When it comes to money, what keeps women up at night? Northwestern Mutual’s 2016 Planning & Progress study reveals 87 percent of women feel anxious about their finances due to unexpected expenses, health care costs, credit card debt and more. Saving for retirement gives 29 percent of women the most anxiety, the study found.
My advice to women: Don’t let financial fears get in your way. With the right tools, information and a confident mindset, you can help overcome common money worries and be in a better position to achieve your goals. The key is answering five questions:
1. How can I sharpen my budgeting skills for retirement? Making the switch from earning a steady paycheck to relying on your retirement income can be tough. Retirement brings changes to not only your lifestyle, but to your budget as well. And there are additional factors to consider when mapping out your spending and saving, such as life expectancy.
The U.S. Department of Labor estimates there is a 50 percent chance that a 65-year-old woman will live to 90 and an equal chance that a 65-year-old-man will live to 88. These additional two years of expenses make it essential for women to have a clear picture of what their financial habits in retirement should be.
For women 50 and older, worries about debt might start to build due to lingering loans, medical bills and more weighing heavily on their shoulders.
Give yourself a trial run of what your new budget will look like before you retire. It’s helpful to calculate both your needs (the essentials) and wants (discretionary purchases) before seeing how these compare to any additional sources of retirement income you may receive, such as Social Security or a pension. By mapping out a complete list of assets and expenses, you can better visualize a plan for the future.
2. Will I ever be debt-free? According to the Northwestern Mutual study, 30 percent of women say eliminating all their debt would have the most significant impact on improving their financial situation.
For women 50 and older with retirement on the horizon, worries about debt might start to build due to lingering loans, mortgage payments, medical bills and more weighing heavily on their shoulders. In addition, since women are more likely to leave the workforce to care for their children or ailing relatives, this can mean less time to put aside money toward wiping out debt. Coupled with other factors, including the wage gap and unpaid maternity leave, the stress women face to pay off debt with fewer resources can heighten.
To put yourself on track, ramp up your repayment (where you can) to eliminate debts more quickly. Consider using the debt avalanche method — tackling debt with the highest interest rates first. While it might pinch your wallet in the short run, this strategy pays off long-term by saving you the most money.
3. If the unexpected happens, am I ready? Put another way: If your life suddenly changed without warning, would you be financially prepared? The thought alone is enough to induce anxiety and stress about the future.
There’s no way to truly anticipate every unexpected medical expense or home repair over the next 25+ years, so contributing regularly to an emergency savings fund can be key to achieving financial peace of mind. Create a plan for monthly contributions, making it a goal to add increasing amounts as retirement nears.
Beyond your own financial security, also consider ways to keep your family’s goals on track. A financial expert can recommend a life insurance or disability plan to protect your family’s financial assets if something were to happen to you. Knowing you’ve taken steps to toward financial protection can ease fears of an uncertain future.
4. How can I leave my legacy? Ask yourself: “Where do I want to leave an impact?” Maybe it’s important to you to have enough money put aside for funding your children’s college careers, the wedding of your daughter’s dreams or a donation to a community organization that has made a difference in your life.
Once you’ve mapped out your goals for retirement and beyond, it’s time to revisit your estate plan. Though you might have already started important decision-making such as creating a will or trust or naming power of attorney for your finances, have you kept these up to date? With every major life event (divorce, having children, a dramatic income change), make sure your estate plan reflects those changes. By having a written estate or legacy plan, you can enjoy peace of mind that your wishes will be honored the way you intended.
5. Where can I get help? Being fully informed is a key step toward worrying less about finances. The best method for success is knowing what your options are and the strategies to make them work for you.
A financial expert is a great resource for this information and for tailoring a holistic plan that fits to your lifestyle and needs. Yet, as Northwestern Mutual’s study shows, only 33 percent of women report working with a financial representative. Partnering with a professional on this journey can help reduce some of the pressure and remind you that you’re not alone.
Don’t let financial worry determine your choices. Take control of your financial plan. By investing yourself in these strategies, you might even find that your confidence was there all along.
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