Continued interview from Brite Magazine with Money Saving Expert

…Continuing our interview from Brite Magazine with Rebekah Barsch, money saving expert and director of retirement markets at Northwestern Mutual.  We wanted to know a few more action items (other than owning a great wardrobe now and in the future – see page 5 of Brite Magazine)  to help women stay financially fit from now until retirement. Be sure to check out these money saving tips before your next plan of action:

1) Your data explains that on average, the CDC estimates that women will live five years longer than men, while it is estimated that they earn only $0.77 to every male dollar, making their long-term financial planning even more critical.  We are realizing more and more that we need to have an action plan, but we sometimes fail to actually ‘take action’ – what small steps can we take this next quarter to make this transition seem less overwhelming?

Rebekah: Financial security planning is very important for women for a number of reasons – studies show we are living longer, earning less, and are more likely to take time away from our careers to act as caregivers for our families.

Sometimes managing our finances can seem overwhelming. Here are a few steps that I encourage women to take right off the bat:

• Start Now – Don’t wait for the “ideal time” to invest in your financial security. It’s never too early – or too late – to begin.  Start today.
• View Income as Your Most Important Asset – Because studies show that over time, women tend to earn less, we need to be diligent about protecting our income.  Manage the risk to yourself and your family of interruptions or the loss of your income due to unexpected events.  Consider life insurance and disability income insurance to protect you and your family.
• Give Yourself Options – Don’t build your retirement savings thinking you’re going to live to “average” life expectancy.  Women live longer than men, and we need to plan accordingly to ensure we are financially secure for life.  Remember, it’s not about getting to retirement… it’s about getting through retirement.
• Don’t Go it Alone – Find an advisor that you trust to help you make tough decisions and keep you on track.

2) With the job market and economy still in debatable turmoil, how would you tailor a five-year plan outline to shift in our favor?

Rebekah: More and more, we need to stick with the basics, such as putting money away month after month, and working with a trusted advisor to develop and execute a comprehensive plan.  Accumulating wealth and managing risk should go hand-in-hand in a sound financial plan. While we can’t control market turmoil, we can commit to a steady, predictable long term approach to financial security.

3) Commodities are still the best-performing asset class this year.  With that being said, many “financial gurus” teach the three-pronged approach to wise investing: commodities, real estate and an investment portfolio.  Do you agree with this plan given the current state of the economy?  What projected advice do you have?

Rebekah: Your portfolio should be determined by several factors that are unique to your situation, including your tolerance for risk (how do you feel when the market drops?), and the time horizon you have to invest (are you saving for a short term goal, like a new home, or a longer term goal, like retirement?).  These characteristics should determine the asset allocation of your portfolio. At Northwestern Mutual, we believe in broad diversification for our client’s portfolios, since no one really knows which asset classes will rise and fall at any given time.

4) What is the debt to income ration for women vs men – and what factors “entice” us to get into our debt hole?  How can we avoid them?

Rebekah: Managing debt is critical in order to achieve and maintain financial security. Several factors entice us into debt – some we can control (e.g. spending outside of our means, not saving) and some we cannot control (e.g. loss of job). I recommend that individuals establish a practical budget to ensure they are saving and spending appropriately, and have a plan in place for those things they cannot control. We recommend clients hold 3-6 months of income as an emergency fund, which can be pulled from in the event that a steady stream of income is lost or interrupted due to unforeseen circumstances.

5) Do we make that $0.77 increase or do we simply plan and execute better?

Rebekah: I believe it is a mix of both.  The desire to spend time with our children and take care of our parents is not likely to change for women, which means that our income growth trajectory may continue to be flatter than our male counterparts. We should honor our commitment to our families both by spending that time, as well as being very proactive in our financial security planning. In most cases, women will be the ones living with the end result of our planning, so we need to take ownership and action of our financial future.