what every woman should know about money-11-17

A Man is Not a Financial Plan: What Every Woman Should Know About Money

Barbara O’Neill, Ph.D., CFP®Co-Author, Money Talk: A Financial Guide For Women

boneill@njaes.rutgers.edu

Personal Introduction

• CFP® for 33 years

• Rutgers University professor/financial educator

• Author/co-author of eight personal finance books

• Twitter handle: @moneytalk1

Presentation Agenda

• Introduction

• Unique financial needs of women

• 10 things women need to know about personal finance

• Online personal finance resources

• Q & A

Let’s Get To Know One AnotherMoney Coat of Arms

Women Have Unique Financial Needs

• We live longer, on average

• We earn less, on average

• We may have gaps in employment that impact future retirement benefits (e.g., Social Security)

• We are impacted more severely than most men by events like divorce and widowhood

• Some women lack financial experience

Another Big Reason: The White Night Syndrome

Money Talk Book Introduction

No matter how much women preferto lean, to be protected and supported,nor how much men prefer to have them do so,they must make the voyage of life alone,and for safety in an emergencythey must know somethingof the laws of navigation.

Elizabeth Cady Stanton, 1892

It’s Only a Matter of Time...

An estimated 85% to 90% of American women will be on their own financially at some point in their lives

– Some will never marry

– Some will see their marriage(s) end in divorce

– Some will outlive their husbands

Ten Important Things... …That All Women Need to Know

– To achieve financial success

– To reduce financial stress and worry

– To live a more comfortable life

– To be able to retire someday

– To pay the least amount of taxes possible

– To feel secure and financially independent

1. Your Financial Goals

• Include a specific date (e.g., 2020)

• Include a specific cost (e.g., $7,000)

• Develop an action plan to achieve the goal (e.g., “I will contribute $400 monthly to my 401(k)”)

• Develop positive habits that support the action plan

• Measure your progress periodically

2. How to “Pay Yourself First” (Automated Savings and Investing)

• 401(k), 403(b), Thrift Savings Plan (TSP), and Section 457 employer tax-deferred retirement plans

• Automatic checking to savings deposits

• Mutual fund automatic savings programs

• DRIP accounts for stock purchases

Try to give savings the same “respect” as major household bills (e.g., car payment)

Don’t Be Afraid of Investing

The Rule of 72

3. How to Develop and Maintain Your “Human Capital”

• Never consider your education finished

• Learn new skills and information

• Computer/tech literacy is very important

• Purchase adequate disability insurance to protect your income stream

• Practice good health habits

4. How to Maintain a Good Credit Rating (In Your Own Name)

• Check your credit file regularly

– www.annualcreditreport.com

• Correct errors, if any (form is provided)

• Pay credit bills on time (35% of credit score)

• Avoid charging >30% of available credit

• Avoid co-signing loans for others

Your Credit Score = Financial GPA• Rating scale of risk• Higher the number, the better• Can often get for free

5. How to Deal With Debt

• Seek a low interest rate credit card:

• Negotiate a lower rate with lenders

• PowerPay debt reduction analysis: http://powerpay.org

• Non-profit credit counseling agencies

• Pay more than the minimum payment!– $3,000 balance, 18% APR

– 3% minimum payment ($90): 14 years; $2,625 interest

– 6% minimum payment ($180): 6 years; $938 interest

Minimum Payment Illustration

6. Tax-Avoidance Strategies• Legal tax-reduction strategies

– Not the same as “tax evasion” (a crime)

• Tax deductions and credits

• IRAs and employer retirement savings plans

• Tax-exempt securities (e.g., municipal bonds and tax-free bond mutual funds)– Know your marginal tax bracket and compare taxable and tax-

free investments

– Tax rate chart: http://njaes.rutgers.edu/money/taxinfo/

Taxable vs. Tax-Deferred Investing

27,6

00

31,3

00

48,3

00

58,6

00 75,8

00 98,8

00

112,

200

157,

900

160,

300

244,

700

$0

$50,000

$100,000

$150,000

$200,000

$250,000

10yrs 15yrs 20yrs 25yrs 30yrsTaxable Returns (at 28%)

Tax-Deferred Returns Garman/Forgue, PERSONAL FINANCE, Fifth Edition, Tax-Sheltered Returns are Greater than Taxable Returns (Illustration: 8% Annual Return and $2,000 Annual Contribution)

7. Your Net Worth• Total all your assets

• Total all your debts

• Subtract debt total from asset total

• The result is your net worth

• Calculate net worth annually to measure progress

• Worksheets: http://njaes.rutgers.edu/money/

8. Your Cash Flow and Spending Patterns

• Track and total your monthly income

• Track and total your monthly expenses

• Compare the numbers

• Identify expenses that can be cut to find money to save

• Everyone has “lattes” that waste money

• Develop a spending plan (budget):

– http://njaes.rutgers.edu/money/pdfs/fs421worksheet.pdf

9. Essential Versus Non-Essential Insurance

• Cover risks with the largest potential losses, not the most frequency of happening (e.g., liability, disability)

• Avoid unnecessary insurance (e.g., limited health policies, life insurance on a dependent child)

• Inquire about available discounts and the cost of various options (e.g., auto insurance deductibles)

• Consider LTC insurance or good alternatives

10. Financial Education Matters- Stay Informed!

• Seminars

• Publications, books, etc.

• Web sites

• Financial advisors

• Investment clubs

• Government agencies

• Social Media

RCE Money and Investing Sitehttp://njaes.rutgers.edu/money/

Rutgers Cooperative Extension Investment Risk Tolerance Quiz:

http://njaes.rutgers.edu/money/riskquiz/

RCE Financial Fitness Quizhttp://njaes.rutgers.edu/money/ffquiz/

RCE Wise Credit Management Quizhttp://njaes.rutgers.edu/money/wise-credit/

Small Steps to Health and Wealth

http://njaes.rutgers.edu/sshw/

eXtension: Cooperative Extension 24/7/365http://www.extension.org/personal_finance

Investing For Your Future Home Study Course (Cooperative Extension)

• Free of charge and downloadable

• 11 units; do at your own pace

• Designed for beginning investors

• Monthly investment messages

• www.investing.rutgers.edu

The Ball Park Estimate• Six easy steps; can do online or download paper worksheet• Can do online at www.choosetosave.org• Flexible annual retirement income and life expectancy figures• Assumes a 3% constant real rate of return

College Savings (529 Plans)www.collegesavings.org

Internal Revenue Service (IRS)www.irs.gov

MyMoney (Federal Government)http://www.mymoney.gov/

Key Financial Messages for Women

• Save early and often

• Invest for long-term growth

• Earn all the “free money” you can (matching)

• Don’t depend on the government

• And…

Major Take-Away: Focus on What You CAN Control

CAN’T Control• Speed of economic recovery

• Financial markets

• Labor market/unemployment rate

• Housing market

• Employee benefit cutbacks

• Political environment

• Actions of lawmakers

CAN Control• Healthy lifestyle

• Spending habits

• Saving habits

• Investment expenses

• Human capital investments

• How you spend your time

Don’t Make the $1Million Mistake

Take Charge of Your Finances

“If it is to be,

it is up to me”

Questions? Comments? Experiences?

Barbara O'Neill, Ph.D., CFP®

Extension Specialist in Financial Resource Management and Distinguished Professor, Rutgers University

Phone: 848-932-9126

E-mail: boneill@njaes.rutgers.edu

Internet: http://njaes.rutgers.edu/money/

Twitter: @moneytalk1