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Outside the Box

July 3, 2018, 11:12 a.m. EDT

Everything you need to know to get your money and life in order

Financial fitness for women

By Mary Ann Ferreira

20thCentFox/Courtesy Everett Collection

Women currently control over one-half of the wealth in the U.S., according to the CFA Institute. This is expected to grow to two-thirds by the year 2020. Some of the reasons for this increase are that women are inheriting wealth, more women are entering the workforce and, finally, that women have greater longevity than men. It is estimated that 95% of women will be the financial decision maker at some point in their lives; therefore, it is important for women to realize that knowledge equals power.

In 1973, 45% of women were in the workforce. As of 2013, that percentage had increased to 57%. Approximately 53% of women are the breadwinners in their family, and the average age of women becoming widows is 56 (surprising, isn’t it?). In addition, with the divorce rate in the U.S. about 50%, more women are responsible for their financial futures.

Women who work outside the home miss an average of 11.5 years in the workforce. This is typically due to family leave to take care of children, parents, in-laws and/or husbands. This not only impacts their annual income and lifetime earnings, but also their eligibility for employers’ defined-benefit pension plans, and participation in defined-contribution plans. About 80% of women have no pension benefits, lower Social Security benefits, and smaller balances in their employers’ defined-contribution plans. These facts emphasize the importance of women learning how to control their financial lives.

Get organized

One of the first steps for women to become financially fit is to become organized. What should be tossed, shredded or saved? Old bills (unrelated to the home), old warranties, and prospectuses should be tossed. Documents that should be shredded include paystubs older than one year, bank statements and quarterly investment statements.

On the save list: tax returns and supporting documents, W2s, life Insurance policies, deeds, mortgage or settlement statements, home improvement records, office documents (e.g., birth, marriage, divorce, death certificates), and passports. Finally, a copy of estate planning documents—wills, trust, health directives, and powers of attorney—should be kept in hard copy or electronically.

Once you have sorted these items, it’s time to start filing. Everyone has their own idea about how things should be filed away.

One choice is to have big categories with hanging files and within those categories have separate manila folders. Examples include Banking, Debt, Employment, Financials, Home, Insurance, Investments, Medical, Receipts/Bills, Taxes, Vehicles, and Warranties. One should keep original versions of vital documents like birth certificates, marriage licenses, divorce decrees, death certificates, and passports in a safe-deposit box, with copies in the home files. To safeguard against identity theft, file cabinets should be locked.

Once you have your papers organized, sorting the mail isn’t such a chore. You can have three piles: bills to pay, documents to file, and documents to shred. And remember: not organizing paperwork is like neglecting to go to the gym—if you postpone it, you will certainly pay for it later.

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Lifetime checklist

Your lifetime checklist can be in the form of a document kept on your computer, or can be kept in an actual binder or notebook. It provides a framework for gathering and organizing vital information. It also helps you organize your financial information and life decisions, and record this information in one place for your loved ones.

The information that should be collected for this checklist includes personal information, such as social security numbers, date and place of birth, citizenship, date of current marriage, etc. Additionally, list the names of people to notify in case of an emergency, such as your primary contact, employer, children’s guardian, the person with medical and financial powers of attorney, animal care person, spiritual adviser, and the executor of your estate.

The next section should be a list of professionals, such as your attorney, financial adviser, banker, accountant, insurance agent, etc. Subsequent pages should contain information about banking (safe-deposit box and personal safe), and brokerage and investment accounts.

Next, list all real property, and information on any mortgages or equity lines of credit attached to each property. Employment information (past and present) is important, as are related pensions, stock options, and disability and/or life insurance. Finally, there should be a section on end of life instructions, such as funeral preferences, a copy of your living will, and relatives to be notified.


“Pay yourself” first and invest for the future—words to live by. Theoretically, if you saved $5,000 a year ($417 a month) starting at age 25 and earned an 8% return, you could accumulate as much as $1.3 million by the time you are 65. Budgeting (or a spending plan, as I like to call it) can help you to stay on track. The way my father used to budget was to cash his paycheck and put the cash into separate envelopes—for rent, food, utilities, etc. Now it’s easy to create a spreadsheet or download a budget form to keep track of income and expenses. The key is to create a system that works for you, and then stick to it.

If you’re not sure where your money is spent, you can review your checkbook register and credit card statements. Or get a small notebook and write down everything you spend in a month. For expenses that are yearly, you can divide by 12 to estimate a monthly cost. If you find that “miscellaneous” is a large part of your budget, you should break it down further and add more categories. Make sure that “savings” is a line item on your budget. That way, you’ll be more inclined to “pay yourself.” Another good way is to automatically have a certain amount each month transferred from checking to savings.

Adhering to a budget helps you to reduce expenses and reach your goals. The process of creating a budget will actually give you an awareness of your spending habits and may prompt you to make changes. While there are certain fixed expenses (taxes, housing, utilities, etc.) that are essential, many expenses can be reduced (clothing, entertainment, etc.). Creating a spending plan will help you to save money to meet you goals. This is an important ingredient for a financially fit future.


Before creating a sound investment plan, you need to take the time to do some life planning. How do you envision your life? What are your needs, wants, and wishes? You may have short-term goals such as next year’s vacation, or longer term goals, such as purchasing a home, sending a child to college, or saving for retirement. Your investment plan should be based on your goals, the amount of time you have to pursue them, and your comfort with investment risk. In other words, your investment plan should be unique to you.

Growth-oriented investments, such as stocks, may be appropriate for your long-term goals. Income-oriented investments, such as bonds, may be appropriate for your short-term goals. Once you have an investment plan suited to your personal goals, sticking with your plan is critical to achieving those goals. Don’t let short-term fluctuations in the market cause you to derail your investment plan. Your plan should change only when your goals or life circumstances change.

During major transitions, your goals (as well as your investment plan) should be re-evaluated. Certain stages of life—such as marriage, real-estate purchases, having children, parental care, health issues, and, of course, retirement—are key times when your goals, and possibly your investment plan, need to be reviewed. Just as you need to review and change your exercise plan occasionally, your investment plan should be reviewed when such events happen, but no less than annually.


Having the right insurance at the right time in your life will protect you and your family. All women should have disability, health, and homeowner’s insurance. Women with dependents should also have life insurance, and women over 50 who have significant assets should consider purchasing Long-Term Care insurance.

Unfair as it might seem, women pay a significantly higher rate for long-term disability insurance than their male counterparts. Statistically, women are much more likely than men to develop some type of disability that prevents them from working. Arthritis and rheumatism are the most common disabilities affecting women; however, heart disease, cancer, mental health issues, diabetes and nervous system disorders are also leading causes of disabilities in women. Long-term disability insurance replaces a portion of your income if you become too ill or too injured to work for an extended period. Many companies will provide their employees with some disability insurance, but you may need additional insurance.

A comprehensive health insurance plan is an essential component of financial fitness. If your employer doesn’t provide it, and you can’t afford a comprehensive plan, you should at least consider a catastrophic health insurance policy to cover a medical crisis. Once retired, you can apply for Medicare and then decide which Medigap or MedAdvantage plan best suits your needs.

Homeowner’s insurance is required by mortgage lenders, but even if your home is paid for or you rent an apartment, insurance is essential. Typically, your home is your biggest asset, so you want to make sure that its value is covered.

Sufficient life insurance should be purchased to cover all debts, such as mortgages and student loans. If you are single and have no dependents, you do not necessarily need life insurance. While working, that money should probably be spent on disability insurance.

Unless you have enough money to “self insure,” Long-Term Care insurance is a means to pay for long-term care services such as home care and nursing home care. LTC coverage can give you more freedom to select what type of services you need.

Retirement needs

Because women face special challenges when planning for retirement, it is important that they make retirement planning a priority. Women often have their careers interrupted to care for children or elderly parents. As a result, many women spend less time in the workforce and/or earn less money than their male counterparts. To complicate matters, women typically live longer than men, and therefore have to stretch their retirement savings and benefits over many more years. For all of these reasons, saving for retirement really needs to be a high priority for women.

It’s never too late to start saving for retirement. If you contribute the maximum allowable amount into a deferred income plan such as a 401(k), you can build up a good portion of your retirement savings that way. Such plans reduce current taxable income, and allow your investments to compound tax-deferred. Many employers will even match a portion of what you contribute.

If you are staying at home to raise your family, you can still save for retirement. If your spouse has earned income that covers the contributions, you can contribute to either a traditional IRA or Roth IRA, as long as your spouse has enough earned income to cover the contributions.

How much do you need? This is a common question. At age 65, a woman can expect to live an additional 20.3 years. Many women, however, are living well into their 90s—and beyond. For married women, the loss of a spouse usually means a decrease in retirement income from social security and pensions. And roughly half of all women 75 years of age and older are living alone.

You can start by estimating how much income you will need in retirement. Your budget and current expenses (with some modifications) can be used as a starting point. Then, estimate how much you will receive from Social Security (you can obtain this number at www.ssa.gov), pension plans, and other sources. The gap is your retirement savings goal, and just knowing that info will motivate you to start saving. Save as much as you can, and always look for ways to increase that savings through bonuses, raises, etc.

Estate planning

All people, not just those who are wealthy, have an estate. The estate consists of everything you own: your home, vehicles, real estate, life insurance, brokerage accounts, retirement accounts, savings accounts, personal property, and even your furniture. You want to be the one to decide who inherits your estate. If there is no will then the laws of your state prevail and the state determines who inherits your assets—both financial and otherwise. Your special pieces of jewelry or paintings, for example, may be given to family members who will not appreciate them. A properly created will can prevent that.

Although a will is important, there is more to estate planning than just having a will. Proper planning includes appointing individuals to make personal, health care, and financial decisions in case of incapacity. In addition, guardians may need to be appointed to raise minor children to adulthood and trustees to manage their inheritance. Don’t leave such things to the state/courts to decide. In addition to a will, estate planning documents you should have may include: Financial Power of Attorney, which appoints someone to take care of your financial needs if you become incapacitated; Health Care Directive (also known as a living will) which sets forth your intentions regarding end-of-life health measures; and Power of Attorney for Health Care, which appoints an “attorney in fact” to make critical decisions about your health care when you are mentally incapacitated.

Another consideration is whether or not you would like to avoid probate. Probate is the judicial process that determines the validity of your will, inventories your estate, and transfers the assets of the estate to your heirs once all the taxes and debts have been paid. To avoid probate (which has public access), you may wish to use several planning tools. A Revocable Living Trust is a vehicle that holds your assets, while allowing you, as trustee, to keep control of those assets. Upon your death, the trust becomes Irrevocable, and is managed (and possibly distributed) by your appointed successor trustee. Joint ownership of real or personal property will also avoid probate by transferring title directly to the surviving joint owner upon your death. “Payable on death” or “transfer on death” designations can be added to brokerage and bank accounts; these transfer rights on the accounts upon your death directly to whomever you name (similar to beneficiaries on your retirement accounts).

There are many components to an estate plan, and it is a large part of your financial fitness. It is imperative that you act on this, and that you have an estate attorney review your situation.

Financial plan

A comprehensive personal financial plan will help you pull the above topics together in several ways. It can help you identify your personal goals and objectives, prioritize and assess your current financial situation, and identify/quantify changes that are warranted. Together with your adviser, you can develop a plan that positions you for a lifetime of financial fitness.

Mary Ann Ferreira is an adviser and partner at Viridian Advisors. She is a Certified Financial Planner practitioner and a Certified Divorce Financial Analyst with expertise in the financial aspects of the divorce process. Her passion is to create a positive client experience, especially for women and their families in the Pacific Northwest

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