warned. Just because something promises a higher return doesn’t mean you should jump at it. You want growth but it’s just as important that it is risk-adjusted.

For example, let’s say you invest in a relatively risky investment that has big swings up and down (volatility) and you see a return of 15% in your first year. That may sound great. However, if you then see a return of -15% the second year, you’ll actually end up with less money than you started with.  Meanwhile, a more conservative, less volatile investment that returns 4% in the first year and another 4% in the second year would leave you with 108% of your initial investment. That’s why it’s so important to balance returns with risk.

3. Protection:

While we often think of financial planning as just making and saving money, the truth is that protecting your money can be just as important. That’s why insurance is such a huge part of financial planning. Homeowners’ or renters’ insurance can help protect your belongings while life and disability insurance can help you make sure you and your loved ones are taken care of if anything happens to you that keeps you out of work. You don’t want to spend so much time earning and saving money just to see it disappear in the event that something unexpected happens.

4. Tax-Advantaged:

No matter how much money you have, make sure you are knowledgeable about how taxes will impact the money you earn and the money you save. Whether that means learning about the difference between a Traditional IRA and a Roth IRA in order to decide which is right for you, or saving for your children’s college by using a 529 plan, there are plenty of opportunities to incorporate tax-efficient strategies into your financial plans.

Unfortunately, by the time people realize the  tax impacts of investments and planning strategies are not ideal, it’s often too late to adjust them. That’s why it’s important to educate yourself upfront on how you can plan your investments to be as tax-efficient as possible. Doing so could save you a huge chunk of money over the years.