Lehigh Valley Woman – Finance Section – June / July 2014
by Laurie A. Siebert, CPA, CFP®, AEP® Senior Vice President, Valley National Financial Advisors
Financial planning is important for everyone and, in particular, women, because of the responsibility we have as caretakers for our children and parents. We find ourselves juggling these responsibilities regularly, and keeping track of the financial decisions and opportunities we and our loved ones have becomes one more chore for which we must contend. Breaking down the financial considerations we have at critical stages makes it more manageable.
The Stages
• TESTING– early twenties, college age, finding out who we are, new jobs, dependent
• NESTING – late twenties to early fifties, settling down, having a family, acquisition
• INVESTING – late fifties, savings begin to accumulate, grown children
• RESTING– sixties and later, retirement, hobbies, healthcare costs and issues
• DIVESTING – later in life, anxiety provoking, the ultimate unknowns, overwhelmed, care-taking
Risks and Rewards
• TESTING STAGE. At the testing stage, our children must consider the cost of their education and career risk. Helping them explore these issues makes them better prepared to accept or manage the consequences. What is the cost of education, what is the cost of borrowing, and what are the chances of being successful in this career? This is the time to establish a strong work ethic and salary benchmark, and avoid the risk of high loans, high interest rate
school loans and jumping from job to job.
• NESTING STAGE. At the nesting stage we must consider the cost of borrowing and keeping up with the Jones.’ This is the ti me where people sett le down, make long-term decisions about jobs, home buying and children. These are some of the biggest decisions we will make that will impact our financial future. Thoughtful consideration rather than impulsive decisions at this ti me will impact our ability to retire, and meet our cash flow needs, than any other t me in our life. Buying less than you can afford and saving more should be the habit to embrace. The high cost of debt or too much debt is one more risk you do not need if you might also have job risk. The rewards of family and home should be guarded with smart choices. When choices have gone well during the previous two stages, you have set yourself up well for the investing stage.
• INVESTING STAGE. One of the risks in this phase is inattention. Paying attention to your asset allocation is important at every stage but this is a period of transition where you are preparing for retirement and you must remain diligent. Rebalancing periodically and reviewing your risk tolerance to market fluctuations keeps the emotions out of decisions. The power of compounding and smart decisions on tax-efficient investing enhances your returns. It’s important to understand inflation risk and interest rate risk and how your various accounts are taxed.
• RESTING STAGE. Reap the rewards of your work! But, cauti on is warranted as life expectancies increase and healthcare costs continue to escalate. Understanding how all the pieces of your cash flow work together will give you the boost you might need. Strategies may be implemented to maximize Social Security and/or reti rement benefi ts. Be smart about your cash fl ow. Spending like you’re still working may not be a workable plan. What if a spouse dies prematurely and income sources you had relied on are no longer available? Plan for contingencies.
• DIVESTING STAGE. Your risk toward the end of life is using up all your assets too soon or having assets go to the wrong people. The rewards at this stage are knowing that you did the best planning possible and after taking care of yourself, you may still be in a position to do for others. With adequate resources, you may reap the benefits from the joy you bring in giving. Charitable organizations are always in need, and helping friends and families with trips or education can be equally rewarding.
With so many stages, risks and rewards, consider using a professional to help. Start taking care of yourself today and others will benefit as well. Email me at lsiebert@valleynationalgroup.com or at www.yourfinancialchoices.com for more information or additional
questions.
Remember: be proactive, not reactive, and make the best of your financial choices.
