10 Things About Money Every Woman Needs to Know
As told by co-founder of Rappaport Reiches Capital Management, Shari Greco Reiches.
Some statistics about women and money are so well known that we take them for granted. Women live longer and get paid less. They are more likely to take time out of the workforce to care for children. It’s likely that at some point a woman will be in charge of her own finances.
All of these statistics scream out that women need to understand their financial situation. But statistics can’t capture the feeling that a woman has when she is suddenly on her own. I have seen it firsthand.
My father passed away at the age of 32, leaving my mom with me (eight-years-old) and a newborn son. Money was tight, but my mom was strong and found a way to make ends meet. She taught me the value of forging ahead. But the experience was formative for me—I knew my life’s mission would include empowering women to take charge of their money.
Empowerment starts with understanding these 10 things about money:
1. What to do “Just in Case”
Start with a “Just in Case” list that provides crucial information if you need to step in and take financial control. It starts with who to call (financial advisor, CPA, attorney) and where the money is (brokerage and retirement accounts, passwords). The more comprehensive the list, the better.
2. Sources of Income
Understand all sources of cash flow coming in, including business income, salaries, pensions, social security, and distributions from investment and retirement accounts. Where is the income deposited, and how frequently?
Track your expenses over the last 12 months and divide into 3 categories—Basics, Savings & Debt Reduction, and Wants.
- Basics include housing costs (mortgage, rent), children’s expenses, food, clothing, transportation, health insurance, and health care.
- Savings & Debt Reduction includes contributions to retirement accounts, funds added to savings or long-term investment accounts, and monthly non-mortgage loan payments.
- Wants include discretionary items such as dining out/entertainment, travel, and hobbies.
Compare your totals to this guideline: 50% of after-tax income spent on Basics, 20% on Savings/Debt Reduction, and 30% on Wants. Are some changes needed?
Track your assets, and put them into one of these categories:
- Liquid – Checking, money market, and savings accounts
- Investments – Brokerage and retirement accounts, other long-term investments
- Personal— Your home and other “big-ticket” items
Update your asset values on an annual basis. Is the total heading in the right direction?
What do you owe? Include your mortgage/home equity line of credit, credit card balances that are not paid off monthly, and any other loans. Is there a plan in place to reduce debt?
Your tax return provides a roadmap of all your income and assets. Have your tax advisor walk you through your annual income tax return.
What life and disability insurance is in place? Is it enough to pay off the mortgage and college expenses for the kids? Good questions for your family’s insurance advisor.
8. Wills and Beneficiaries
In the case of a death, where does the money go? A basic estate plan includes a will that designates who gets what. But some assets aren’t covered by wills. IRAs and 401(k) accounts are transferred according to a beneficiary form. Are these forms up to date? A conversation with an estate planning attorney may be needed.
9. Powers of Attorney
What would happen if a medical emergency left you or a loved one unable to make a tough medical decision? A health care power of attorney (POA) lets you name a trusted agent to step in. A property POA works in a similar manner for financial decisions. Check to see if you have updated POAs in place.
10. A Financial Plan
Women need to know the answers to the following questions:
- What is my plan for retirement?
- How much can I spend and be confident I will never run out of money?
- How much risk is in my investment portfolio?
A thoughtful financial plan incorporates decisions regarding saving, spending, and investing. It takes into account taxes, inflation, and projected portfolio returns. Do you have a financial advisor that can help with your plan?
I have one more item. While it’s #11 in my list of things about money every woman needs to know, it may be the most important. It’s knowing your Core Values—the priorities that you value most; the convictions about how you define yourself. Perhaps your Core Values include family, meaningful work, or giving back to your community. Core Values act as a guide, and provide clarity, as you face major life decisions. They can help you set goals and priorities as you decide how to spend your time and money.
About the Author
By Shari Greco Reiches, Co-Founder of Rappaport Reiches Capital Management. Shari is the architect of the firm's Maximize Your Return on Life Solution, which aligns clients' financial planning with their Core Values. Certified in Applied Behavioral Finance, She brings more than 30 years of experience in wealth management. Her book Maximize Your Return on Life - Invest Your Time and Money in What You Value Most was recently published.