Sunday, November 21, 2010

Investing Strategies For Women

Retirement is a funny thing. We plan our whole lives for something that seems so far away it will never arrive. We are told to start planning early so that we can enjoy the benefits of compounded growth, yet in our "early" years we are repaying loans, mortgages, getting started in our careers (meaning we do not have a whole bunch of disposable income to begin with) and so on. Indeed, in our youth we rarely consider the consequences of an under-funded retirement plan.

The idea that investing for retirement would be different for women than it would be for men may seem silly and even slightly insulting at first glance. The idea isn't meant to be sexist in any way, but there are a number of factors that tend to be different in lives of women that make this topic vitally important.

The first is the fact that women are paid less for the same job in the modern workforce. While this margin has been getting smaller and smaller over time, it's still significant. In a recent study by the United States Department of Labour, women were shown to earn 24 percent less than men for doing the exact same job. This can have serious implications when it comes to investing for retirement.

The same study by the Department of Labour also showed that women, on average, spend less time working than men. A gap of seven years was present in the study due to time that some women take off to have children, raise a family or care for elderly or sick parents. While the obvious impact to the amount of money earned in a lifetime is obvious, there is also the impact on any sort of savings plan through work, as well as less social security.

As if that wasn't bad enough, the last United States Census showed that women are living an average of seven years longer than men. So, not only are women earning less and in fewer years in the workforce, they also live longer which means they need to save more for retirement.

What does all this mean? It means that women might need to take a slightly more aggressive path toward investing for their retirement. It also means that women need to start even earlier than men to start saving and investing. Other good tips are to set different goals than your husband, since your set of circumstances are different.

You might also want to have even more diversification in your portfolio than most so that if some of your investments go sour, you won't be left with nothing. It's also a good idea to stay on top of your investments. Reviewing them on a regular basis lets you know where your doing well and where you might need to make changes.

While it's unfortunate that a woman may need a completely different investing plan for retirement than her husband, the fact remains that there are forces conspiring against women in the workplace. But with the right strategy and the proper goals, everyone can enjoy a healthy and prosperous retirement.

Where many investors err in this area is in being honest in how they feel about risk and re-evaluating their tolerance and time constraints on a regular basis. While all financial planners and advisors will provide this type of analysis, investors are urged to consider such things independently so that they are completely satisfied with the shape their investments will take as they ease toward that seemingly distant milestone known as retirement.

Savings Strategies for Women

Building savings – not an easy task in the best of times – has become even more of a challenge during the recession. While women typically earn less than men in most occupations, the good news is that women's jobs have held up better. Women have a 20 percent lower unemployment rate than men, according to a recent report from the U.S. Department of Labor.

Women also live longer and rely more on Social Security – the troubled trust fund will pay out more than it receives this year – than men.

So how can women build a bigger nest egg when times are tough? Here are four tips to help women take control of their finances:

1. Know the Difference between "Saving" and "Investing"

Wall Street and the financial planning industry have led us to believe that "saving" and "investing" are the same. They are not. Money put in savings is money a person doesn't want to (or can't afford) to lose. Money invested is subject to loss. Most people today "invest to save," but they have no idea what their nest egg will be worth when they plan to tap into it.

This is not a financial plan. It's gambling. And it has led to a nation of Americans wondering if they'll ever be able to retire, and what they'll have to give up in order to do that.

The typical equity mutual fund investor has actually been losing 1 percent per year for the past 20 years, after adjusting for inflation, according to the research firm DALBAR. The bottom line: Money a person cannot afford to lose should not be invested in stocks, real estate or other traditional investments.

2. Don't Wait to Pay Down Debt Before Increasing Savings

Often people think they must pay down their credit card balances and other debt, before they can increase the amount they save. But that's not necessarily true.

Case in point: A woman in her fifties was paying $600 to $800 a month more than the minimum payment due on her credit cards. She discovered that by cutting back to the minimum payment and putting the difference into a guaranteed savings vehicle, she could have a nest egg worth about $50,000 more than she otherwise wood when she retires at age 65. I call this the "better than debt-free" way to manage money.

3. Look Beyond Traditional Saving and Investing Methods

Many people do not realize there are proven and time-tested ways to grow a substantial nest egg without the risk or volatility of stocks, mutual funds, real estate, and other investments.

One asset class has increased in value during ever period of economic boom and bust for more than a century: dividend-paying whole life insurance.

A dividend-paying whole life policy grows by a guaranteed and pre-set amount every year. The growth is exponential, meaning it gets more efficient every single year the policy is held. This gives some protection against inflation and provides peak growth at the time most people need it most — retirement.

Such policies can even include options that turbo-charge the growth of equity (cash value). Once credited to the policy, both guaranteed annual increases plus any dividends paid are locked in. They don't vanish due to a market correction.

These policies also provide peace of mind for retirement planning because they specify the minimum guaranteed income a person can draw in retirement.

4. Realize Saving Doesn't Have to Mean Sacrificing

Saving with this kind of specially designed dividend-paying whole life policy allows the policy holder to borrow equity and use it for needed major purchases. Some companies even offer policies that continue to grow as if no money had been withdrawn. This can open up all kinds of new possibilities for responsible savers.

A couple I know hadn't taken a vacation since their honeymoon eight years earlier. They couldn't justify taking a vacation because they felt they should save the money. They hated the idea of putting it on a credit card and having to pay all that interest. So they borrowed the money from their policy for a one-week vacation at a resort on the Mexican Riviera.

They set up a schedule to pay back the loan to their policy over a year, and made plans to use the same dollars to take a nice vacation every year. By using this powerful saving tool, they found a responsible way to do something for themselves they would not otherwise be able to do.

By saving instead of gambling, hardworking women and families can provide for their financial future. It only takes know-how, and the willingness to try something that's time tested, but different from conventional, unpredictable investing strategies.

Family Financial Innovation

Are you one of the family easy newly married, or at least for the moment have one or two small children? If so, how do you manage the family's income?

In the case of family financial management, there is no term money sourced from the income the husband or wife. Because both men have agreed to build the household, the income one partner referred to as family income. In today's modern era, no longer the backbone of the family is the husband forever. Today many are also working wives. In addition, not a few of the wives who worked had since before marriage already have their own income.the wives who worked had since before marriage already have their own income.

To further the question is whether, if a wife who has long had its own income, then after getting married and keep working, income earned by the wife is only used for personal purposes? This should not happen, because married couples have essentially the same goal which is to meet the needs of his family. To change that, the couple should have commitment and family financial goals.

Commitment and financial goals;

First, commitments
by the time you settle down with your partner, it means you and your partner have been ready to share the income to meet your household needs. If you are still using individual ideology in your household, then there will be no different than life itself. What will often happen in the future due to financial problems? Therefore, you and your partner must have a commitment to share which is a foundation in managing family finances. If so far you and your partner are already with the paradigm of income is the right of each, then you and your spouse have to change the paradigm.

Second, determine the financial goals together.
Every family has the right to determine their family's financial goals. How many assets you want to have? How preparation fee schoolchildren? But that being said the key is how you make a priority of the family financial goals. Who should be in and what needs should come first.

Financial goals and revenue allocation
Third, how to achieve financial goals the family?
To achieve the necessary financial goals is to set aside income into savings, and if it is sufficient then the savings are used to meet family goals. More modern again, if the income is allocated to the investment set aside until eventually the numbers will continue to grow. And in the end amount will to meet the family's financial goals.

Another thing to do but set aside earnings into a savings is to buy a house or apartment with credit. For the next loan will be repaid from monthly income husband or wife. Here the husband and wife must have a collective agreement, if the desire to reach financial goals by means of credit. The consequences are there if this is done is each month you have to set aside income to pay the mortgage loan or an apartment. That causes a desire to spend funds for other purposes should be reduced.

Fourth, allocate revenue
Husband or wife should be able to allocate funds for revenue expenditure requirements daily. This can be achieved by way of income of both parties entered into a savings account, and this is called the family income. Then from income shall be selected where daily necessities and which are for investment. For this requires openness ushered the two sides.