With this being the first of a quarterly financial Q&A, I would first like to thank The Peoria Woman for the forum to address such crucial areas for all women—our friends, family, colleagues and neighbors. Although this isn’t always the hottest topic in the soccer fields or at cocktail parties, it is, in my opinion, the most important. Which brings me to our first question:
Why is it important for women to take control of their finances?
Recent statistics show that well over 90 percent of all women will either remain single, become widowed or get divorced (U.S. Bureau of the Census). That means that, at some point in your life, you’re bound to face the responsibility of making your own financial decisions. Typically, even in married couples, one person takes care of the finances. Which ever one this is, it is imperative that they share with their partner all the pertinent information—bills, insurance, investments and all other financial matters. Projections indicate that seven in 10 baby-boom wives will outlive their husbands, usually by 15 to 20 years (The National Women’s Health Information Center, 2003).
Keep in mind, that these years will often be retirement years. Women, on average, can expect to live 19 years into retirement while men can expect to live 15 years (National Council of Women’s Organizations, 2003). Despite the fact that the great majority of women will be, at one point in their lives, in control of their household finances, some women may feel that they lack the confidence or knowledge to make wise financial decisions alone. Although patterns are changing, a woman will generally spend more time out of the workplace, earn less and live longer than her male counterpart. With less money needing to last longer, women need to be prepared to handle all of their own financial decision-making.
This is an important area that needs planning—not only preparing for retirement (which we’ll talk more about next time) but also decision-making in retirement. Life is a constantly moving and changing cycle. Financial plans need annual (at a minimum!) reviews—even if only to see that everything still makes sense for your individual situations as well as whether the “best” investments can still be considered the “best” investments for your time frame and risk tolerance. Let’s not forget that sometimes the changing events in the world may change the outlook for any particular investment or focus.
According to the 2003 Woman’s Life Insurance Society, the average age of widowhood is 56. For the households where the husband took care of all the finances, the recent widow didn’t just lose her life partner and father of her children, but she is also thrust into a world of fear and questions. While death is an inevitable event, no one likes to think about it. Having a plan in place will make handling financial arrangements much easier should you find yourself suddenly widowed. Again, the key to a good plan is knowing what you and your husband have. An organized record of all accounts including retirement, insurance and social security benefits will help you quickly settle accounts and continue to receive the income you are entitled. To communicate with many of the institutions where your husband had accounts, you will need to provide a certified copy of his death certificate.
I know a woman who recently lost her husband and she is 44—my age. She was unaware of even what monthly bills needed to be paid. The last time she managed her own finances was 21 years ago. Imagine all the changes that have happened to our finances during those years! How long will it be before she learns about online bill paying? How many of those bills are set up for automatic pay through her joint checking account?
Now let’s look at this statistic—women carry 76 million credit cards—8 million more than men do (Emerging Markets Report, Oct. 2003). What if she’s one of those women who have the cards, use the cards, but have no idea when, where and how the bills must be paid? Do you think she knows what rate each one charges?
A sad fact of American life is that many married couples will at one point separate or divorce. With this in mind, it is important to try to keep a clear head when it comes to finances, even during this emotionally trying time. Your organized record of family finances should help make the process of dividing property a little smoother.
Taking an active role in your finances is an important step for many women. While preparing for the unpleasant possibility of divorce or becoming a widow is not something you want to do, it can help ease some of the stress should one of these events occur. If you have not established a relationship with a financial professional, you should begin working with someone you trust. He or she can help you prepare for the unexpected and gain confidence in your financial decision-making. TPW
Monica Jagiella is a Financial Advisor and Guided Portfolio Manager with Smith Barney in Peoria and may be reached at 671-2800. She received her bachelor’s degree in finance management and international business from Purdue University and holds the Series 7, 63, 65 and Life/Health Insurance licenses and is currently working toward earning a Financial Planning Specialist designation. Smith Barney is a division of Citigroup Global Markets Inc. and for the fourth consecutive year has earned the #1 spot in the Forbes.com/StarMine Rankings of Wall Street’s Best Brokerage Analysts (U.S.) with 19 total awards.