While many women have no problem cutting coupons or finding a great deal, they may lack interest in long-term financial planning.
According to a 2012 Time Magazine report, “More than a third of American women are the family breadwinner, yet still tend to pass the buck on important money matters, such as investing and retirement.” Additionally, many of us know someone who has suffered a personal setback and experienced financial difficulties as a result. Perhaps you yourself fit this description. Bottom line: It is vital to know about your personal finances, even if you aren’t the one paying the bills.
Janice Goldman Picker was just 35 years old and pregnant when her husband passed away. She’d assumed her husband had their family’s finances in order, but was shocked to find she was left with nothing and her husband’s life insurance policy was given to his ex-wife. Rather than fall apart, Goldman Picker seized this opportunity to take charge of her financial life.
Today, Goldman Picker is an accomplished financial advisor who is devoted to helping others, particularly women, become financially secure and independent. “It’s very important for a woman to establish credit in her own name,” she says. “Especially in this economy, many successful men, whom you would never suspect, have gone through bankruptcy or foreclosure. Some have even done this as a financial strategy to survive the challenging real-estate market. If you are married to someone in that position, the wife’s credit may be the only way you’ll be able to secure a mortgage, a lease, a car or a credit card.”
Heather Wright, a Senior Financial Advisor at Merrill Lynch, explains, “It is common knowledge that women tend to live longer than men. Therefore, it is important for women to establish their own credit for life events and monetize assets into their own name. For example, the sudden death of a loved one leading to an inheritance or transfer of assets into the wife’s name can be overwhelming. There are organizational tools that we use at Merrill Lynch to help clients know what accounts they have, where they are located and what names the accounts are under.”
If you’ve never been responsible for your finances before and want to start taking control, “seeking the help of a financial advisor is a great place to start,” Wright says. “Understanding the family finances is essential to creating a budget and knowing what cash equivalents and investable assets are available in order to develop a clear financial picture of the family balance sheet.”
Goldman Picker recommends these three steps to start taking control of your financial responsibility:
1. Read one thing every day about money. (The Wall Street Journal or New York Times business sections are good places to start.)
2. Have a weekly conversation with someone about money. You may learn something new just by listening.
3. Automatically pay yourself. Start a plan where you are putting away money monthly in a Roth IRA or another type of savings plan.
Tools to help you establish your own credit:
- Set up a budget according to your actual expenses and adjust where necessary
- Establish credit in your own name
- Obtain your credit reports and analyze them to maximize your score. Many times there are old issues that need to be cleared up first.
- Consolidate your investment accounts, as it’s much easier to manage your portfolio this way.
- Know your net worth, the mix of asset classes in your portfolio, the return on your investments and the risk you are taking to get that return.
- Do not feel intimidated by your financial advisor. Make sure the ultimate decision is yours when it comes to a financial investment.
Want to know more about building and establishing your own credit? Read “How to Build Your Credit Score.”
