Traditionally, women shy away from taking decisions about their own financial position and turn to a male partner, family member or friend for advice. However, a sounding board is only useful to the extent that the recipient can understand the advice given. Every woman should empower herself to evaluate advice and make her own, independent decisions.
Around 90% of women will be solely responsible for their finances at some point in their lifetime, whether it is due to separation, divorce, the death of a partner or simply deciding to stay single. And even if you don’t find yourself responsible for your own finances at any point in time, being informed and in control of your own financial destination places you in a position of strength.
What should women do to empower their financial well-being?
Budget: Take control by doing a budget. Keep a spreadsheet of income and expenses and structure a budget that caters for spending less and investing more, then stick to it. Look at your budget at least once a week.
Save: Automate savings (as part of your budget) with a monthly debit order. A financial adviser will be able to guide you in determining your needs and goals and recommend the most suitable savings vehicle. Transfer excess cash to a money market account so you aren’t tempted to spend it. Let the money market fund accumulate enough capital to cover 3 to 6 months’ budgeted expenses to help you build up an emergency fund.
Invest: Once you have your budget under control and established a savings habit, your financial adviser will be able to guide you on investing in suitable products depending on your goals and needs. These can vary from a tax-free plan, retirement annuity (in the absence of a pension fund) and, over time, a local and an offshore equity portfolio too. If you pay tax at an average rate of more than 35% per annum, an endowment structure as part of your portfolio can also be considered.
Set goals: Your financial needs determine what your goals should be. These can be divided into shorter (1-year, 3-year), medium (5-year) and longer-term (10 years or more) goals and your capital should be allocated to the appropriate asset classes to help you reach each goal.
Review: Measure and review your goals against your plan at least once a year.
Protect: Your ability to earn an income, given the skill-set you have, remains the most important asset you will ever have. Protect your income-earning ability at all costs. The earlier you start, the more cost effective this expense becomes over time.
What if you don’t have your own income due to child rearing or other reasons? It is very rare these days for a woman not to develop the ability to generate her own income, and if a joint decision is taken that the woman should become the primary home maker, she is essentially doing so to raise children or to facilitate a partner’s life choices, or both. In doing so, she should realise that she is putting her own financial future in her partner’s hands and should either make peace with the status or negotiate a realistic financial plan that works for both parties to safeguard her financial position. Part of this plan would be to know what your position would be in the event of your partner’s death or disability.
If you struggle to create such a plan or to keep track with the complexity of the financial world, feel free to contact a reputable wealth adviser to assist you in your path to financial freedom.
Wynie van der Wath is a Wealth Adviser at PSG Wealth Paarl Cecilia Square. Contact her at wynie.vanderwath@psg.co.za or 082 780 1459.
