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Study Finds Divorced Women Gain Financial Confidence with Time

The end of a marriage does not have to mean the end of financial stability: in fact, for some women it is just the opposite. Some women find that having no choice but to take control of their own financial planning gives them a confidence they may have not had before.

Kiplinger.com published “Financial Confidence in Divorced Women is on the Rise,” and included the following insight:

“While 57% of women say that divorce was a wake-up call for them from a financial standpoint, the good news is that things do get better. According to the recent Allianz Life 2019 Women, Money and Power Study*, divorced women are feeling better about their finances than they were a few years ago. In addition, financial confidence among divorced women seems to rise the longer they have been divorced.”

The article goes on to discuss how women who have been divorced for more than 10 years reported the greatest gains in financial stability and overall financial confidence. Because these women have had to step up to the plate and manage their household finances many of them rely on help from a professional, such as a Fee-Only financial planner.

The statistics quoted in the article have significance for women in various situations:

>>Women who are just recently divorced can see that with time they too can gain better financial footing.

>>Women who are married can look at this, see the confidence gained by divorced women, and take steps to do more for themselves in that area. And that will look different for different women, some may need to take more ownership and get more informed about family finances if their partner does the larger share of that work. Others may want to step back or work more with their partner if they are the ones managing the family finances.  
>>Women who have not married can remember that they can take ownership of financial planning in all phases of their lives.

Teachable Moments at Thanksgiving

As people prepare for the Thanksgiving holiday, some are looking forward to it and waxing poetic about family togetherness while others are just going to try to grin and bear it. Here is another approach: think about the Thanksgiving holiday as a time to help younger relatives prepare for a better financial future. It can be a teachable moment.

Whether it is your own children and grandchildren or your nieces, nephews, and cousins: “As Thanksgiving approaches, you have the ability to influence young people to save and invest now — not to put that off until some later day.” 

This advice comes courtesy of “Pass the financial knowledge this Thanksgiving,” a business column published in The Mercury News.

After hearing from readers expressing their regret over the state of their finances, columnist Julie Jason decided to encourage more people to talk finance (instead of turkey or politics) this Thanksgiving.

Many people may have done more financial planning if they’d had even just one person to give them a bit of sound financial advice. And that advice doesn’t have be extremely detailed or technical; you could simply share the importance of starting to save for retirement early instead of waiting. Even if you can’t adequately explain compound interest, you can explain that saving more over a longer period of time yields better results.

It is tempting to just recall stories of the failed investments or financial missteps of various relatives, but be sure to balance these tales with those of financial success. Your family has financial superstars too. You can highlight homeownership, land ownership, small businesses, and those living in comfortable retirement. They don’t need to be the richest people; they just need to be doing well enough to live comfortably.

And if you worry that your kids won’t listen to you, it is okay. You may reach younger relatives or friends. And hopefully, your counterparts have the ears of your children and grandchildren who may be more likely to listen to sound financial advice from other relative and friends of the family.

Which Comes First: Student Loans or Retirement?

People go back and forth debating whether or not to save for retirement or pay down debt. Both are financial priorities and while it is possible to put some money towards both, some people want to know whether or not to concentrate on one or the other.

In “Here’s why you should make paying off your student loans a priority over saving for retirement,” Washington Post finance columnist Michelle Singletary writes:

 “If you’re struggling under the weight of student loans — human behavior being what it is — pay off the debt as soon as you can before the cost of living the life you want takes precedence over getting rid of that monkey on your back.”

Some people hear finance experts say not to stress over student loans if the interest rates are low and feel it is okay to not put more towards the debt. They also hear the advice that you’ll come out better in the end investing more money sooner rather than later. Singletary theorizes that consumers hear that and figure they don’t need to make erasing student loan debt a priority but instead of actually investing they just spend and realize years later they haven’t made much progress towards getting rid of student loans.

It can be tempting to look at student loan debt as just another bill, paying off the minimum. Or perhaps even deferring the debt when times get tough. All the while, the interest accumulates and the debt doesn’t go away. As the article notes, some people manage to drag their student loan debt with them throughout their adult lives.

People hear all kinds of financial advice from experts and from friends and family. It can be tough to sort out what actually makes sense. This is why you can find a Fee-Only financial planner you trust to work with you to create financial stability and hopefully wealth you can pass on to the next generation.

Married? Get into Retirement Planning Before Losing a Spouse

Kiplinger.com offered advice for married women who may need to do some retirement planning, mentioning this “sobering reality” – “Most widows feel unprepared to make key financial decisions in their live-alone years.” While it isn’t pleasant to think about death, married people do have to consider they may need to continue without a spouse: not simply emotionally but financially as well. “Thus, it’s extremely important for women to empower themselves with the tools they’ll need to take ownership of their financial future.”

If your spouse is in charge of finances, you need to make sure that you know where financial records are kept and that you have contact information for investment accounts. Even if one person continues to manage the finances, the other spouse still needs to be able to locate important documents.

You need to know what kind of income will be available to you in retirement. Having an idea of how much you may be able to rely on can help you plan better. You may decide that you need to find ways to increase that amount or you may feel satisfied. Either way, it is better to know beforehand than to find out when you are older and dealing with the changes that come with losing a spouse.  Kiplinger’s advises that you “don’t just focus on annual total amounts, but also develop a schedule of allotments — the increments you plan to take out from different sources, such as a non-qualified plan or tax-deferred plans.”

And while there is certainly a lot you can do on your own to prepare for retirement, it is also a good idea to get some expert help. A Fee-Only financial planner can help you strategize ways to make the most of the resources you have and add investments that will ensure you can be comfortable as you age.

Estate Planning is a Plot Point in “The Goldfinch”

One plot point in The Goldfinch (the movie version of this novel was released this year) involves a young boy whose mother has died and left him some money. In the movie, Theodore’s father coerces Theodore into calling his mother’s lawyer to ask that the lawyer to transfer a large sum of money to him. Theodore is to tell the lawyer that the money is for his own benefit but of course they father does not intend to use the money to directly benefit Theodore. The lawyer is unable to send any money because of the conditions Theodore’s mother outlined when she created a trust for him.

When you are a new parent and thinking about a precious life just beginning, it may not be easy to contemplate the end of your own but as The Motley Fool notes in “If You’re a New Parent, Take These 4 Estate Planning Steps” however, “Your baby is counting on you to provide — so take care of these essential steps.” And in Theodore’s case, as in real life, the estate planning steps a parent takes to provide for and protect a child financially can make a big difference.

Some things to consider:

Life Insurance: The money from a life insurance policy can be used to provide for the child should one or both parents die. 

Naming a guardian: You may think of a will as a document to divide your resources, property, and possessions but this is also a document where you can name a guardian to care for your child(ren). If you do not choose a guardian then the courts or your family will make the decision.

Setting up a trust: A child cannot manage any inheritance they receive before the age of 18 so if you want to have a say in how the resources you intend for your children are disbursed, you will need to set up a trust. Whoever you put in charge of the trust will manage money and assets on your child’s behalf, however you can provide specifics such as deciding when they can get a direct transfer or setting money aside for a certain purpose like education.

Financial Planning is Savvy, Not Scary

Halloween is a good time to think about what really scares you and the ways you mask or hide behind old habits to avoid facing your financial fears. Maybe you just ignore bills as they arrive. Perhaps you avoid checking your bank balance, credit score, or investment portfolio because you aren’t sure you can handle what you might see. You might be someone that keeps using a credit card to the very limit, thinking that you will manage to pay it off somehow in the future.

Saving is savvy. People who manage to save money do so because they take the time to initiate a savings plan. They set up automatic deductions or they manually make sure to save at regular intervals. It isn’t easy to save money but what is even more frightening is having a life event occur, needing to be able to rely on savings, and not having any there.

In “4 ways to make managing your finances less scary,” MarketWatch observes: “While your grandparents may have felt the need to hide their money under their bed and not put it in an interest-bearing account, it’s important to remember to be intentional and not be fearful of saving.”

Credit score aren’t scary. MarketWatch also recommends that people not fear their credit scores since “A big piece of creating a stable financial future is by proactively managing your debt and paying bills and loans on time each and every month.”

Once you have seen your credit score and know how it ranks in terms of creditworthiness, you can motivate yourself as needed to either improve to maintain your score. Not knowing doesn’t change the fact that your credit score can affect interest rates that are offered when you apply for a loan. And checking also means that you can be aware in case of another big fear people have: credit fraud. You cannot dispute fraud connect to your credit if you aren’t even aware that there is an issue.

Remember that a Fee-Only financial advisor can bring clarity to your finances and help take the fear out of financial planning with sound advice and money management practices tailored to your situation.

Which Women Face the Greatest Financial Risk in Retirement?

Forbes.com discussed the surprising results of research from The Center for Retirement Research as reported by Prudential Financial:

Women in their 50s who are at the most financial risk in retirement are those who are married and in two-income households.

The research still found risk for women who were married in households with one income and those who had never been married but those who were married with two incomes had a higher percentage of risk. 

The assumption is that a woman is better off if her household is earning more but that is not necessarily so. People in two-income households make more but also spend more and tend to save less. And it is these women who may find it more difficult to maintain their standard of living in retirement, especially since the research found that in 50% of these households, only one partner is using an employer retirement plan.

Life has unexpected twists and turns, however, women in their 50s and beyond need not find themselves on shaky ground financially. Forbes offered the following retirement planning tip for women:

  • Plan as if you are the only one earning income. Rather than depending on a spouse’s retirement savings, both partners should save.
  • Discuss money with your spouse. Whether you both save for retirement or just one of you does, you need discuss finances on a regular basis.
  • Prioritize savings. Don’t let current expenses and debt keep you from saving because you are not likely to have a time when there are no expenses. You can increase your contribution to a retirement plan at work by one percent to start.
  • Work as long as you can. We all dream of retirement but delaying it as long as possible may be better for your financial outlook.  And if you do retire, you can still do consulting work or work part-time.

Estate Planning for Blended Families

If you do not leave a specific, legally executed estate plan with the appropriate documents, then you are leaving it up to your state to decide how your resources are distributed. This could make things quite difficult for your heirs (at least for the people whom the law determines are your heirs if you didn’t name any.) 

And when you are becoming a stepparent or blending your family with another person’s family, it is especially important to consider estate planning. While it isn’t romantic, it can make things smoother down the road. As you can imagine there are a number of uncomfortable scenarios that can result when people blend families and do not consider finances.

Estate Planning When You Have a Stepfamily,” from ElderLawAnswers.com noted:

“Married people typically leave everything to their spouse, so children from the previous relationship may now see their inheritance go to their stepparent, who may in turn leave it to his or her own children. Even if the stepparent promises to take care of the stepchildren, it doesn’t always work out that way. And if additional children are added to the relationship, things can get even more complicated. “

And on the other end of the spectrum, children can inherit money and property and leave a spouse with few financial resources.

The time to consider this may be before you remarry so you and your future spouse are in agreement about how to proceed. However, if you didn’t do any estate planning before blending families, you can take it on now. Even if you did you would still have to revisit your estate plan to make sure it was current or to adjust it as needed.

ElderLawAnswers.com offered some options that partners in blended families employ including:

  • Making the children beneficiaries of a life insurance policy
  • Leaving something to the children when a spouse is getting most of the estate
  • Creating a trust to benefit both spouse and children—for example a trust could be set up so the spouse has it during their lifetime and then the rest could go to the children

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