A Woman’s Guide to Money

Edited by Shayna Mace

Money can be a touchy, taboo or welcome topic, depending on who you talk to.

Some women freely share what they make, how much their house cost or what they spent on a lavish vacation. Others are more tight- lipped, choosing to keep their money matters private. No matter which camp you fall into, at some point, you’ve had a question about money.

Your Budget

What should I prioritize when creating a budget — paying off debt, or saving for emergencies?

Afra Smith, founder of The Melanin Project: “It is critical to prioritize saving for emergencies. Without accessible emergency cash, debt may rise, jeopardizing your budget stability.

Establish an emergency fund before tackling debt repayment. I recommend allocating a minimum of $1,000 in your emergency fund. Do this first by paying only the minimum on debts until that sum is reached. Ensuring the presence of this fund helps to safeguard against financial setbacks and supports effective debt reduction.

Regularly assess and replenish the emergency fund if it falls below $1,000 to maintain a reliable safety net during financial challenges. Additionally, aim to set aside at least 5% of each paycheck for your savings account. This balanced approach ensures debt reduction and financial security go hand in hand.”

How do I balance saving for my child’s education and also retirement?

Meg Prestigiacomo, director, the Prestigiacomo Carroll Group, Private Wealth Management, Baird: “There are no loans for retirement; however, there are sources of funding for education in addition
to your own savings, such as loans, scholarships and utilizing your cash flow when your kids are in college. Making smart decisions about education goals is important to avoid excessive debt loads for the student and/or the parents.

I recommend you start something when your child is born. This can be a 529 plan (like with Edvest) or a savings account. When family and friends give money for birthdays and holidays, stash that in the education account. If you have large day care expenses, when your child starts elementary school, take those extra funds and invest them in that account.”

The Lowdown on Investing

I have no idea how to begin my investing journey. Where do I start?

Jenny Giemza, senior vice president, Wealthspire Advisors: “Investing in yourself needs to be a priority! If your employer offers a 401(k) or other retirement plan, inquire with your HR department on how you can
participate in this. Employer retirement plans tend to be the cheapest opportunity to invest with the greatest resources, and many offer a matching contribution which should be maximized — don’t leave ‘free’ money on the table!

If you’d like to have more flexibility with your investment choices, explore reputable brokerage platforms such as Charles Schwab, Fidelity or Vanguard. These large firms should be competitive when it comes to trading fees, costs, et cetera. Vanguard offers very low-cost index funds, allowing a do-it-yourself investor the ability to create a very diversified portfolio. The more time you have to invest your funds (i.e., the younger you begin investing), the more risky you can be with the investment options.

For funds needed in the short-term (i.e., the next one to three years), you’ll want to protect these funds by exploring options such as brokerage money markets, bank CDs or Treasuries.”

What if I’m maxing out my 401(k) at work? What else can I invest in?

Elaine B. Rich, CFP®, founder, wealth advisor, EnRich Financial Partners: “If you have already maxed out contributions to your 401(k) plan and you still have excess cash to invest, consider opening a taxable brokerage account and a Roth IRA.

The first option is open to anyone regardless of your income, and if you invest in stocks, your annual tax liability will be limited to the amount of your interest, dividends and realized capital gains — most of which are taxed at favorable tax rates.

Contributions to a Roth depend on your household income. The future growth in a Roth becomes tax-free as long as you hold it for five years and are at least 59 1⁄2 years old at distribution. You may always distribute your original contributions tax-free.”

The Golden Years

Do I have enough money to live on for the rest of my life?

Elaine B. Rich: “This is one of the biggest questions I get as a financial planner. Here’s what you need to consider:

  • Assess your current income and expenses as well as project your expected future income and expenses, including income taxes and factoring for inflation.
  • Determine your goals for retirement or how you envision living your life in retirement. Take into account travel expenses, housing arrangements and possible long-term care expenses.
  • Evaluate your current savings rate as well as the amount of any employer-provided contributions. If you are struggling with how much to contribute, there are many online resources that can help you, such as the four- input calculator at Vanguard (Google “Vanguard Nest Egg Calculator”) and the one my own firm offers (find it at emaplan.com/4a). The important thing is to get started as soon as possible and adopt practices that get you quickly comfortable living on less than you earn.
  • Make sure you are investing your money in stocks,
    and not just a savings account. Savings accounts consistently yield less than or about the rate of inflation long-term — and that’s before income taxes. Investing in stocks over a period of at least 10 years has historically provided returns that are three to four times that of inflation. Doing so will increase the likelihood of not running out of money prematurely.
  • Reevaluate your plan and progress toward reaching your goals. Life circumstances change! Make adjustments to your savings rate and goals as needed.”
How much should I be saving for retirement?

Meg Prestigiacomo: “Everyone’s circumstances can be very different, so really the correct answer can be determined by meeting with a financial advisor to help you figure this out. The general rule of thumb is that you should be saving 15% of your income for retirement, and this should start in your 20s. If your employer makes a contribution, then that is included in the 15% guideline. For instance, if your employer contributes 5%, you only need to set aside 10%. If you are unable to save 15%, then start small and increase annually and/or when you receive a pay raise. Depending on your goals and existing resources, you may need to save more or less.”

The Biggest Money Mistakes to Avoid

Jennifer Ridley Hanson, CFP®, CDFA®, director of wealth planning, senior wealth advisor and partner, at SlateStone Wealth, dispenses some essential advice.

  1. Not being aware of your family’s finances.
    “Take an interest in your money. It’s easy to delegate decisions to a partner or family member, but that won’t help if you must suddenly figure things out on your own. Know the passwords for online access to your joint accounts. You do not have to become a financial expert; you just need to gain a solid understanding of your overall financial picture so that you know what you own, where it is located and how to access it when you need to.”
  2. Being too conservative with your long-term investments.
    “We know that women live longer than men, so we need to accumulate more money to fund a comfortable retirement. Women usually are less comfortable taking risks with investments. While investment risk sounds scary, there is a direct relationship between risk and reward. The risk associated with a growth-oriented, long-term investment is typically a risk worth taking over a long enough time period, as the ups and downs of the stock market’s volatility tend to smooth out over time. Remember that there is also a risk of outliving your assets if you are not investing to at least keep pace with inflation.”
  3. Not having a handle on your debt.
    “Have a solid plan to pay off credit cards as fast as you can. Playing the credit card balance transfer game doesn’t help unless you are paying down the balance and not adding to your debt at the same time. If you take advantage of a low or zero-percent ‘teaser rate,’ you should be making more than the minimum payment each month so you can pay off that card balance in full before the rate goes back to the usual 21% — or more.”

Talking Taxes

I give charitably throughout the year, both money and items. What tax benefits are there to this?

Carrie Waters Schmidt, MS, CFP®, CDFA®*, AWMA®, ADPA®, CSRICTM Financial Planner, Equanimity Wealth (a registered representative of Lincoln Financial Advisors): “On your income taxes, you’ll need to exceed the standard deduction, which is the combination of your property taxes, mortgage interest and charitable donations (as well as a few other items) in order for any of those items to be deductible from your income taxes — as in, reduce the amount of taxes you may owe.

For 2024, the standard deduction is $14,600 if you’re single, or $29,200 if you’re married and file jointly. If you are close to the standard deduction, then saving all your Goodwill and St. Vinny’s receipts and monetary donation records is worthwhile — but otherwise it’s likely not.

If you’re over the age of 70 1⁄2, you can bypass this by gifting directly from an IRA through a qualified charitable distribution.”

Organizing Your Estate

What is an estate plan? What documents comprise an estate plan?

Carrie Waters Schmidt: “An estate plan speaks on your behalf upon your death. It’s made up of several documents and beneficiary designations. It’s important to note that everyone should have an estate plan to clearly state how you want your assets distributed and dictate whether or not you can avoid probate. An estate plan includes:

  • Beneficiary designations: Most people think their will is going to direct distributions of all their assets upon their death. But, many of their assets have beneficiary designations that trump the will. Typical assets that have beneficiary designations are life insurance policies and retirement accounts.
  • Asset titling: Similar to beneficiary designations, people often forget that the titling on their assets trumps their will. If an asset is owned by you and your mom as Joint with Rights of Survivors (which is often the default ownership type), at death your mom will get those assets, not your spouse or your kids.
  • Last will and testament: This states how you want your assets divided and lists guardians for minor children. You can also include a testamentary trust for your kids in this document so you can outline at what age you want your kids to have full control over any assets they inherit from you.
  • Healthcare and Financial Powers of Attorney: This describes who you want to act on your behalf if you become incapacitated or cannot express your own wishes.
  • Living will: This outlines whether or not you would like to utilize life-sustaining procedures in the event you have a terminal condition or are in a persistent vegetative state.”

What to Consider When Starting a Business or Side Hustle

Jill Mack, VP private and commercial banking at Capitol Bank, says to start with these steps.

  1. Set clear financial goals. Develop a solid business plan with financial projections to determine how much you need to start your business or side hustle. Create a detailed budget for the business/ side hustle. This will give you a clear picture of the financial resources required and help you plan accordingly. There are resources, like SCORE (Senior Core of Retired Executives), that can assist you.
  2. Create a financial plan. Start
    by assessing your current financial situation, including your income, expenses and savings. Identify
    areas where you can cut back on unnecessary expenses and allocate those savings towards your business. Consider consulting with a financial advisor to create a comprehensive financial plan.
  3. Explore funding options. Talk with your banker about loan options, whether they are Small Business Administration guaranteed loans or conventional bank loans. Research and explore grants, and crowdfunding options.
  4. Start small. Consider starting on a smaller scale. Begin by offering your products or services to a limited group or within your local community. As your business grows and generates revenue, reinvest the profits back into your business and then expand to reach a wider market.
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