Take Control, or Be Controlled!
Updated: Feb 2
My previous blog topics got right to the meat of the stock market, what it was doing, and what you should be doing based on what happened in the stock market the previous week. Not a bad approach, but I want to switch things up and focus less on the market and more on you and what you should be doing to take control of your financial future.
For the readers who love the technical aspect of what is moving the market and how the market performed, not to fear, I will still have a weekly summary, it just won’t be the main focus.
The state of women’s financial health seems to be the topic du jour these days. I agree with the dire picture that is being painted because I have seen first-hand some of the financial challenges that women face, and it isn’t pretty.
I want to start the topic of Taking Control by sharing 10 stats that I found interesting and that I hope you find eye-opening and motivating.
Only 7% of women are “very confident” in their ability to fully retire with a comfortable lifestyle.
40% of women fear ending up broke and homeless.
Just 33% of women have a detailed financial plan in place, and, among women ages 25-34, just 10% has a financial plan in place.
59% of women who estimate their financial needs guess what their retirement savings needs would be rather than using a calculator or advisor.
60% of women over 65 cannot afford to cover their basic needs.
Social security replaces only about 40% of workers’ prior wages.
Over 90% of women feel they need to be more involved in financial planning.
86% of women do not know how to invest or choose a financial product.
62%of women expressed strong interest in learning more about finances and retirement planning.
53% of women want information that is easier to understand.
Stats courtesy of Women & Money Magazine
There is no sugarcoating the fact that, in general, women are behind the ball on financial planning and creating a sound financial future. I know that most women are not interested in money for money’s sake and don’t’ define success by how much money they have in the bank. That’s great, however, a big part of financial planning is gaining control over your future, and goes beyond just accumulating a lot of money in the bank.
Like the title says, if you don’t Take Control, then be prepared to Be Controlled! How, you ask? Here are some ways that not having a financial plan or even a few hundred dollars in savings or investments keeps you controlled:
You are helpless in the event of an unexpected illness (you or a family member), and are at the mercy of whatever help or charity is rendered by others.
You are beholden to your job and are helpless if there are layoffs where you work.
You don’t have the freedom to pursue a dream or passion (even if it is just for a little while).
You don’t have the freedom to leave an abusive or unfulfilling relationship.
You don’t have the ability to support yourself in case of separation, divorce, or the death of a spouse/partner.
You are saddled with the knowledge that you will work past retirement age, because you HAVE to and not because you WANT to.
You are unable to help your kids, grandkids and other loved ones with your time or resources because your time is not your own and you don’t have the freedom to choose how you spend it.
It’s not a pretty picture. Think of how this picture could look different, if you take control and plan your financial future. Take a look below at how waiting to take financial control can impact your nest egg (aka your peace of mind!)
As the graph illustrates, if you start investing later, it is hard to catch up with someone who started earlier even when you double or triple your investment amount! A 25 year old who invests $100/month will have more money by age 65 than a 35 year old who invests double the amount, or a 45 year old who invests triple the amount.
The takeaway message: Take control and start now, not later!
Your first steps towards Taking Control
Five steps that you should take right away, if you haven’t already.
Think deeply about your dreams and the type of future you want for yourself. For instance, do you dream of retiring at a certain age and living a certain lifestyle? Do you dream of leaving the workforce (permanently or temporarily) to pursue a passion, raise kids, or volunteer? What is your dream?
Determine how much your dream will cost. How much do you need to have saved to retire at the age you want? How much do you need to have saved to take a year off from work? There are calculators to help you determine this. Here are a few that I like: http://www.bankrate.com/calculators/savings/saving-goals-calculator.aspx and http://www.bankrate.com/calculators/retirement/nest-egg-calculator.aspx
Create a budget. List all the income that you have coming in, and all your expenses. Separate “wants” from “needs”. Be honest with yourself.
What is the gap between what you need to save and what you are able to save? Don’t be intimidated by how wide the gap is. Knowing where you are now and where you want to be in the future is a HUGE step. Carve money out of your budget towards closing that gap. It may mean giving up a “want” that you love. Do it; your future self will thank you.
Finally, start to improve your knowledge on investing. Reading this blog is a great first step. I also recommend reading my book Fifty Shades of Green, which simplifies investing and makes it easy to understand.