How to invest in SIPs with erratic income?

incomeRecent media blitz by Mutual Funds about the Systematic Investments plans or SIPs has helped establish them as an easy and effective tool for wealth creation. However, I still come across a large section of people in the self-employed category staying away from SIPs. Since they have erratic income flows and unsure of their cash flows they are wary of committing themselves to fixed periodic investments.  Well my solution to them is to use Systematic transfer plans or STPs to get the same benefits as in a SIP.

How it works?

Self-employed or anyone with erratic cash flows can first park their money in liquid schemes and then invest a fixed amount using STP in an equity mutual fund.

For example: You currently have surplus Rs 20,000 in your account which you want to invest in an equity mutual fund. You first invest this into a liquid scheme and then use STP to transfer a fixed amount to the equity mutual fund. You can keep adding the money to the liquid fund as when you have a surplus. STP works just like SIP, it staggers your investment over a period of time and helps maintain a balance of risk and return

Transfer facility is available on a daily, weekly, monthly and quarterly interval.

How do you gain?
In an STP, the money remains invested in a liquid fund till it is transferred to equities. This money earns a return, which is generally higher than that of a savings account. STP helps in averaging out the cost of investors by purchasing fewer units at a higher NAV (net asset value) and more at a lower price.

#AspirePFS  #SIP #STP #MutualFunds #Investments

5 issues women face in their finances as breadwinners

For women who are breadwinners, their financial issues are different.By Dawn Doebler | @HerWealthBWFM

Women are increasingly earning more money and significantly contributing to their household income. In fact, nearly two-thirds of women in the U.S. are now the primary breadwinner or co-breadwinner in their family. Today, they are also much more likely to head families on their own as single breadwinners.

Women as breadwinners are a relatively new phenomenon that came about as a result of several societal shifts. For starters, women are now more educated than ever before, and they are putting that education to work by making up nearly 50 percent of the nation’s workforce.

Women now earn more degrees than men. According to a Catalyst study, for the class of 2013-2014, women earned more than half of bachelor’s degrees (57.15 percent), master’s degrees (59.9 percent) and doctorate degrees (51.8 percent).

Secondly, since many more women pursue higher education, they are delaying other life events such as marriage and having a family.

While women now have more choices about whether to work, those choices add complexity to their financial decisions, especially when compared to families living out traditional roles. For example, if a woman defers childbearing into her 30s, she faces the difficult challenge of paying for her children’s college education while at the same time maximizing her retirement savings.

The third shift is that many more women are, quite unexpectedly, entering their 60s solo.

That often means they will work out of necessity and will need to manage their finances differently than their friends or family members who transition to retirement with a spouse. Whether as the result of divorce, early widowhood or the choice to never marry, being single and in your 60s dramatically changes the financial planning strategies and actions to address retirement income needs and potential long-term care costs.

Most breadwinner women are living a life that differs significantly from their mothers. Because they are contributing more income to support their lifestyles, the security of their family, and future retirement, their concerns are also much different.

Breadwinner women still face constraints of traditional roles and biases

Women who find themselves in the breadwinner role often have mixed emotions about the financial responsibility of supporting themselves as single women, or as providers for their family. And while many say they want help in building their wealth, societal norms and time constraints get in the way.

Studies show that working women continue to perform the majority of housework and child care duties. So, it’s not surprising that female breadwinners prioritize their financial matters immediately at hand (i.e. paying tuition or filing taxes), but often don’t have time for longer-range financial planning.

Less time may also mean limited financial conversations with their partners or financial advisers. Even when they are engaged in the financial planning process, female breadwinners find much of the mainstream investment and planning advice still assumes traditional gender roles of a working man and stay-at-home or lower-earning woman.

These challenges can get in the way of women being financially prepared, especially as most will outlive their spouses or need to support themselves should they enter retirement as a single woman.

So, to emphasize, for women who are breadwinners, their financial issues are different.

According to the 2016 U.S. Health Report, the average male life expectancy was 76.3 years in 2015 and women’s was 81.2 years. What is less well known is that, by the time they reach the age of 75, 70 percent of women will require assisted medical care at some point during the remainder of their lifetime.

They may need to retire later

These statistics have several implications, with one being that many women will choose or need to work into their late 60s and 70s. Older Americans are choosing to work later in life for better or cheaper health care options, even after they reach Medicare age.

Working longer also delays the need to draw down on savings to pay for living expenses, but it has even more important implications. By increasing the number of years to put money away in a retirement plan, women will have more resources available when they eventually retire.

Or, they may not be able to work longer

One planning concern is the overreliance on a woman’s ability to work later in life. With this as a major assumption, women’s retirement plans can be easily derailed if there’s an unexpected illness or if they’re needed for care giving.

For married breadwinners, there’s the challenge of coordinating retirement dates. If a female breadwinner is married and has a spouse who is already retired, then for lifestyle reasons, she may choose or feel pressure to retire early. That decision should be made only after carefully considering their savings and if it is sufficient to maintain the lifestyle they desire in retirement.

Their investments will have to generate more income

Living longer also means it’s even more important for a woman to consider the risk of being too conservative in the asset allocation of her portfolio.

If you retire at age 65 or 70, it’s likely you could live another 20 years or more, so your assets need to generate enough growth to outpace inflation. Retirees today will hold portfolios that in no way mirror those of retirees in prior generations. Not only were interest rates higher when our parents or grandparents were retired, many also benefited from pension income that guaranteed a level of cash flow to meet at least basic needs.

Competing priorities complicate their retirement planning

If you are a breadwinner primarily or solely responsible for your children’s education or care for your aging parents, it can be a very difficult decision to prioritize your retirement planning above the needs of those you love.

It’s important to also consider the risks to you, so you don’t compromise your security in retirement. We recommend that you maximize retirement contributions to the extent you have sufficient cash flow and realize that saving into a tax-deferred account may provide enough of a tax break to make the savings affordable.

In the face of competing demands for your time and money, be sure to plan for retirement long before the day arrives

Breadwinner women are creating financial freedom for themselves and future generations of women. While being a female breadwinner comes with special financial challenges, those can be addressed with ongoing communication and careful financial planning along the way.

Times are changing quickly and organizations like Her Wealth® provide ways to connect with other breadwinner women and offer resources to become more financially empowered.

As women take control over their work lives, they have more power to take control of their wealth and to create the life they desire for themselves and their families.

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NRIs Investing in India – How to avoid problems with your investments!

Aspire logoWhen an individual turns into an NRI, the requirements under various laws in India change. Foreign Exchange Management Act, Prevention of Money Laundering Act, etc have provided for various rules that a person has to follow as an NRI.

 When do you officially become an NRI?

There are several definitions based on a range of factors that can be applied. One common one is that if you stay for more than 180 days outside India in a single financial year, you are deemed to be an NRI for that financial year.

However, if you have taken up a job outside India with an intention to be there for a long period of time, you are designated an NRI as soon as you move out of India. This definition is usually not taken into account.

In the latter scenario, it is important that you take care of a few things.

What you can or cannot do for Investing as an NRI

There are 7 key points to make note of.

  1. As an NRI, you cannot hold an ordinary savings account. Speak to your bank or visit them and inform about the change in your status. The savings account has to be converted into a NRO or a Non-Resident Ordinary Account. You can receive all local payments such as rent, interest from bank deposits or any other investment monies in this account. You can also pay any local (India) bills, etc out of this account.
  2. You should open an NRE (Non-Resident External) Account with your bank along with online banking facility. Using this account, you can transfer your foreign currency receipts into Rupees. This can be used to make any further investments in India. Of course, they need to be allowed to you as an NRI. Remember, you can use only the NRE account to make investments from your foreign earnings.
  3. Based on a recent ruling issued by Govt of India, as an NRI you cannot hold small savings or Postal scheme investments in India. If you have such deposits, you should inform the respective investment provider and get your account closed. You will be paid interest till the date you became an NRI (if you went for a job outside, it is the same date as you left India). Subsequently, your investment will be redeemed and sent to your account. The investment account will be closed.
  4. When it comes to Mutual Funds if you are not based on US/Canada, you can pretty much invest in any mutual fund. However, there are restrictions on the number of funds that take in investments from US/Canada based NRIs. That too comes in with some regular compliance related paperwork. Click here to know more.
  5. Inform your current mutual funds about the change in status along with the updated KYC. The funds that you cannot hold as an NRI (specially for US based NRIs) will probably need to be redeemed.
  6. Update your PAN, KYC, FATCA and other necessary documents with regards to your new status as an NRI. This will ensure that you remain compliant at all times and can buy or sell your investments without any hassles.
  7. As an NRI, become aware of taxation in the new country of work. While India might not tax you on your NRE Bank account FD interest, you may have to show it in the Tax return of the current resident country and pay up taxes.

It is not compulsory but ideal that you if you have any earnings in India, you file your tax returns in India even though there is no tax. This can be useful for any future requirements that you may have in India.

Invest in mutual funds online with AspirePFS

#AspirePFS #MutualFunds #NRI #Investments

A little bit of knowledge is all you need to drastically cut your tax outgo, the MF way

By #DhirendraKumar

MF-DirectAbout a month ago, in a sister publication of this newspaper, I wrote a column explaining the exact nature of the tax advantage that mutual fund investments offered over bank fixed deposits. The case I discussed was one where the goal was to earn a monthly income. It turns out that in an example investment where the annual income received was Rs 80,000, the tax outgo for bank deposits was Rs 24,720 while for mutual funds was Rs 1,831. A lot of people who never invest in mutual funds don’t really understand taxation on investments and were shocked at this. Even those who understand tax laws have not thought through the implications for specific types of investments. The reason for mutual funds being so much more tax efficient is the fact that the returns are delivered to the investor’s books as capital gains whereas in bank deposits, they are delivered as interest income. Some advantages of investing in mutual funds come from these kind of transformations. There are three ways that an investment can deliver gains: interest income, capital gains and dividends. Mutual funds, like stocks, can deliver gains as either capital gains or dividends. However, there is an important difference. When you invest in stocks, capital gains are generated in the stock markets, and depend on stocks price movements and your acumen in buying and selling them. Dividends on the other hand, are decided by the company’s management, and most of the time, have only a small and transient effect on stock price. Both depend on the company’s profitability but the mechanisms are different. In mutual funds, things are different. Funds invest in stocks or bonds out of the pooled money that investors give them. They earn capital gains, dividends and interest income. They are free to distribute the gains as capital gains or dividends, as they wish. Practically all mutual funds have growth (capital gains) plans and dividend plans. The same underlying gains, are distributed as either, and investors can choose whichever they want This has some good outcome and bad. The good part is that knowledgeable investors can fine-tune tax strategies as per their needs. The above example is based on such a transformation. The bad part is that investors who do not have a complete understanding of what is going on get misled by the word ‘dividend’. Mutual fund dividends are not dividends like corporate dividends. They are just your own money returned to you under the ‘dividend’ label. If you had chosen a growth option in the same fund, then the very same amount would have been available as capital gains. Many investors feel that a dividend is something extra and believe that a fund that pays more dividend is a better one. This is not true. A mutual fund dividend is a pay-out from your own money. The facility of transforming one kind of gain into another is a great option that mutual funds have. In debt funds, they enable huge tax efficiency. Debt funds generate part of their gains from interest income. Through an MF, these can be transformed into capital gains or dividend income. The convenience and savings can be considerable.

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6 Questions You Need To Ask Before Investing In A Mutual Fund

MF-DirectMutual fund investments are widely considered a necessary tool for building a well-rounded investment portfolio. However, just like the broader financial services market, there is no one-size-fits-all mutual fund product. Therefore, you need to ask the right questions to determine what works best for your needs. Think of the MF market like a dinner buffet, with offerings ranging from highly safe debt funds to highly risk-oriented funds and everything in between. If your goal is to eat healthy, you would go for the salads, right? And if you’re okay with a few extra calories, you’d make a beeline for the gulab jamun. Similarly, once you know what the different kinds of mutual funds are like in terms of their features, risk profiles, and benefits, you’ll have a better idea of how they fit your specific requirements.

Hence, here are some questions you should ask your mutual fund distributor/financial advisor.

What is the fund’s objective?

Each mutual fund is set up with a certain objective in mind. It could be to focus on a particular market (such as equity or debt), a sector (such as banking or real estate), a basket of stocks across sectors, a certain geography (emerging or developed markets), or even in other funds (fund of funds). This guiding objective will influence how the fund house spends, manages and grows its investors’ money.

Asking about the fund objective or theme helps you understand how and where your money is going to be allocated..

How has it performed against the benchmark index?

In school, we all knew that Guptaji ka beta or Sharmaji ki beti, whose scores were the benchmark against which our own report cards were judged. Well, whether or not that was right, there is a similar example in mutual funds. Each fund is typically benchmarked to a market index, such as the BSE Sensex, NIFTY 50, S&P CNX 500, etc. In the long term, if a fund does better than its benchmark index, that’s good news. If it delivers the same or lower returns than the benchmark, it is not-so-good news.

Knowing the one, three, five and ten-year returns against the benchmark will help you take a decision on whether the fund is worth investing in. However, one must also keep in mind that past performance is never an indicator of future returns.

The other benchmark to gauge the fund’s performance is similar mutual funds by other fund houses, whose investment focus is the same as the one being considered. Doing this will give you a clearer idea of whether the fund has delivered results to investors.

What type of fund is it?

There are different types of funds out there, and understanding how exactly they will allocate your money is important. Equity-focused funds invest in stocks of various companies. Similarly, debt-focused mutual funds invest in bonds and other securities. Balanced funds invest in a mix of equity and debt, while a gold exchange-traded fund may do none of the above and invest instead in gold bullion. Therefore, make sure you ask this important question.

How will this fund help me achieve my goals?

Each individual has short and long-term goals. Do ask the distributor/advisor how his/her recommended fund will help you achieve your goals. For example, buying a car in three years and arranging for the marriage of your children after 20 years require very different kinds of investment approaches. So lay out your goals and be firm about choosing a scheme whose tenure, investment focus and risk profile is likely to help you achieve those goals.

Are there any tax benefits?

Equity Linked Savings Schemes and various pension fund schemes provide tax benefits under the Income Tax Act. Investing in these funds can give you the dual advantage of equity exposure and tax planning. If tax saving is one of your objectives, be sure to ask the distributor/advisor about the tax benefits of the fund.

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How women can overcome these financial blind spots


Women typically earn less than men and have different tracks that lead them to take breaks from their careers.

Consequently, women need to invest with these considerations in mind — or risk falling behind financially.

Women are at risk of falling behind when it comes to personal finance and investing.

And the stakes are high. Women’s median weekly earnings were 82 percent of men’s in 2016, according to the U.S. Bureau of Labor Statistics, which looked at full-time wage and salary employees.

In addition to the income gap women face, they are more likely to take time out from their careers to provide care for their parents, children or spouses, according to a recent report from UBS Wealth Management. Women are also almost twice as likely to work part-time compared to men, UBS found.

In addition, women tend to live longer than men. In the U.S., women are expected to live 6.7 years longer than men.

“Even a few years difference can have an impact on women’s wealth,” the UBS report noted.

The disparity can make a big difference when it comes to retirement. A 2016 report from the National Institute on Retirement Security found that women are 80 percent more likely than men to be poverty-stricken in retirement.

Together, these factors mean that women need to approach financial planning and investing differently.

“There are many things that go on in women’s lives that put them at a significant disadvantage to men in terms of their overall wealth,” said Jane Schwartzberg, head of strategic client segments at UBS.

There are several things women can do to improve their financial prospects, according to the report.

Think of wealth as an opportunity, not just as security

As investors, women tend to emphasize different priorities than men, UBS’s research found. That includes focusing on making sure they can provide for their children and preferring to put their money in investments that have meaning for them.

But women need to make sure they are not being too risk averse — such as having large amounts of cash or investing in low-risk investments like bonds — which can set them further behind. Women can combat this by seeking professional feedback on whether their investments suit their goals.

“They may be independently investing more conservatively than is appropriate for their life expectancy,” Schwartzberg said.

Become more confident about investing

Women have distinct traits that make them successful investors, according to UBS’ research. When compared to men, they trade less, which means their portfolios often perform better.

But what can hold women back is a lack of confidence. Women can combat that by studying up and becoming more educated, which in turn will lead to more certainty, the UBS report found.

“Women are actually more likely to attend financial education programs and take action,” said Svetlana Gherzi, behavioral finance specialist at UBS.

Take a proactive role with your money

Putting financial planning on the backburner will only hamper women’s ability to plan for their unique circumstances.

To avoid falling behind, women need to take a proactive approach early on by saving, putting their money to work and coming up with a financial plan.

“The most important thing is to take the driver’s seat, rather than assume someone else is going to get you to the right place,” Schwartzberg said.


#Aspirepfs #Women #MutualFunds #Investments

Why Women Need to Plan for Long Term Senior Care

Women live longer, and that means women will have more years of retirement to pay for — in many cases, living on their own or in long term senior care.

By : Sarah Stevenson

Why Women Need to Plan for Long Term Senior CareHow to Plan for a Long Life

Planning for retirement isn’t an easy task — and it’s even more challenging for women. We have an ever-increasing life expectancy, so we’re more likely to live long enough to need assisted living or other types of senior care. We’re also more likely to be a caregiver for others or to live solo due to widowhood. Yet, studies show that women are less likely to plan effectively for a long life.

Getting educated about retirement planning and learning how to make the right financial investments is a critical step to maximizing your life for the future. Women, in particular, need to plan ahead, especially if they want to continue to live comfortably and take care of their own needs in retirement. The MetLife Study of Women, Retirement and the Extra-Long Life states why:

  1. Women are more likely to age solo. Women are more likely to live alone in their older age, whether due to divorce, widowhood, or other reasons, and that often means bearing the financial burden of retirement solo, too.
  2. Women are more likely to have higher healthcare costs. The MetLife study mentions a variety of reasons for this, including less access to insurance and more out-of-pocket expenses. Women are also more likely to either need long-term care themselves or be the providers of long-term care.
  3. Women live longer. If you’re age 60 today in the U.S., and you’re female, says the report, you can expect to live to about 84 — but if you’re male, it’s 81. Having more years to live translates directly into more retirement costs.

Ways Women Must Approach Finances Differently

Women have historically needed to approach finances differently, and that’s another reason why we can get behind in our retirement planning.

Here are a few specific examples of how women’s financial situation significantly differs from men’s:

  1. Women are less likely to have a retirement plan. Although more women are participating in the workforce than ever before, they are less likely to have a retirement plan — either because they choose not to even if they qualify, or they work part-time and don’t qualify. Women are also likely to work fewer years if they take time off for caregiving or child rearing. What this all adds up to, is lower lifetime savings, according to the U.S. Department of Labor.
  2. Women earn less than men: Not only are women more likely to work part-time, they only earn 81% of what men earned, according to the MetLife report. That, of course, has nothing to do with our own financial behavior, but it translates into less contribution to pensions, savings, and Social Security.
  3. Women invest more conservatively: Women are more likely to have a penny-pinching attitude when it comes to savings, but although we’re confident about our ability to stretch a dollar, we tend to be less confident when it comes to investing our money for the future. According to a TIME article, this may be because we feel we don’t know enough about it, or feel intimidated by the male-dominated financial world; in some cases, women were raised to consider investment to be the man’s domain.

What Should Women Be Doing to Plan for Senior Care?

In past eras, women tended to leave all the financial planning to men, in fact, many women today grew up surrounded by the attitude —conscious or not — that husbands take charge of the long term finances.

Obviously, this is an attitude we can’t afford. It may seem daunting, but women can start with a few simple strategies for saving:

  1. Come up with a contingency plan. Don’t wait for emergencies to actually happen before you figure out how to deal with them financially, warns MetLife. Consider what contingencies are likely for your situation, whether it’s a health emergency or long-term care, and figure out how you plan to round up the necessary resources.
  2. Don’t delay. There’s no better time to start than now!
  3. Get educated and build your financial confidence. Research any financial planning matters you don’t understand, consult a variety of resources, and don’t be afraid to talk to a financial planner or investment expert. “Be careful not to conclude too quickly that you have ‘all the information you need,’” says the MetLife report. Learn about insurance, savings plans, and senior care costs.
  4. Learn about your retirement benefits. If your employer offers a retirement plan, join it and start saving now, and find out how long you need to contribute before you’re vested. If your spouse has a pension, Social Security or Veteran’s benefits, make sure you know what the rules are when it comes to spousal rights in cases of death or divorce, notes the Department of Labor.
  5. Review your finances regularly, and set a budget. In a Forbes article, CPA Laura McNutt suggests, “Once a year conduct a retirement analysis. Look at what you own, your spending needs and determine if what you have is going to accomplish those needs.” Be detailed about what your goals are and what you need to save to reach them.

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15 Mistakes in personal retirement planning

Posted  by Stoyan Panayotov

1. Complacency

Complacency is one of the worst enemies when planning for retirement. Feeling that you are all set and do not need to change anything could cause you many headaches in the future. We all have blind spots. Taking a second look will help you see some of the threats to your long-term plan that you have not noticed earlier.

2. Fear of asking the right questions

Many of us are afraid to ask the tough questions. “Am I on the right track?” What is my risk tolerance?”, “Is my advisor working in my best interest?” are just a few of the questions you can try to find the answer to. While the reality of truth might be harsh, addressing these issues sooner rather than later, is critical.

3. Over dependency on one source

Some folks are completely relying on a single source for their retirement being that social security, work pension or 401k plan. With social security running out of money and many pension plans shutting down or running a huge deficit, the burden will be on ourselves to provide us with reliable income during retirement years.

4. Not saving enough

According to a recent article by Chicago Tribune, only 18% of the people feel confident that have enough money saved for retirement. That is a scary number. It means that 82% of the US population is not prepared financially for retirement. They will not have enough funds to replace their current income when retire.

5. Portfolio not aligned with objectives

One common problem I see in my prospect client portfolios is the mismatch between investment allocation and personal goals and risk tolerance. I often see portfolios that are either too aggressive or too conservative or sometimes just hold too much cash. Aligning your investments and retirement savings with your goals will ensure that you are taking the right amount of risk to make them happen.

6. Lack of diversification

Another common problem I see among clients is the lack of diversification. Many portfolios are heavily invested in a single asset class, a target retirement fund or an index fund.

Diversification is the only free lunch you can get in investing and will help decrease the overall risk of your portfolio. Adding uncorrelated asset classes such as small-cap, international and emerging market stocks, bonds, and commodities will reduce the volatility of your investments without sacrificing much of the expected return in the long run.

7. Concentration

Owning too much of one stock or a fund can cause significant issues to your retirement savings. Just ask the folks who worked for Enron or Lehman Brothers and had their employer stocks in their retirement plans. Their lifetime savings were wiped out overnight when these companies filed for bankruptcy.

8. Not rebalancing

Regular rebalancing ensures that your portfolio stays within your risk tolerance level. While tempting to keep an asset class that has been on the rise, not rebalancing to your original target allocation can significantly increase the risk of your investments.

9. Paying high fees

Paying high fees for mutual funds or even a financial advisor can eat up a lot of your return. It is crucial to invest in funds that can produce superior returns net of fees. If you own a fund that has consistently underperformed its peers net of fees, you probably should not be in that fund. Similarly, paying fees to a financial advisor should bring you a bigger value than if you would have achieved by doing it alone. If you do not feel that you are getting a good value for your buck, maybe it is time for a change.

 10. Over reliance on technology

Technology in our age is incredible and developing fast. However, we are humans, and phone apps and web tools cannot answer all our questions. They might give you a good guideline but cannot capture all aspects of your life.

11. Lack of tax planning

Long-term investing will produce gains, and many of these gains will be taxable. As you grow our retirement saving the complexity of assets will increase. And therefore the tax impact of using your investment portfolio for retirement income can be substantial. Building a long-term strategy with a focus on taxes can optimize your after-tax returns when you liquidate your investments.

12. Lack of estate planning

Many people want to leave some legacy behind them. Building a robust estate plan will make that happen. Whether you want to leave something to your children or grandchildren or make a large contribution to your favorite foundation, estate, and financial planning is important to secure your best interests and maximize the benefits for yourself and your beneficiaries.

 13. Lack of exit planning

Good exit planning is especially critical for business or real estate owners who want to use their accumulated assets for financing their retirement. Unlike liquid investments in stocks and bonds, corporations and real estate are a lot harder to divest and doing may have serious tax and legal consequences. Having a solid exit plan will ensure the smooth transition of ownership, business continuity, and optimized tax impact.

14. Not understanding the big picture

Between our family life, friends, personal interests, causes, job, real estate properties, retirement portfolio, insurance and so on, our lives become a web of interconnected relationships. Above all is you as the primary driver of your fortune. Any change of this structure can positively or adversely impact the other pieces. Putting all elements together and building a comprehensive picture of your financial life will help you manage these relationships in the best possible way.

 15. Not getting help

Some people are very self-driven and do very well by managing their own retirement. Others who are occupied with their career or family may not have the time or ability to deal with complexities of financial planning. Seeking help from a fiduciary financial planner or wealth advisor is normal. These folks will keep you on track, watch out for your blind spots and help you meet your personal and financial goals.

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Why Women Should Rethink Their Finances After Divorce

DIVORCEYour budget is likely to take a big hit when your marriage ends.

By Stacy Rapacon,

Getting a divorce stands to be as budget-breaking as it is heart-wrenching, especially for women.

“The dynamic is changing a little as more women are staying in the workforce and continuing and accelerating their careers, but typically, divorce hits women harder than men,” says Nicole Mayer, a certified divorce financial analyst and partner at financial planning firm RPG Life Transition Specialists in Riverwoods, Illinois.

Indeed, marriage tends to offer some financial advantage. Married women’s median weekly earnings were about 20 percent higher than those of women of other marital statuses, including never-married, divorced, separated and widowed, according to the most recent data from the Bureau of Labor Statistics. They even earn 9.6 percent more than unmarried men (but 23.4 percent less than married men). After divorce, specifically, women’s household income fell by 41 percent, on average, almost double the loss men experience, according to a 2012 report from the U.S. Government Accountability Office.

Why is divorce so much more detrimental for women financially?

One reason is that women overall earn less than men. Based on median weekly earnings, for every dollar men earn, women make just 82 cents, according to the BLS – and the disparity can be much greater for certain races, as well as job types. For example, in the first quarter of 2017, white men earned a median $977 a week while white women made $790 a week and black women earned just $645 a week. By job, personal financial advisors have the biggest gap, with men earning a median $1,714 a week compared with women’s $953 a week.

While income inequality is a much more deeply seated cultural and societal issue, traditional gender roles play a big part of the problem, says Chris Chen, certified divorce financial analyst and CEO of Insight Financial Strategists in Waltham, Massachusetts. Specifically, the demands of caregiving, which tend to fall on women whether it’s for children or aging parents, contribute to lowering lifetime earnings. Taking time away from the workforce to do the job of a caretaker means fewer hours at a paying job, which also leads to lower Social Security benefits or opportunities to save in general.

“With regard to women, the pay gap has been narrowing, but it’s still there,” Chen says.

And the impact of those traditional gender roles goes beyond the numbers. Women were often not in charge of their household’s overall finances; money management was the husband’s domain.

“Traditionally, women end up taking on a lot of the household duties, [which] might be paying the bills and doing some of those kinds of things,” Mayer says. “But they never really handled the finances.”

So divorcing your income-providing, money-managing spouse is bound to do damage to your bottom line – and force you to make a change. Taking an optimistic point of view, uncoupling presents you with an opportunity to step up your independence and flex your own financial power.

“The silver lining [to divorce] is that most women feel much more confident, much more in control of their finances after the divorce than before,” says Natalie Colley, an analyst at financial planning firm Francis Financial in New York. “That’s because they’re finally the ones in control of their finances.”


How can you get going on your fresh start?

First, you need to do an inventory of your current financial situation, including your income, expenses and assets, as well as your financial goals and future plans. And remember, much of this will be all new post-divorce.

Going from a dual-income household in marriage to a single-income household is a big change. And if your spouse was the sole or primary breadwinner, you may need to step back or up in your career. Even if you get spousal and child support, you can’t rely on it for the long term, and it’s better to adjust to not having that extra income sooner rather than later. “Alimony and child support are not forever,” Chen says. “You have to plan for when it ends: Continue advancing your career to progress from a lower-paying job, and make sure your expenses are lined up at the right level.”

On the other side of the equation, your expenses are likely to eat up more of your income. “You’re really supporting, in some aspects, two households, so you feel like you’re living on a lot less,” Mayer says.

Looking forward, your dreams and goals are probably different now. For example, your vision of retirement might completely change from what you had been thinking with your spouse. And the path to getting there is certainly altered. “You always assumed there’d be two of you and maybe two 401(k)s and two IRAs, and that’s now all changed,” Mayer says. “So now it’s really updating your picture as a whole, your long-term picture.”


Of course, while starting over can be exciting and refreshing, it can also be daunting. Don’t let that stop you from charging into making your new financial plan.

“The biggest mistake I see people make is they don’t start the process immediately after divorce,” Mayer says. “They wait five or 10 years – when child and spousal support stops – and then reality hits. Those first few years are really transitional years, and you have to tackle them head on.”

The best way to overcome any fear you might have about taking the reins on your financial life is to get educated. Do all you can to better understand money matters in general and your own financial situation specifically. That might mean continuing to read articles like this, maybe taking free or low-cost classes on the subject or working with a financial professional. Whatever route you take, learning more about what you fear can help you realize you had nothing to fear at all.

“Once they feel they have a good handle on these things, women become much more confident and then much more aggressive in their portfolios,” Colley says. “And they can lean into their financial lives even more.”

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