Article: The Financial Plan every Woman Needs to Have in Place.
Author: Melissa Dailey-Newman
By 2030, women will likely be in control of $30 Trillion (with a T) according to a recent McKinsey study1.
To put this in perspective, the US GDP hit $26.84 Trillion at the end of the 2nd quarter of 2023 (US Bureau of Economic Analysis).
To prepare for this transfer of wealth, it’s critical every woman has a financial plan in place that incorporates these five components.
PART ONE – A PROPER BALANCE SHEET
I believe putting together a client’s balance sheet is the absolute foundation for financial planning. In the wise words of Maya Angelou, “You can’t really know where you’re going until you know where you have been.” By pulling together statements and balances of all your investments, property, and outstanding debts, you will have a clear picture of your current financial status. The process of pulling together your assets and liabilities provides a comprehensive review of the financial circumstances that led you to this point and delivers your personal benchmark for all future financial decisions: Your net worth.
Consider this like stepping on the scale before establishing a weight loss goal. Before creating a diet and exercise plan, you need to know your starting point. Only then can you measure future success.
PART TWO – CASH FLOW AND BUDGET
Budget is not a bad word. Knowing exactly how much money you have coming in and how much you have going out is a necessary part of money management.
When you’re younger, you can often have more debt that requires a debt management strategy to help balance monthly payments, minimize fees, and interest. On average, women have $36,131 in student loan debt, which is 2.7%, more than what's carried by men (Experian2).
During your working years, you’re typically balancing several priorities like paying off your mortgage, saving for kids’ college tuition, and investing for retirement. According to the Dept. of Labor3, on average, women working full time, year round are paid 83.7% of what men are paid. Compensation data from Payscale4 shows women reach their peak earnings at the age of 44, earning on average $66,700. Men reach their peak earnings at the age of 55, earning on average $101,200.
Once you retire, you’re living on a fixed income. In 2021, the average annual Social Security income received by women 65 years and older was $14,204 compared to $18,108 for men. The estimated cost for medical expenses in retirement is $165,000 for women, who tend to live longer, and $150,000 for men. (NYT June 20235). The key to successful budgeting is to plan for larger expenditures like property tax, car/home repairs, and seasonal gift purchases, in addition to managing month-to-month expenses.
PART THREE – YOUR WHY
Starting with your WHY ensures you’re putting INTENTION into your
financial plan.
Create purposeful goals for your spending, saving, investing, and giving that will maximize your time, health, life experience, and monetary abundance.
Here are a few questions to guide you through intentional goal setting within your financial plan.
• What is your biggest concern about your family’s future?
• If money was not a deciding factor, how would you spend your time in retirement?
• If you could go back in time, what is one thing you’d do differently with your investments?
• Where do you plan to be living 10 years from now?
PART FOUR– ESTATE PLAN
A critical component to every woman’s financial plan is being prepared for the unexpected.
Do you have a Power of Attorney or Medical Directive in place should a trusted friend or family member need to make an important decision on your behalf? One of the biggest misconceptions about having an estate plan is that it only pertains to documents necessary after your death. A Power of Attorney may be necessary if you are traveling out of the country, temporarily under anesthesia, or want a family member to access information about your financial accounts or health status.
Keep your beneficiaries up to date. Life events such as birth, marriage, divorce, and death can impact how you want to name your beneficiaries. Review how your property is titled so you understand what the impact is if you become incapacitated or pass away unexpectedly.
In a January 2023 survey6 by Law Depot®, 22% of women respondents reported having a documented estate plan.
Plan your Legacy. Do you have a giving plan that will direct your donations to a charity or certain cause? Have you discussed your philanthropic values with your children to ensure your wishes are fulfilled? Many organizations have a giving coordinator that can assist you with necessary paperwork and information such as the nonprofit’s tax ID number.
PART FIVE - FIND AN ADVISOR YOU LIKE AND TRUST
The world of financial planning and investing doesn’t have to be intimidating. Your Clearwater Capital advisor will consider your unique circumstances and priorities and incorporate your life goals into a financial plan personalized for you.
Take the next step today, and imagine where you will be one year, five years, and ten years from now.
THIS COMMENTARY HAS BEEN PREPARED BY CLEARWATER CAPITAL PARTNERS. THE OPINIONS VOICED IN THIS MATERIAL ARE FOR GENERAL INFORMATION ONLY AND ARE NOT INTENDED TO PROVIDE OR BE CONSTRUED AS PROVIDING LEGAL, ACCOUNTING, OR SPECIFIC INVESTMENT ADVICE OR RECOMMENDATIONS FOR ANY INDIVIDUAL. ALL ECONOMIC DATA IS DERIVED FROM PUBLIC SOURCES BELIEVED TO BE RELIABLE. TO DETERMINE WHICH INVESTMENTS MAY BE APPROPRIATE FOR YOU, PLEASE CONSULT WITH US PRIOR TO INVESTING. INVESTING INVOLVES RISK WHICH MAY INCLUDE LOSS OF PRINCIPAL. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities, insurance products, or to adopt any investment strategy. The opinions expressed are as of the date of writing and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Clearwater Capital Partners to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. S&P 500 is a registered trademark of Standard & Poor’s Financial Services, a division of S&P Global (“S&P”) DOW JONES, DJ, DJIA and DOW JONES INDUSTRIAL AVERAGE are registered trademarks of Dow Jones Trademark Holdings (“Dow Jones”). The two main risks related to fixed-income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments.
