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Going Solo
By Lee Matthew / Illustration by Robin McClannahan
Another way to say it is this: 90 percent of us will be making financial decisions on our own at some time in our lives. So, where our financial future is concerned, we'd better be prepared to "go solo."
There are many kinds of single women, and each has her own particular set of financial considerations. For example, if you're single with no children, your financial security is probably entirely up to you. So you may want to take full advantage of your employer-sponsored retirement plan, or set up your own tax-deferred plan if you're self-employed.
If you suddenly find yourself on your own, whether through widowhood or divorce, consider the following:
1. Don't rush; stop and assess your situation.
You may need help from a reputable financial adviser, so take the time to find someone you can trust. Get referrals from your lawyer, accountant and friends who have been in your situation. Talk to several advisers; typically, there is no charge for an initial appointment. Don't be afraid to ask questions, and stay away from any adviser who won't take the time to explain things in a way you can understand.
2. Go slowly with any important investment decisions.
Take the time you need to make decisions that are in your best interest. While you're feeling vulnerable, it's probably wise to avoid financial decisions that you can't change your mind about later. Beware of anyone who tries to rush you into investments you don't understand, especially with no overall strategy.
3. Stay focused on your goals.
Know what you want and move toward your goals at a pace that's comfortable. Remember the importance of both income and potential growth as you work toward developing a balanced financial plan. Stay up to date on your progress by conducting periodic reviews with your financial adviser, and keep reading and educating yourself along the way.
On the other hand, if you're a single mother, your children's financial well-being may have to come first, at least for a while; but you won't want to neglect your own financial future. If you're newly single, whether through divorce or widowhood, you may feel overwhelmed if you've never been involved in investment decisions, and you may be worried about making the money you have last as long as you'll need it.
But whatever your specific concerns, there are some basic steps every woman can take toward developing a financial plan.
1. Know where you stand.
You have to know where you stand financially before you can get where you want to go. Begin with your cash flow, which is a summary of where your money comes from and where it goes. Make your list as detailed as possible, because the cash flow is really a picture of the day-to-day decisions you are making about your money. The clearer your picture, the easier it will be to evaluate your decisions and make the changes you want to make.
Next, draw up a statement of your net worth. This is a snapshot of your financial position as of a given date. It summarizes everything you own (your assets), and everything you owe (your liabilities). Typically, the net worth is updated every year or so, as you work toward meeting your financial goals.
2. Decide where you want to be.
This is the process of setting financial goals: What and where do you want to be, and when? For example, you may want to buy a house, or contribute to your children's education, or retire comfortably. Closer goals may include buying a new car, or taking a special vacation. Sometimes, especially if you're going solo for the first time, goal-setting involves a re-evaluation of what's important to you and how you want to live. Give yourself enough time to think through your goals, remembering that, like net worth, goals are periodically revised and updated.
3. Develop a financial plan you can understand and follow.
The first step to a good financial plan is education. Where money and investing are concerned, knowledge is power. So learn as much as you can about financial markets and how they work, including such concepts as compound growth and diversification. Find books and magazines that explain these ideas in a way that's understandable to you. Take a class or two; many women learn better in a group setting. And find a financial adviser who is committed to educating you.
Many women delay getting started on a financial plan because they're afraid of getting trapped by decisions they'll later regret. But the truth is just the opposite: Your biggest mistake would be never to make a plan at all. By all means, go at a comfortable pace -- but do get started. Remember that a financial plan is nothing more than a map or guide.
*
Lee Matthew is a financial planner.
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Tuesday, October 5, 1999
Prepare now to pilot your own financial affairs
ACCORDING TO the U.S. Census Bureau, the average woman today spends more of her adult life unmarried than married.
Does this surprise you? Consider this: One-fifth of us never marry at all. Nearly half of our marriages end in divorce. And three-fourths of women who are married now will eventually be widowed.
Suddenly Alone
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