Saturday Finances—Why Women Need to Save More Than Men

My notes from Fidelity's Webinar, "Why Women Need to Save More than Men"_8 March 2016

Why Women Need to Save More Money Than Men

Moderated by Cheryl Wilson, SVP_Fidelity Market Manager

Jean Chatzkey, Personal Finance Journalist
Kathy Murphy, President, Fidelity Personal Investing

Women earn 79¢ to every dollar that a man earns.  This means that when women retire, they have a smaller amount of savings to live on, but they live longer, currently by 4.8 years according to the 2013 CDC National Vital Statistics Report.  

It may not sound like a big difference until you think about how much it costs to live for 5 years, especially for older folks living on fixed incomes with healthcare expenses.

In addition, women take more breaks during their careers (e.g. raising children, caring for elderly family members, returning to college, relocating, etc.).  Interruptions translate into reduced lifetime savings.

The 10 Times Rule

This is a good savings rule for both men & women.

By age 67, you should have saved: 10 times your annual salary.

age 60 > 8X
age 55 > 7X
age 50 > 6X
age 45 > 4X
age 40 > 3X
age 35 > 2X
age 30 > 1X

How To Get Started

1.  Take advantage of workplace funds.  Start as soon as you start working.  

2.  Get over the idea that financial management for women is an option.  Stop telling yourself that it's okay to let someone else control your financial future.

3.  Focus on savings, first.  Raise income & reduce expenses.  Once you start saving, think about how to invest.

4.  If you are unsure about stock picking, utilize mutual funds that are managed by professional fund managers.

5.  Automate savings & investments.  
  • Auto-enroll in work programs; 
  • auto-saving; 
  • auto-invest;
  • & auto-deposit

My personal policy:  I have a savings account that invests $100 per month into an automatic stock purchasing plan with a brokerage firm.  I keep track of the balance on the savings account so that I have enough to fund the automatic withdrawals for the year.  

6.  Set up a personal spending policy each year.   This can be whatever you want it to be, and it's personalized.  

Schedule a time to sit down with your  spouse & talk about your finances every quarter.

2016 Fiscal Calendar

1st Quarter:  October 1, 2015 - Dec 31, 2015
2d Quarter:  Jan 1, 2016 - Mar 31, 2016
3d Quarter:  April 1, 2016 - June 30, 2016
4th Quarter:  July 1, 2016 - Sept 30, 2016
7.  Take free educational webinars.  Fidelity has a lot of these, and they are free!  Check out Fidelity Viewpoints HERE

The 50/15/5 Rule

A Recommended Spending Plan

50% > expenses
15% > retirement accounts
5% > emergency money
30% > personal spending

Fidelity Viewpoints "Savings & Spending Checkup"

30% Personal Spending

If you follow the 50/15/5 Rule, then you can plan on having 30 percent of your money left after meeting your essential expenses, retirement & savings goals.

By the way, here's an example of the need for an emergency fund.  This happened last weekend...Yes, that is a tree on top of my gazebo.

Our neighbor's tree crashed through my fence & landed on top of my gazebo.
We have a $1,000 deductible on our homeowner's insurance.
To have the tree removed immediately before the whole thing comes down,

we will need to write a check for $400 this week.

Don't let emergency expenses interfere with retirement savings.  Retirement comes first.

Fidelity Viewpoints  "How to Save for an Emergency"

The 30% personal spending must also cover unexpected life expenses like...

  • An adult child needs financial support
  • Extended college expenses
  • Providing care for an elderly parent
  • Drug or alcohol dependence
  • A sibling dies & you adopt children
  • A son or daughter is unfit & you are raising grandchildren
  • A spouse dies unexpectedly
  • Divorce

Every one of these unexpected life events can eat up the 30% of personal spending pretty quickly, so you have to develop a personal financial plan that anticipates some of life's unexpected events.  

This is why it's a good idea to talk to a financial planner.  

I know.  I'd rather prance down Main Street in my bra and underpants than discuss my personal financial business with a 30-year old stranger, but's worth it in the long run because I don't want to get hit with unexpected expenses that are going to drain our savings later on.

A financial plan helps you navigate through the emotionality of life's unexpected events.

A whole life insurance plan is a good idea for anyone raising young children.

Fidelity Insights  "Life insurance buyer's guide: What type, how much and who will benefit."  

How Do We Balance Short-Term
& Long-Term Goals?

Retirement comes first, adult family members come second, i.e. college education expenses, weddings, financial support, etc.  If you choose to help, allocate no more than 1/3 of your 30% personal spending for family needs, and that includes education expenses for grandchildren.  Let their parents manage the rest.  

You may be wondering why only 1/3 should go to adult family members.  You love them, and you want to be generous, so why not more?  Again, I think it has to do with ensuring and protecting financial independence over a lifetime.  

Let's face it, we're all going to get old.  Being financially independent takes the financial burden off of loved ones and makes it possible to achieve your dreams later in life.   

Credit Card debt:  Pay it off.  The interest on credit cards is higher than what you can make by investing the money.  Make it a priority to pay off credit card debt. 

My personal policy is that we use one Southwest VISA credit card for most of our monthly expenses and business expenses.  That way, we earn flight points, and the credit card is paid off each month.

Take advantage of credit card reward programs.  

Southwest Rapid Rewards VISA   

Student Loans:  Depending on the type of loan, it's usually a good idea to pay it off sooner rather than later.  If the interest is higher than what you can make by investing it, than pay if off ASAP.  Otherwise, pay it down each month.

My personal policy is to pay off all debts as soon as possible, except for our mortgage because of the tax benefit.  Even then, I add an extra payment onto the principal each year to speed up the timeline for paying it off.  

The deciding factor on whether or not to pay off a debt ASAP is how much interest you are paying.

Final Words

It is never too late to take charge of your financial future.  Do something today.  Do not be afraid to pick up the phone and talk to a financial advisor.  It's free and you'll learn a lot!  

It's a little scary at first, but have your question(s) ready and be honest with your responses.  They're not trying to pry.  It is a dialogue.  Take fear out of it & step over the threshold of an uncertain future.

Click to go to Fidelity's Investment Guidance  

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