From Christine DeCorte & MassMutual Financial Group, 702.371.1000
10 Financial Q&As for Women
A Financial Checklist
When it comes to financial planning, women across America will want to ask themselves some personal questions and do some soul-searching throughout 2004 if they want to put plans into action to help them achieve financial success and security.
That's the conclusion of a group of highly experienced and knowledgeable female financial professionals from MassMutual Financial Group member companies, including OppenheimerFunds, Inc.
"As women continue to make broad gains in the workforce, they're truly on the cusp of enduring financial success," said Susan Sweetser, second vice president of the Massachusetts Mutual Life Insurance Company (MassMutual) and head of Women's Markets at MassMutual Financial Group member companies. "As we approach the IRS tax deadline, this is typically when many Americans establish, review or revise their financial plan. It's an ideal time for women to take a good, hard look at what they need to do today if they want to achieve a financially secure tomorrow."
Sweetser pointed out that women often have complicated personal and professional lives, and each stage of their life presents different financial challenges. "At every critical cycle -- whether single, married or near retirement -- life experiences and circumstances can potentially strain financial resources," she said. "To help meet these challenges, we carefully developed a short list of answers to questions that many women may have regarding their finances."
Sweetser noted that the information is designed to help women take more control of their financial future.
"Because studies consistently show that women live longer than men, their money must last longer," said Donna Winn, senior vice president of the Wealth Management program at OppenheimerFunds, Inc., a MassMutual affiliate. "However, many women aren't as involved as they should be in planning for their own long-term financial future. Lack of time is a chief concern women often cite, with many women bearing family caretaking responsibilities as well. So our hope is that access to quick financial tips can motivate even the busiest of women."
Below are the top 10 questions to ask yourself now:
1. What do I want to achieve?
As with any journey, the path to your financial future requires a "roadmap." Determine a realistic goal for where you want to be at this time next year, and determine the best way to get there. Know exactly where your money is going, and how much you have for investing. Next, choose your destination by figuring out your short, intermediate and long-term goals. Don't forget to include an emergency cash account in your short-term goals.
2. Will I live "happily ever after?"
We hope so. But it always pays to be prepared, especially since it's commonly recognized that half of all marriages end in divorce. That's why, regardless of your income, a prenuptial agreement is something every engaged couple should consider. These legal arrangements ensure that you will be protected; you'll also protect any children you may have from a prior relationship. Importantly, if the marriage doesn't last, your ex cannot make a claim against the assets you brought into the marriage. And, if you die, your children will still be entitled to their fair share of your estate. If you are in a relationship or married, it's best to have a contractual agreement as to how property should be divided with your partner if the relationship ends.
3. How will I protect my loved ones when I pass away?
An absolutely essential -- albeit uncomfortable -- financial question to ask yourself, since many families rely on two incomes to get by. What if mom dies? Imagine the consequences without adequate financial protection. Be ready for the unpredictable. At a minimum, you'll want enough life insurance to cover your financial debts and funeral. If you have children, you'll want to leave at least enough to replace your earnings for a certain period of time, to cover the costs of hiring someone to fulfill your obligations at home and to pay for your children's college educations. Many professionals with families seek insurance protection equivalent to 8 to 15 times their annual earnings to adequately support their families. And stay-at-home mothers need coverage too. Consider what would it cost to have someone come into your home to provide quality care for your children and to run your household if you were no longer able to.
4. Do I want a stranger making important decisions for my children?
Of course not. So, whether you're 25 or 65, make sure 2004 is the year you prepare a will. If you die without one, a court will step in and determine how your assets are allocated (based on each state's law). If you're a single mom with minor children, the same judge will decide with whom they will reside. And remember, if you're in a serious relationship -- but not married -- your significant other may have no rights to your property, unless your will directs otherwise. Lastly, if this is the year you expect to reach new stages in life, pull out your existing will and update it. An up-to-date will can make things much easier for your beneficiaries during a time of great grief.
5. Am I invincible?
Of course not. What would happen if you were suddenly disabled by illness or injury and unable to work? Facing the financial challenges associated with a serious illness or accident -- without the protection afforded by disability income insurance -- can be devastating. Group insurance benefits and government programs will cover only portions of the cost of care and lost income. Including the appropriate level of disability income insurance protection in your financial plan could be the difference between helping to maintain your current lifestyle and perhaps falling surprisingly short of your accustomed standard of living. If you already have an individual disability income insurance policy, update it annually to reflect any promotions or large increases in personal income.
6. How will I support my aging parents when they can no longer support themselves?
Women often assume the caretaker role in their families. In fact, according to a 2003 OppenheimerFunds' study, 29 percent of women said they anticipate supporting their parents one day. Yet, with women increasingly becoming significant wage earners, they don't have the flexibility to be executives AND caretakers for their parents. Consider long-term care insurance for you, your spouse and your parents. Such insurance isn't just to assist you or the insured in paying bills for assisted care living at home, in an assisted care facility or nursing home; it can also help enable the insured to receive care at home for a much longer period. It can also help protect your estate from being depleted by the rapidly escalating cost of care.
7. Am I "maxed out?
The answer should be yes -- despite your age -- when it comes to this year's 401(k) plan contributions. If planned properly, retirement can be a time to enjoy the things you've spent so much of your professional life working to afford. Remember: women on average live longer than men -- so odds are your retirement savings will have to go farther. Make sure you're participating in your employer's 401(k) plan and start making contributions -- even if it's only at the threshold to receive the company's match. Otherwise, you're leaving free money on the table. If your employer doesn't provide a 401(k), then be sure to max out your contribution to an IRA or other tax-qualified personal retirement instrument. Note: recent tax changes allow those over age 50 to save more in their 401(k) and IRAs. Lastly, if you are already maxed out on your 401(k) and IRA contributions, you might consider additional tax- deferred investing opportunities -- such as a fixed or variable annuity.
8. Do I really need to make that impulsive purchase?
Pay attention to some of the small things you buy. Try this: for a month, write down everything you purchase, and determine which things you can do without. Invest the money for those non-essential items in mutual funds or pay an insurance premium, and reap the rewards that can come with making tiny sacrifices. At some fund companies, including OppenheimerFunds, you can open a mutual fund account and contribute as little as $50 a month. Most importantly, you'll be establishing a regular pattern of saving and investing. You don't have to be a total miser; instead of eating out five times a month, try cutting back to two.
9. Can I pay cash?
Avoid the temptation of using credit cards to overspend. Stick to having one credit card for emergencies and to build good credit. Otherwise, use cash. While interest rates are expected to remain at near-record-low levels in 2004, the interest rates charged by some credit card companies on unpaid balances have not followed suit. Make sure you are aware of your credit card interest rate. It could very well be more than 20 percent -- far more than the historical average annual return of most investments. In general, use credit cards only if you plan on paying off the entire balance every month. What's more, too many cards could adversely impact your credit rating. If you do have debt, including school or car loans, make sure you pay bills on time. You don't want late payment fees on your credit history.
10. Do you "Teach Your Children Well?
Fiscal responsibility is not just for adults. Teach your children about money and investing. Teach them to protect what they have. Teach them how to be responsible with money. Pass along your unique insights on how to grow and invest money over time. Show your daughter your quarterly statements. By sharing what you know, you can help better prepare your children for a more financially secure tomorrow.
"Whatever the responses to these questions, each woman's financial situation is unique. The important thing is to plan for the future," Sweetser said. "Hopefully, you'll never need to learn firsthand the value of a prenuptial agreement or disability income insurance, but, if you do, you'll be glad you're prepared to meet those challenges."
Winn added: "More than ever before, women today need to get involved and make confident investment decisions. At risk is nothing less than our future financial independence."
Sweetser recommends that women identify and obtain the assistance of a good financial professional. While a candidate's credentials should be checked carefully, Sweetser also suggests that women rely on their 'sixth sense.' "Ask yourself: 'am I comfortable articulating my goals to this person? Is he/she listening to me? Do I feel respected?' Go ahead and rely on your intuition. Then get started -- right away -- on your financial plan."
C: 054607-000 04/04
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