With more women joining the workforce and taking charge of their finances, it has become essential for them to learn the basics of financial planning and investment.
Having a sound financial plan in place gives women the liberty to make choices that align with their goals and not just financial constraints.
Importance of Financial Planning for Women
Career Breaks
Taking career breaks is a common occurrence among women. A financial plan can help them prepare for this phase and bridge the income gap.
Marriage, Parenthood, and Emergencies
Emergencies can also arise anytime. Having a contingency plan in place can help women tide over such situations without compromising their financial stability.
Similarly, marriage and parenthood are significant life events that can have an impact on women’s finances. That’s why it’s essential to plan for these events financially.
Higher Education
Spending on higher education is also a vital investment that women should consider. By planning ahead, women can save up enough to fund their own education.
Here are steps women can take to master the art of financial planning.
- Assess your current financial situation
The first step in financial planning is to assess your current financial situation. You need to take note of your income, expenses, assets, and liabilities. This will give you a clear idea of where you stand financially and help you identify areas where you can save more or invest better.
Start by making a list of all your sources of income. This includes your salary, bonuses, and any other sources of income such as rental income or investment income.
Next, make a list of all your expenses. This includes your fixed expenses such as rent, mortgage, and utilities as well as your variable expenses such as groceries, entertainment, and travel.
Once you have a clear idea of your income and expenses, you can calculate your net worth.
- Write down your financial goals
This will help you stay focused and motivated as you work towards achieving them. Your financial goals can be short-term or long-term, and they should be specific, measurable, and realistic.
Once you have identified your goals, you can break them into smaller, more manageable steps.
- Create a budget and stick to it religiously.
The third step in financial planning is to create a budget and stick to it. A budget is a plan for how you will spend your money each month. It helps you control your spending, avoid debt, and save for your goals.
Start by listing your income and expenses for the month. Then allocate your income towards your expenses such as rent, mortgage, and utilities. Next, allocate money towards your variable expenses such as groceries, entertainment, and travel.
Once you have allocated your income towards your expenses, you should have money left over. This is your discretionary income, which you can use to save for your goals or pay down debt.
- Prepare for Emergency Fund
An emergency fund is a savings account that you set aside for unexpected expenses such as car repairs, medical bills, or job loss.
A good rule of thumb is to save 3-6 months’ worth of living expenses. This will give you a cushion in case of an unexpected expense or job loss.
Having an emergency fund will give you confidence, reassurance and help you avoid going into debt in case of unexpected expenses.
- Get a financial plan and retirement plan
The final step in financial planning is to get a financial plan and retirement plan.
A financial plan is a comprehensive plan that outlines your financial goals and how you will achieve them.
Meanwhile, a retirement plan is a plan for how you will save for retirement. It includes a savings goal, investment strategy, and retirement income plan.
It’s always a good idea to work with a financial advisor to create financial, and retirement plans that are tailored to your personal needs and goals. A financial advisor can help you navigate the complex world of finance and make informed decisions about your money.
Financial planning is a crucial aspect of every woman’s life that should not be overlooked.
By mastering the art of financial planning, women can strive to achieve financial freedom and live life on their own terms.
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Any opinions are those of Gary Gainspoletti, CPA, CFP®, Russell Gainspoletti, CPA, CFP®, or Brandyn Skeen, CFP®, and not necessarily those of Raymond James. This information is intended to be educational and is not tailored to the investment needs of any specific investor. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of the strategy selected. Past performance is not indicative of future results.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP® , CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.