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The words, women and investing have traditionally not been associated; just like a polka dot skirt and a plaid blouse – not a likely combination. However, with record numbers of females in the workforce, along with changing attitudes about gender, old barriers and 'glass ceilings' are being shattered. Though investing may be gender-blind, a proper strategy should not be. Women tend to live longer and will likely earn less than men, so their investment strategies must take these factors into account. That said, putting their money to work clearly becomes more critical. Here are a few tips to get started:
1. Before you begin building your financial portfolio, sit down, take out a pen and make a list of everything you own (cars, cash, bank accounts, stocks, bonds, etc.) and everything you owe (credit card balances, student loans, etc.), and be brutally honest.
2. Rank all of your debts by the interest rate you are paying; beginning with the highest. Decide how much you can afford to dedicate to debt reduction each month from your regular income and attack accordingly. The sooner you eliminate high rate debt, the sooner you will be able to start building that nest egg.
3. Investing and perfection don't go together - don't worry about not knowing enough. The key is to get involved and improve over time. An investment advisor can help take some of the fear out of investing - just be sure to find one that's right for you. Simply take the time and muster the strength to sit down with an advisor, so a course can be charted. After all, this service is free!
4. Diversification is important in putting together a complete portfolio. Don't be afraid to take some risks; remember you're investing for the long term. The stock market is currently in a bearish mode, so including some undervalued stocks is clearly advised at this time. Sometimes it's best to run ahead of the 'herd'.
5. Entertain frugality – the cost of grooming is by far one of a woman's most costly habits; a necessary 'evil' if you will. However, this 'evil' does not have to send you (or keep you) in the fiery pits of financial hell. Instead of visiting the salon every week, try alternate visits, with you picking up the slack in between. This practice over a few years will save you thousands of dollars that would've been invested to earn attractive returns.
6. Exercise discipline in sticking to the charted course. The key to success is making intelligent decisions and sticking to the basics. There is nothing mysterious about building your portfolio; it is realised through a culmination of small, well-organized, choices.
So you've just found out that you are pregnant, pretty exciting! Like any good parent, you are already planning all the great things you are going to do for your child, and how special that child will be. You decide he/she will go to the best schools, become a lawyer, doctor or engineer. But then you take a look at the cost of good education and fall into despair, as you realize that these aspirations, though noble, can certainly prove to be a challenge. Fret not! Like every other situation in life, being prepared will always give you the edge. Preparation in this case should take the form of careful planning, to ensure that you are able to provide for all the educational needs of your child.
The first step is to gather information. Determine which schools you would like your child to attend and gather information on the costs involved for tuition, books and other miscellaneous expenses. Next, prepare a time line to determine how much time you have to prepare yourself to meet the costs related to the different stages of your child's education development. Then prepare a budget, detailing your current income and expenditure, so that you can determine how much you can afford to save on a periodic basis, towards this particular goal.
Once you have your information, time line and budget, it will be time to get busy. Procure the assistance of a licensed investment advisor, who can assist in the next steps of the planning process - designing your investment portfolio.
Choosing your investments should be your next step, and a very important one. Take a careful look at the investment options available and determine which are best suited to you in terms of the risks and returns, as well as flexibility. Given that goals of this nature are generally long term, minimizing your tax-burden should be an important consideration. A 25% withholding tax is levied on interest for most investment options, over the long-term, this 25% can add up to a significant amount. For example, the difference in return over a five-year period on $500,000 at 15% p.a. invested in a tax-free account, as opposed to a taxable investment is over $150,000. There are however options that allow you to avoid this burden. Tax-free fixed income investments are great for the more cautious individual, allowing you to maximize returns on a relatively secure investment. For the more adventurous, equity-linked investments represent an excellent way to maximize your returns over the long run, all tax-free!! And, if you are unable to manage your equity investments on your own, there are managed funds available, which take away that hassle, while still providing you with impressive returns.
Having determined how much you can afford to invest towards this goal, how long you have to achieve this goal, and the investment vehicles best suited for you, it is now time to hit the ground running. Do not delay. This is a common mistake that can render your goal unnecessarily difficult, if not impossible. Remember, consistency is key. No matter how small, committing yourself to consistent savings will set a trend that will bear fruit in the years to come. The value of interest compounded over several years is remarkable. J$5000 invested monthly in a combination of fixed income and equity investments over 16 years can realize over J$12 million.
So, make that call, speak with an investment advisor, set the right path to your child's future, it's never too late. Do not let opportunities pass you by, make the necessary sacrifices now. In years to come, when your professional son/daughter goes off for the first day at work, you will be glad you did.
Prior to writing this article, I called a few single women to find out what they do with their money on a daily basis. These are some of the responses I had received; "I don't have any children or any major responsibilities now, therefore, I can afford to spend money on myself. In fact, I had better do that now because when things change (e.g. if I have a child) then my priorities will have to change."
"Because I am single, I am a target for sales people. They visit the office with jewelry and clothes soliciting a sale from me. After all, I can afford it." "There are no parties that I miss. Money is put aside just for these occasions and I party every week." "No movie, play or any other event such as the jazz festival can miss me, and I must have a spanking new outfit for all of these events."
The common trend in these discussions reflected that plans were being made for immediate needs only. Planning for retirement, ensuring that monies exist in case of emergencies, or plans to pursue further education were not considered by these women.
This is a step-by-step plan for single workingwomen, to ensure that they enjoy financial security in the future.
Ascertain how much money you have each month, i.e. how much do you get paid weekly, fortnightly or monthly.
Write a list of all the things you spend your money on daily and monthly. It would be useful if you include all annual events that you attend, the amount of money saved each month, how much money you loan to friends and relatives, how much money is spent on clothes, and how much is paid monthly on credit cards. Determine what your needs are versus your wants, bearing in mind needs are things you cannot do without.
List the areas you are currently overspending in, or areas that you think you can cut back on, and start cutting back immediately.
List all your goals in life. Determine how much you will need to save each month to achieve these goals.
Build a budget and stick to it. This is necessary to control overspending. Establish how much money you will spend each month, as well as how much money you will need to save.
Invest your savings into an account that will help you to achieve your goals. Call all the investment institutions and see which one will best help you to achieve your financial goals. Ask about standing order arrangements, as these will help you to be disciplined in your investing.
Make your single life really count, stop overspending and start saving towards your future. The earlier you start, the more beneficial it will be for you. So start today!
We all want to live in our dream home, send our children to the college of their choice, and retire comfortably so that we can do whatever our hearts desire. The key is knowing how to do it!
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