As a woman in wealth management, I have become attuned to the unique financial challenges that today’s women face when considering their wealth. Women today are more educated, have more financial power and control than ever before, but this also means that they must make informed decisions about their finances. Women-headed households are increasing: 31% of South African children are raised by single moms.
Being a woman today has financial implications:
. women cannot rely on someone else to take charge of their finances
. their retirement contributions are less, or less frequent than those of men
. women tend to earn less than men
. they need a larger pool of capital to retire as they live longer than men
. they will most likely be responsible for their own financial well-being
In this article I will address some of the main wealth planning themes.
A familiar topic for many women is wardrobe planning. We plan for seasonal changes: which items to keep and what to let go, what basics and accessories you need, and how to streamline your cupboard to prevent clutter, so you can make quick decisions and step out into the world with confidence.
Planning your financial well-being has similarities to wardrobe planning. We often don’t have it figured out 100% of the time. There are challenges: your budget falls short of your goals, you may lack the knowledge to analyse what you have and what else you need, you don’t understand the options and what is best suited to your needs, or how to assess value for money. How worried should you be about trends? How to go about looking your best with what you have vs how you achieve your goals within your financial means given the complexity of the financial world.
So, what should you do and where do you start?
There is no beating about the bush – on average, women must invest more than men because they live longer. Start investing as early as you can, and work your way up to invest at least 20% of what you earn. In all, R1 000 invested at 25 is worth R21 000 at 50 at a 10% annual return. At 30, R1 000 would be worth R12 500 at 50 at a 10% annual return. A good equity or balanced fund can return more than 10% per year in the long run. A new top for R300 every second month (or 6 cappuccino’s a month): 60 tops most of them will be out of fashion in 10 years’ time.
Plan to retire later
Women live longer, but they tend to work longer. On average, women retire younger than men. We need to revise our expectations about retirement and remain productive as long as possible.
It is important to invest in asset classes that offer substantial growth over the long term. Understand your goals and understand which instruments and assets will help you achieve your goals over time. Analysing costs, especially the hidden costs of investments, is important. You need different strategies for wealth preservation, wealth creation and cash flow generation.
Protect your most valuable assets
Nobody thinks twice about insuring their motor vehicles, yet your most valuable asset is your ability to earn an income, and you should protect it vigilantly with the appropriate life, disability and critical illness cover.
Importance of diversification
Investors always ask where they will get the best return and the answer is always: diversify for the specific time frame by investing in a variety of asset classes. No single strategy is advisable. You are unlikely to predict next year’s winners and you need to be careful when you make changes.
This info doesn’t constitute financial, tax, legal or investment advice and the PSG Konsult Group of Companies doesn’t guarantee its suitability or potential value. As individual needs and risk profiles differ, we suggest consulting a qualified financial adviser, if need be.
* Wynie van der Wath is a financial adviser for PSG.
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