As women over 50, we stand at a pivotal crossroads in our lives where financial security becomes not just a goal but a necessity. It’s a time to evaluate our finances for prosperity and stability. In my financial planning work over the last 20 years, I’ve found commonly overlooked areas that impact financial health. Below, I have outlined the key areas that deserve your attention:
Understand Your Relationship with Money
First, it’s essential to reflect on your relationship with money. Our feelings about money profoundly impact our financial decisions. Understanding your financial fears and aspirations can guide you toward more fulfilling and wise financial choices.
Craft a Spending Plan
Next, understanding and managing your cash flow is crucial. It’s not just about how much you have coming in, but where it’s going. This step does not need to be complicated — and shouldn’t be. Creating a spending plan helps you understand your spending needs versus wants. It can help you pinpoint unnecessary expenses, and reallocate those funds to areas more important to you such as saving and investing for long-term security.
Gain a Basic Understanding of Investments
Investing plays a key role in securing your financial future. It’s essential to review your portfolio and ensure it aligns with your risk tolerance and retirement goals. Diversification is key. Get a basic understanding of how to balance stocks, bonds, and other investment options to optimize your portfolio’s performance.
Educate Yourself on Income Taxes
Taxes can take a significant bite if not carefully planned, but many people have no idea how their income is taxed. This can be a very costly oversight. Understand how your income, investments, withdrawal strategies, pensions, and Social Security benefits impact your tax liabilities. Strategies like tax-loss harvesting or contributing to Roth IRAs can offer tax-efficient ways to manage your income in retirement. That said, this is not a one-size-fits-all situation. Get a basic understanding of how income is taxed so you can understand if recommendations make sense. Then, if you want additional guidance, have your tax preparer or financial advisor work with you on a tax plan or income recognition strategy.
Plan for Incapacity and Your Estate
Estate planning is something many shy away from, yet it’s one of the most crucial steps in managing your finances. It ensures your assets are distributed according to your wishes and helps avoid unnecessary stress for your loved ones. Likewise, incapacity planning through directives and powers of attorney ensures your affairs are in trusted hands should you be unable to manage them yourself. Often the focus is on creating documents, but it’s essential to understand there is more to it than the documents. Understand the documents, what they cover, and what they don’t cover. Obtain a letter of instruction from your estate attorney to complete actions such as changing, title on assets, naming beneficiaries, or listing power of attorney agents on accounts so you have everything in place to fit your plan.
Understanding Insurance Needs
Insurance needs evolve as we age. Evaluate your health, long-term care, life, and property insurance coverages (including personal umbrella liability coverage) to protect yourself against unforeseen expenses that can undermine your financial security.
Credit Rating and Identity Protection
Maintaining a strong credit rating and safeguarding against identity theft becomes increasingly important as we age. A solid credit rating ensures access to credit when needed, whether for refinancing a home, buying a car, or getting insurance. It’s also crucial for securing favorable loan terms and interest rates. Additionally, identity protection is paramount, as women over 50 can be particularly vulnerable to identity theft, which can severely impact financial health and creditworthiness. Periodically monitor your credit reports and be cautious about sharing personal information. By law, you are entitled to a free credit report once-per-year, from each of the three reporting agencies. The legitimate website to access your free report as authorized by Federal law is: annualcreditreport.com. The reporting firms may try to sell you additional services or your FICO score. You do not need to purchase these items. Stay with the free option and download your report to see if there are discrepancies. If you note an issue in your report, follow the instructions provided by the reporting agency to alert them of the matter.
Efficient Document Management
Keeping a well-organized record of your financial documents, including estate and incapacity information, passwords, insurance policies, and investment records, simplifies management and eases the burden on your loved ones.
It’s never Too Late
It’s often said it’s never too late to take control of your finances. While it can sound like a cliche, it is true. Empower yourself with knowledge, seek professional advice when needed, and step confidently into your future, knowing you created a solid foundation for your financial well-being.
