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.
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.
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