Should today’s women take a different approach to planning a secure financial future to men or even to their mothers and grandmothers?
At Magenta, we think the answer to this question is complex – the mechanics of financial planning will be the same for everyone, but today’s women need to take other issues into account to ensure their future financial security and freedom.
The mechanics of Financial Planning
Financial planning is a process, not a product. But what goes into the making of a financial plan? Of course, there is a lot of uncertainty around the many twists and turns in this journey called life and a good plan should adapt to that. But there are some numbers that need to be crunched to give clients the best chance of living the life they want to live.
A financial plan will include:
- Statement of Objective – a broad statement of what you want to accomplish, where you want to be, and when.
- Cash Flow and Budgeting – what do you earn and what do you spend, now and in the future.
- Financial Statement – a snapshot of your current and expected future financial position, assets and liabilities.
- Risks – What are the greatest financial risks and how do you cover them? This is the insurance section.
- Taxes – Incorporate strategies to minimise taxes for the long term.
- Investment – A personalised investment strategy to achieve the stated objectives.
- Education – consideration of school/university funding if appropriate.
- Estate – do you have an up to date will and power of attorney? What are your final wishes?
- Action Checklist – what you should do and when.
A good financial plan does not need to be complicated and the setting up should broadly be the same for everyone.
A woman’s financial plan
A comprehensive financial plan for women needs also to include the following considerations:
- Longevity – women generally live longer than men so will need more money to be financially secure
- Career breaks – often mean promotion prospects are reduced
- Caring responsibilities – often mean that careers are interrupted and/or more lucrative work is not possible
- Confidence – women are less likely to invest and more likely to keep money in cash deposits with poor interest rates
- Education – financial information is mainly aimed at men and is not “user friendly” for women
- Deference or delegation to a significant other – often means that women don’t have all the information they need
- 4 generations – today’s women often act as financial stewards for elderly parents, children and grandchildren as well as themselves.
We have written about these issues before and when working with women to help with their financial planning, we always take these into account so that our advice is especially relevant to their particular circumstances.
Also we know that women value different things in life to men and thus they will spend their money (and time) differently. When it comes to investment, many studies have shown that women investors are much less likely to be proactive or “fiddle” with their portfolios in the same way that men do. This often leads to better financial outcomes.
We do not wish to fall into the trap of gender stereotyping, but our experience tell us that women are more likely to want to invest their money in good things that will make a positive impact on society, the environment and the planet.
They often also place greater focus on the future of their children and grandchildren and want to organise their money for the general betterment of the family.
We know that our women clients hate jargon, three letter acronyms and being patronised! They like straight talking, honest conversations about what is important to them and how to achieve their goals most efficiently.
We also know that the success of any relationship between a client and her financial planner needs to be based on trust and likeability – this will only be achieved if the planner really understands what the client is trying to achieve in life, so that they can plan the journey together.
Working with our female clients to give them greater access to financial education, success, independence, security and happiness is one of the great joys of our profession.
If you would like to know more about financial planning for women, please do call us for a friendly chat.