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Chapter 18
Your Financial Future Starts Now
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Your Financial Future Starts
Now

Challenges ahead:
– Student loans
– Credit card debt
– Budgeting,
spending, saving
– Marriage
– Children

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Choose wealth
NOW!
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A Look Back at the Financial
Life Cycle
Increase awareness and discussion of
personal finance issues.
 Financial decisions affect your lifestyle; make
sure they reflect your financial goals and
values.
 Prepare for the financial challenges, and
changes, of the next few years.
 Use your strongest ally on the road to
personal financial success – time.

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Women and Personal
Finance: Why It’s Important
 Achieving
financial security is tougher
for women
 Know the facts that make women
financially vulnerable
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Why Are Women Financially
Vulnerable?
 90%
of women will be solely
responsible for their financial decisions
at some time in their lives.
 20% of women will never marry.
 47% of first marriages and 49% of
second marriages end in divorce.
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Why Are Women Financially
Vulnerable? (cont’d)
75% of women do
not know how much
they need to save
for retirement.
 Women invest more
conservatively than
men, therefore
earning less.

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Why Are Women Financially
Vulnerable? (cont’d)
 Women
live longer than men.
– Age 65, women outnumber men 3 to 2
– Age 85, women outnumber men 5 to 2
 75%
of married women are widowed,
with the average age of widowhood 56.
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Why Are Women Financially
Vulnerable? (cont’d)
Of the 12% of
elderly people living
in poverty, almost
75% of them are
women.
 80% of the widows
living in poverty
were not living in
poverty before
widowhood.

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Financial Independence,
Especially During Retirement?
 Women
generally
– earn less than men.
– are less likely to have pensions than men.
– because of lower earnings, qualify for less
Social Security than men.
– live longer than men.
 Consequently,
planning for retirement is
more difficult for women than for men.
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A Dangerous Myth…
 Women
must
dispel the myth
that “someone”
will take care of
them!
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Take Responsibility for Your
Financial Future
 Gain
knowledge.
 Get involved in family
investment decisions.
 Develop and
implement your
financial plan.
 Seek professional
help if you lack
confidence to act.
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Financial Principles Are GenderNeutral, But Women Should
 Recognize
that you live longer and may
be divorced.
 Get involved in your husband’s pension
decisions.
 Fund retirement plans and IRAs to the
max.
 See a financial planner, if needed.
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Life Events: Marriage
 Learn
your partner’s
financial history,
habits, goals.
 Track your expenses.
 Develop a budget.
 Review and revise the
plan annually or when
life changes occur.
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Life Events: Marriage (cont’d)
 Talk,
talk, talk about your financial
situation.
 Seek help from a professional.
– A financial planner
– A financial counselor
» National Foundation for Consumer Credit
» Debt Counselors of America, now
Myvesta.com
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Life Events: Marriage (cont’d)
 Two
other important
decisions
– Joint or separate
checking account(s)
– Joint or separate
credit cards
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Life Events: Children
 Birth
through age 18,
$153,600
 For a medium income
family (i.e., $41,000
income per year), the
investment increases
to $1.45M by age 22
with education costs
and lost wages from
child-rearing.
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Life Events: Children (cont’d)
 How
do you prepare?
– Keep your insurance current and
premiums paid – health, life, and disability
– Consider a tax-free flexible spending
account
– Maintain adequate income and savings
– Update your will and name a guardian
– Review your financial plan
– Start saving for education costs
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Keys to Financial Success
 How
the rich become rich
– Understand the difference in income and
wealth
– Live like a millionaire – practice frugality
wealth – consider the 12
decisions
 Choose
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Why Frugality?
 Sets
the stage for personal finance
success
 Helps you spend less and save more
 Helps you stretch your money
 Helps you ignore marketers and realize
that money, and what it buys, is not
happiness
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Choose Wealth #1: Become
Knowledgeable

Knowledge
– Makes it easier to
avoid financial
pitfalls and bad
advice.
– Spurs your
commitment.
– Helps you handle
money surprises.
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Choose Wealth #2:Don’t
Procrastinate

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Bad advice SLOWS
your financial
progress.
Procrastination
STOPS it……and
makes your future
work a lot harder.
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Choose Wealth #3: Live
Below Your Means
Spend less than you
earn.
 Change your attitude
toward spending.
 Track your spending
and cut out
extravagances.
 Make savings
automatic.

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Choose Wealth # 4:Realize
You Aren’t Indestructible

Do you need it?
– Life insurance – it
depends?
– Health insurance –
YES!
– Disability insurance –
YES!

Lead a healthy
lifestyle.
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Choose Wealth #5: Protect
Your Stuff (Look Out for Lawyers)
and auto insurance – a
necessity.
 Liability coverage – too little can ruin
your financial future.
 Raise deductibles to keep costs down.
 Increase your emergency fund.
 Consider an umbrella policy.
 Home
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Choose Wealth # 6: Embrace
the “B” Word (Budget)
 A budget,
or cash flow plan forces you
to control spending and save by
– Using restraint when spending.
– Thinking about what you buy.
– Living below your means.
– Being frugal.
 To
develop a budget, track your
spending and eliminate expenses.
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Choose Wealth #7: Reinvent
and Upgrade Your Skills
 To
prepare for future job
insecurity,
– Make sure your talents
and skills are needed.
– Continue to educate
yourself – your best
investment for the future.
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Choose Wealth #8: Hide Your
Plastic
 Use
restraint to avoid
credit card DEBT.
– 20% of college students
have 4 or more cards.
– People spend about 30%
more with cards than with
cash.
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Choose Wealth #9:Stocks Are Risky,
But Not as Risky as Not Investing
 If
your investment horizon is long,
invest in stocks and ride the risks up
and down!
 Use diversification to reduce risk.
 Use your time horizon to guide your
asset allocation.
 Consider a stock index mutual fund.
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Choose Wealth #9:Stocks Are Risky,
But Not as Risky as Not Investing

Don’t let the fear of
stock risk keep you
from attaining your
goals – don’t ignore
the greater danger
of inflation and
taxes.
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Choose Wealth #10: Exploit TaxFavored Retirement Plans to the Max

Remember the
advantages of taxdeferral:
– Contributions aren’t
taxed.
– Earnings aren’t
taxed
– Eligibility for
employer match
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Choose Wealth #11: How
Many Children You Have

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Balance your
values, goals,
personal life, and
finances – and
remember, children
cost money. Plan
on it!
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Choose Wealth #12: Stay
Married
 Married
people tend to earn more and
accumulate more than single people
living alone or together.
 Income of divorced women with
children is 40% of that of married
couples.
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Choose Wealth #12: Stay
Married
 Why
do married couples do better
financially?
– Cooperation skills from marriage translate
into a job skill.
– Money management is necessary.
– Unnecessary spending is reduced.
– The single lifestyle is expensive.
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The Trap of Too Much Debt
 Little
capacity, but the potential for lots
of debt – college students and credit
 Part of the culture: borrowing more than
you should
 Bankruptcies at an all-time high
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Six Keys to Successful Debt
Management
 Key
#1: The Obvious: Spend Less Than
You Earn and Budget Your Money
– Use a budget to control spending and build
savings. Pay yourself 1st!
 Key
#2: Know The Costs
– Know the long-term costs of borrowing and
avoid “high-priced” lenders.
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Six Keys to Successful Debt
Management (cont’d)
 Key
# 3: Understand the Difference
Between Good and Bad Debt
– Borrowing makes sense when you can
afford the downpayment and the future
payments, and the purchase
» fulfills one of your goals
» outlives the financing
» provides a return that is greater than the cost
(i.e., the effects of depreciation)
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Six Keys to Successful Debt
Management (cont’d)
 Key
# 4: Make Sure You Can Repay
What You Borrow – Set Your Own
Standards
– Apply the 28%, 36% mortgage ratios
– Apply the debt limit ratio
Debt limit ratio =
total monthly nonmortgage debt payments
total monthly take-home pay
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Six Keys to Successful Debt
Management (cont’d)
Key #5: Keep a Clean
Credit Record – It’s a
Source of Emergency
Money
 Your credit history
determines the cost of
borrowing.
 Your borrowing
capacity is available for
emergencies.
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Six Keys to Successful Debt
Management (cont’d)
How
Can You Avoid Credit History
Problems?
– Avoid borrowing up to your limits
– Pay your bills on time
– Check your credit report every 2-3 years
for errors
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Six Keys to Successful Debt
Management (cont’d)
Key #6: Don’t Live
with Bad (And
Expensive) Debt
In 1998, the typical
U.S. family had credit
card debt of $5,800
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How Can You Avoid Bad and
Expensive Debt?
 Negotiate
down the rate on your current
credit card(s).
 Eliminate the lifestyle pattern that lead
to the debt.
 Pay more than the minimum payments.
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How Can You Avoid Bad and
Expensive Debt? (cont’d)
 Liquidate
an investment, or savings,
that is paying less than the interest rate
charged on debt.
 Try to find a cheaper source of money
(home equity loan, life insurance,
friends or family).
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How Can You Avoid Bad and
Expensive Debt (cont’d)
To follow this
path, a serious
lifestyle change
may be
necessary!
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Getting Started on Your
Financial Future
Begin with a budget and a plan.
 Manage your cash – monitor bank fees and
ATM charges.
 Avoid “bad” debt; get rid of it if you have it.
 Build a safety net – health, disability, property
and liability, and life insurance.
 Start investing for future goals.
 Take advantage of tax-favored retirement
plans.

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Nothing Helps Your Financial
Plan if You Procrastinate
THE MOST
IMPORTANT
STEP!
Follow Axiom15
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Summary
 Financial
independence for women is
tougher – be aware of the problems and
start planning NOW!
 Consider how marriage and children
can help you match your financial future
with your values and goals.
 Share the habit of the wealthy –
frugality.
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Summary (cont’d)
 Learn
and implement the 12 decisions
that will help you “choose wealth.”
 Meet the financial challenge of
controlling debt; follow the 6 keys to
successful debt management.
 Develop a basic financial plan for your
future….but remember to “Just Do It.”
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