Originally published in the September-October edition of AACI’s VOICE
In the last issue of the Voice we discussed how women frequently lack confidence and feel insecure and when it comes to financial planning and investments. We also identified five key risks that women face as they move through their retirement years, including (i) Outliving Assets due to longevity, (ii) Loss of Spouse, (iii) Decline in Functional Status, (iv) Rising Healthcare and Medical Expenses, and (v) Inflation.
Against this background, I strongly urge women to become active participants in their financial lives in order to increase their chances of having a comfortable retirement. Here are five steps you can take:
- Educate yourself. I cannot emphasize enough the importance of reading books and articles, attending seminars and speaking with knowledgeable professionals in order to increase your financial aptitude and confidence.
- Identify your goals. If you are like most women, you have goals, but haven’t really thought about what it would take to achieve them. Think them through and write them down. The more concrete your financial goals, in terms of magnitude (how much money you need) and timing, the more likely you are to achieve them.
- Develop and implement a long-term financial and investment plan. No rational traveler would take a trip to a far-off location without a road map and directions. Similarly, no rational investor should jump in without spending time and effort developing a plan to meet her financial goals. The plan provides you with a framework, discipline and accountability. If you are married and your spouse hasn’t taken the lead in formulating your family plan, run with it yourself and involve him as much as possible. The plan should be tailored to your life expectancy, your standard of living, your risk profile and your unique financial goals.
- Understand the risks. Women tend to err on the side of caution when investing, preferring to avoid short-term loss rather than achieve long-term gain. The erosion of purchasing power due to inflation is one of the major financial risks faced by women. Conservative bank deposits, which will not keep up with inflation, can often be more damaging to your financial well-being than the partial (and often temporary) loss of your investment values due to market volatility. Currency risk, especially for those individuals with income and/or assets in more than one country, must also be considered.
- Reassess, Rebalance, Reallocate. Even the best financial plan needs to be revisited once a year to ensure that you are still on track to meet your goals. Adjustments should be made and the plan should be tweaked as necessary. And if you have experienced a major life change – the death of a spouse, a divorce, the loss of a job, an inheritance – your plan should be re-worked to reflect your new situation. Planning is not a one-time exercise. As your priorities and goals evolve with time, your financial plan should evolve along with you.
Women are different from men, and historically, have been less exposed to the financial world. But that’s no excuse! Educate and empower yourself to take control of your financial life. Financial security is not something that just happens – it is something you work toward. And with HaShem’s help, you can succeed.
Debbie Sassen is an independent Financial Planner and Licensed Investment Advisor (US) with the Investment Advisor Alliance, RIA. With over 25 years of experience in the financial services industry, Debbie uses her broad background to help people, in particular women, to organize their financial lives, identify their financial goals, and implement strategies to achieve financial freedom. She can be reached at Debbie.Sassen@yahoo.com or 054 842 7638.
Note: The above article is not, nor should it be a substitute for, financial advice relating to any individual’s specific needs.