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Financial Planning in Times of Crisis

We recently saw a social media post warning people not to look at their 401(k) accounts as we are in the midst of a global pandemic related to the spread of COVID-19. And as many have noted, it is possible that if the illness itself doesn’t get you, then anxiety and worry could wear you down instead. You may or may not choose to look at your retirement accounts but you cannot ignore the need for financial planning at this time. Certain industries, companies, and individuals will see a loss of income and it is how they manage to recover that will make a difference in the long term.

Global Trade magazine examined the current global pandemic and its effect on the stock market, referencing what happened during the influenza pandemic of 1918-1919, concluding:

“It is comforting to see that when the final wave of the Spanish flu subsided in February 1919, the market began an increase of 50% which lasted until November of 1919.  Whether this increase occurred because of the end of World War I or the end of the flu or both is impossible to say, but it does provide encouragement that once the coronavirus begins to subside, the market will bounce back once again.”

According to some historians there were several waves of the illness at that time and it actually extended into 1920. People who didn’t panic but instead implemented a strategy to maintain financial stability may have fared better in the Roaring Twenties that followed.

You can reach out to your Fee-Only financial planner if you have questions about how  economic changes related to the Coronavirus will affect your financial planning and retirement planning.

If you have yet to consult with a financial planner, this may be the time to get the guidance of financial expert. Rather than worry, you can get the help you need to emerge from this crisis on solid financial footing.

Women Face Challenges in Saving for Retirement

You may have heard the advice about the importance of saving for retirement and you may know just how important it is  to save and still not be able to really put aside money for retirement as you would like. MarketWatch published an opinion piece that asks: “Why is it still so hard for women to save for retirement?

The article discussed that Millennials have not been observed to be great savers, didn’t mention Generation X, and had this to say about Baby Boomers:

“The largest inequality with income and savings is among working baby boomers who are on the tip of retirement. For working baby boomers, the median deferral rate to contribute to an employer’s 401(k) plan was 7% for boomer women vs. 10% for boomer men, according to the [T. Rowe Price] survey.”

You may have heard three of the main reasons mentioned with regards to why women have a difficult time putting away money for retirement: women take breaks from work to be caregivers, women live longer than men, and  women earn less because of the pay gap. An additional reason offered is that women have difficulty bulking up their retirement funds because of the kinds of work women choose. Many women are self-employed, do contract work, work part-time, or work for organizations that do not have retirement plans. You could also argue that certain fields do not receive adequate pay, no matter who chooses to work in those fields.

One of the most important pieces of advice the article offers tells women to start investing sooner rather than later. Instead of waiting until they completely understand finance and investing, women should invest early and often. You have time to educate yourself but don’t wait to contribute if your employer offers matching funds. Whether your employer offers a retirement plan or not you can invest. The writer suggests a target-date mutual fund designed to provide you with funds by investing with your retirement target date as a guiding principle.

If you’re not sure where to begin, contact a Fee-Only financial planner for help.

The Inspiring Story of Self-Made Millionaire Madam C.J. Walker Comes to Netflix

Madam C.J. Walker, one of many women who blazed a trail in business and finance, is getting her own Netflix limited series that will be released on March 20, 2020. This woman, the child of enslaved parents, was an unlikely entrepreneur who faced a number of hardships before she found success selling a hair growth formula she perfected after suffering from hair loss herself. 

Her story was summarized this way on rogerebert.com:

“The first to be born free of her six siblings, Walker, born Sarah Breedlove, withstood the blows of familial betrayal and rancor competition to revolutionize Black haircare. Walker’s story is one of devotion, shifty ingenuity and absolute mettle against the backdrop of post-slavery racial and gender oppression.”

During her lifetime, Madam C.J. Walker made it possible for other women to follow in her path by opening businesses, employing other African Americans, and through philanthropic gifts to her community. And beyond her lifetime she both inspired and provided the means and the template for increasing wealth to her descendants. Walker is a true example of generational wealth. Her daughter A’Lelia Walker also owned businesses and engaged in philanthropy. The limited series on Netflix is based on a book written by her great-great-granddaughter A’Lelia Bundles. 

If you are wondering about generational wealth, clevergirlfinance.com notes:

“If you are able to leave something behind for your children or grandchildren, then you are contributing to the growth of generational wealth in your family.”

Generational wealth comes in many forms: it can be assets such as real estate or investments and can also come in the form of teaching valuable skillsets and investing in a child’s education.

Madam C.J. Walker’s tenacity made her a millionaire and changed the trajectory of her family and her community as a whole by providing a financial foundation that aids her descendants today.

Consider a Quarterly Personal Financial Review

How often do you to check your finances? Some  of the more diligent among us may do a mini-financial review every week or every month. The more avoidant among us may only check when certain occasions arise, such as tax season or the holiday season. If you never take stock of your financial outlook, we want to make the case for a quarterly review.  It  isn’t so often for those who tend to hyperventilate at the thought of anything related to money and it isn’t so infrequent that it does little to help if you need to make changes.

This means that rather than waiting for something to prompt you to look at your bank accounts, investments, insurance policies, and bills, in light of your financial goals, you look at these things yourself to determine what changes need to be made, if any. When you are dealing with the stresses of everyday life and paying bills, there will be things you may not notice. A lot of us work on autopilot and may not notice money going towards things like subscriptions we don’t use. While you are dealing with the day-to-day, you might not think about finding a lower insurance premium but this is something you can consider when you take a moment to check your finances each quarter.

And since a quarter is three months, you can decide just how to define your quarters; you could start at the beginning of the year and check in with yourself in January, April, July,  and October. Or you could wait until the end of a quarter and do financial reviews in March, June, September, and December.

It is up to you to take charge of your own financial planning and find a system that works for you. Too many of us realize too late that we’ve been paying banking fees and insurance premiums we didn’t need and making adjustments sooner would have helped us free up more money to save, invest, or pay down debt. A Fee-Only financial planner can help with your overall financial goals but you still need to keep tabs on yourself.

The Pink Tax Affects Women’s Financial Planning

March is Women’s History Month and part of finding ways to help women find financial stability and use their resources wisely is recognizing the systemic biases that can get in the way of an individual woman’s financial planning. One of these things is the pink tax. If you didn’t know the pink tax is a collective term for when women are charged more than men for goods and services. Sometimes these goods and services are made and marketed specifically towards women and sometimes they are not. And since we know that often women earn less than men for the same work, the pink tax is another thing that hampers women’s financial freedom.

In “The Pink Tax: What’s the Cost of Being a Female Consumer in 2020?,” Listen Money Matters gives a broad overview of how historically women have paid more for products :

“Women being charged a higher price for things isn’t new. The sales tax system in the United States was created decades ago. Politicians had to decide which products would be subject to a sales tax and which would be tax-free. But things have changed since these decisions came about, and tax policies have not changed to reflect the times.”

Often women’s clothing costs more than men’s clothing and manufacturers cite the need for more cloth or different kinds of stitching to explain why. But what about hygiene products that women and men use, such as razors? Listen Money Matters notes that women often pay more for these products too, even the cheaply-made women’ razors that only differ from men’s razors in color.

And what about services? Some dry cleaners charge more for women’s garments than for men’s. They are using the same machines but may also justify the higher price saying that women’s garments are somehow more complicated.

The Listen Money Matters article also discusses research which found that women are quoted higher prices for auto repair and may get quoted higher prices for used cars (Although in fairness, “People will take advantage of uninformed consumers no matter what their gender.”)

So, what can be done?

We can continue to put pressure on lawmakers to stop taxing (or even charging) women for products they need (Recently, the Scottish parliament approved free sanitary products for all women.)

If you work in an industry that charges women more and are in a position to work towards change, do so.

And for women, money management is important and you can seek the help of a Fee-Only financial planner to reach your financial goals.

Women: Take Time to Learn More About Investing

The title of Zina Kumok’s Business Insider column says a lot, “I relied on my dad’s investment advice for years until a casual conversation with a friend showed me a better way.” It shows that even when you grow up in a household where money management is taught and discussed, you may still have a lot to learn.

Kumok, a personal finance writer, writes that her parents gave her a great financial education but their division of labor affected how she saw herself. Because her mother did the budget and taxes while her dad did the investing, she got the idea that investing was something for men to handle. Since society overall does not encourage women to get into investing on their own, it wasn’t difficult for her to believe that investing was out of her league, despite her profession and despite the fact that she had already been advising her friends on these matters.

When a friend who works in finance helped Kumok to see that women tend to write about managing household money but not about investing, she started to think differently  because investing is something women need to know more about. Instead of relying on her father, she started to educate herself about investing so she could chart her own course. She also met with a financial planner.

As we approach Women’s History Month, it is useful to remember that women (such as Abigail Adams) have managed both household finances and investing. When it comes to financial planning and personal finance, we all need to learn as much as we can. Kumok writes:

“The only way to build true, lasting wealth is by taking what you’ve earned and using it to build on your success. Women tend to live longer and earn less than men, so it’s even more crucial for us to learn these skills.”

Planting New Seeds for Financial Freedom

Valentine’s Day is over and many people have gone into stores to take advantage of discounts on merchandise that did not sell before February 14. CNN Business even wrote about “What happens to the Valentine’s Day flowers that don’t get sold?” in case you ever wondered what happens to surplus flowers. Unlike candy, which may be edible for quite a while, flowers will not stay fresh forever.

According to CNN Business, these flowers are donated, used to educate people studying to be florists, thrown away, or they get composted.

Now what does that have to do with financial planning? We’ll tell you—after you have been out there on your own for a while, you may have accumulated a lot of financial lessons (and probably some finance-related books, CDs, tapes, magazines, and other products). Are you still holding on to all of it?

Donating: If you look at your shelves and see books or videos from a finance guru that are no longer useful to you, why no donate them? What didn’t work for you, might be instructional for someone else. You may not realize it but each time to see the books, etc. that you don’t use or didn’t particularly like, you mind may linger on them a bit too long and this can be distracting.

Composting: Many of us have learned some financial lessons the hard way. We invested in something that didn’t work out, be it real estate or stocks. We have bought things that fell apart quickly. We have thrown good money after bad. It happens. And after you donate material items related to your less than amazing money moves, soak up those lessons and use them to till the soil for new financial ventures. You already know what may not work. So, count these episodes as a lesson learned and use the experience as you move on.

If you feel stuck or uncertain as to where to go next in your financial planning, consult a Fee-Only financial planner. A Fee-Only financial planner doesn’t just crunch numbers, these professionals also help you find ways to clarify and reach your financial goals.

Ask Questions Before Merging Finances

Is there overlap between psychology and financial planning? Perhaps. While your Fee-only financial planner is not qualified to diagnose psychological issues and a psychologist will not be able to manage your finances, both experts may suggest that you have a talk with a romantic partner before you combine finances.

In “3 Questions to Ask Before Joining Finances with Your Partner,” Psychology Today outlines topics that couples can discuss before the merge their money, noting that your “financial philosophies don’t have to perfectly align”  but that you do need to reach “compassionate compromise.”

Talk about how you experienced money growing up. It helps to understand the role money played in a person’s upbringing and the money management style that person observed in their caregivers.

Talk about long-term financial goals. If you are going to go the distance with someone, you need to know what the finish line looks like for them. If you don’t have the same end in mind, that it okay. You can find ways to work on that and combine your visions. There are many couples how don’t discuss this until one or both of them retire and that is when their different ideas of post-career lifestyles surface.

Talk about the areas where you want to spend the most. Beyond the typical saver vs. spender split, you need to know just what your sweetheart is willing to spend money on. Even the most scrupulous savers spend a little money on something. And while someone may think a spending buys everything in sight, they may not be interested in spending much on certain things. Some people would rather travel and spend less money at home and on renting/buying a home. Someone else prefers to spend money on dining out while spending very little on local transportation, getting around in an inexpensive car or a scooter. 

When you both know what the other is willing to splurge on and invest in, you can work on finding harmony in your financial planning and in your relationship.

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