by Tenielle Shellman, Manager—Central Planning, Wealth Enhancement Group

Whether you are a single or married woman, working or stay at home, young or mature it is important that you are involved and understand the basics of wealth management. Statistically, women live longer than their male counterparts, so it is important that we plan for a longer life expectancy.

No matter what your situation is, it is important to create a plan for achieving your financial goals. The first step is to define your goals and dreams for the future. Be as specific about your goals as you can be. If you are married, it is important for you to define your joint goals with your spouse as well as the individual goals you may have for yourself. Remain focused on your goals and evaluate them often. Associate time frames with each goal and identify the possible obstacles and benefits for achieving each goal. Also define how important it is to achieve each goal. Treat each goal as an expense and contribute toward all of them regularly.

Next, it is important to establish a budget. Again, if you are married, this is an exercise that you and your spouse should create and define together. Begin by identifying your monthly fixed expenses (mortgage/rent, utilities, insurance, etc.) and irregular expenses (purchasing a new car, maintenance for homes or autos, etc.). Reviewing checking account statements, credit card bills and receipts that you have retained may help you track and identify these expenses. Next, identify any income sources such as wages, dividends, and interest. Based on your income and expenses, then determine what your excess cash flow may be. Based on any leftover cash, divide your goals into short-term (purchase a new home, take a vacation, etc.) and long-term objectives (children’s college tuition, retirement, etc.), and determine what you can afford to contribute to each goal regularly to begin a systematic savings plan. If you find that there isn’t any excess cash flow each month, then this exercise may help you identify what discretionary expenses you may be able to cut. With any budget, it is important to continue to evaluate and monitor your expenses against your planned budget and adjust when and where necessary.

Next, create a net worth statement. This would include your joint assets as well as your spouse’s assets if you are married. Be sure that you have an account established as an emergency reserve fund. Typically it is recommended that you maintain a liquid account of at least three to six months of your living expenses.

If one of your goals is to plan for retirement, you will want to estimate your retirement need. A common rule of thumb is to assume 60 to 90 percent of your current expenses, however I would caution against assuming a certain percentage without evaluating your own specific situation and goals. Go through your expenses in detail and think about how they will change as you transition into retirement. What expenses will go away, increase, or decrease? What new expenses might arise?

Following are some common financial mistakes that women make when creating and developing their financial plan:

1. Saving for their children’s college education and not their own retirement.
   
2. Not taking advantage of employer-sponsored retirement plans, especially if there is a matching contribution made by the employer.
   
3. Not making contributions to other retirement accounts, like an IRA or Roth IRA, if they meet certain qualifications.
   
4. Underestimating their need for life insurance for themselves and their spouse.
   
5. Not planning for a lengthy retirement in which they may outlive their assets.
   
6. Not being involved and understanding their household finances until a life transition occurs, like the incapacitation or death of a spouse.
   
7. Not planning for major expenses such as the cost of a nursing home or assisted-living facility.