Flourish in the Face of Financial Challenges

Maintaining stability to achieve success on through your golden years.

Even after you achieve financial stability, there are several key times in your life that are going to present significant challenges that can throw even the best laid financial plans off track. Having children is right at the top of that list.

“The single best predictor that a family would go bankrupt was if they had a child.”
                                                                                                                       – Elizabeth Warren

Women also face distinctive financial challenges heading into retirement, as well as when facing the financial upheaval of separation or divorce. The tips below can help you get through these trying financial times in your life with your stability and your credit intact. If you’re having trouble maintaining stability in the face of financial challenges, call us today at or complete an online application to schedule a confidential debt and budget evaluation from a certified credit counselor at no charge.

Financial Stage 4: Bringing kids into the mix

Financial life stage 4Kids are great, but they also certainly present a big challenge to your financial stability. You add significant financial burden to your budget with pre and post-natal care, a constant steam of clothes they outgrow, back to school shopping (the second most expensive shopping season of the year, after the winter holidays), extracurricular activities, family vacations and a continual steam of “Buy me…” requests.

These tips can help you plan ahead to being raising your family:

  • Don’t wait to start saving. Ideally you want to have a healthy level of savings before you decide to have kids. If you want children, start saving now – even if you aren’t to the point of having them yet. And don’t stop saving, since a baby could become twins or triplets which would double or triple your cost.
  • Take advantage of startup programs. Start saving as early as possible for your children’s college tuition with something like a 529 college savings plan. You may also want to consider pay-ahead tuition and insurance programs, like the Gerber Grow Up Plan.
  • Have the right insurance. Make sure that the medical, dental and vision costs for your children will be covered. A trip to the ER that isn’t covered properly by your insurance could easily end up in collections and cost you your good credit. Also consider life insurance on yourself and your partner in case something happens to one or both of you.
  • Teach the right financial lessons early. It’s never too early to start teaching your kids the value of a dollar. Make sure to teach your kids about budgeting. Also take steps to show them how credit works and why savings is essential so they start learning these valuable lessons early.
  • Don’t hide your situation when money is tight. Parents often try to shield children from any negativity, but you could be hurting your budget and your kids’ financial learning by hiding problems. Be honest and use the opportunity to teach them about overcoming financial challenges together as a family.

Feminine Facts

Not including college education, it costs an estimated $245,340 to raise one child to the age of 18 in the United States.[3]

Financial Stage 5: Retirement

Financial life stage 5Making your retirement dreams into reality is tough regardless of your gender. However, women often face a tougher battle to achieve their retirement goals. Then tend to have less in retirement account and weaker investment portfolios.

These tips can help you as you approach and reach your golden years:

  • Don’t rely on Social Security as your sole income. No one is certain what will happen to Social Security in the coming years. Benefits could be the same when you retire or they could be less. A robust retirement strategy will help you achieve your goals without significant dependence on these benefits.
  • Take advantage of your company 401(k). Don’t wait to start using 401(k) retirement plan as soon as they’re offered. A little money out of each paycheck as early as possible will go a long way when you’re ready to retire.
  • Supplement your 401(k) with an IRA. Diversify your retirement accounts by opening a private IRA or Roth IRA. Always contribute to your 401(k) first if your company offers some kind of dollar-for-dollar match program up to a certain point, but then put extra retirement contributions into your own account.
  • Consider long-term investments. If you get or collect lump sums of cash during your life, consider putting them into stable long-term investments, such as CDs or bonds. Even an MMA account will offer better growth than your regular savings account. Putting this money into special investments also helps you avoid spending it.
  • Pay off your mortgage before you retire. The last thing you need on a fixed income after retirement is the big expense of a mortgage. A paid-off home means one less bill to worry about. It also gives you some security that no matter what happens in your financial situation, you should be able to keep your home.
  • Don’t take on debt to help family. Parents and grandparents often put their own financial stability at risk during retirement to help family. You’re on a fixed income and taking on high-interest credit card debt to help someone out puts you at risk.
  • Don’t be afraid of reverse mortgages. If you’ve owned your home for a long time and you almost or already have the mortgage paid off, reverse mortgages are a safe way for homeowners age 62 and over to access valuable equity without monthly payments.

Feminine Facts

54% of women plan to retire after age 65 or not at all; almost half (49%) plan to work at least part-time.[3]

Financial Detour: Divorce or separation

Take a financial detourNot every woman will go through divorce during her lifetime, but even separation after a serious relationship can present challenges for your finances. When your life path takes a detour, you have to take steps to get yourself back on the right financial path as you move forward on your own.

These tips can help you reestablish financial stability after divorce or separation:

  • Have a detailed list of accounts and assets you share. Make sure you know what you both have so you can ensure it is divided up appropriately. Being informed can help you avoid getting shortchanged.
  • Divide assets and close out joint accounts as quickly as possible. A divorce proceeding will do this for you, but if you’re ending a long-term relationship without divorce then sometimes joint accounts and jointly held credit cards linger. You don’t want your ex’s bad credit habits driving down your credit score. Close the accounts and pay off any debt quickly. Don’t just assume your ex will be responsible with payments.
  • Check your credit reports once accounts are closed. Take advantage of the free credit report you can obtain once per year to make sure that all joint accounts have been closed and you aren’t tied to your ex in any way credit-wise. You can download your free credit reports through annualcreditreport.com.
  • Develop a new household budget. Both your income and expenses will change during separation, so you need to take accurate stock of your situation. Take time to create a new budget for your household so you know where you stand. It can also help you determine the target income you need to aim for to regain financial stability.
  • Don’t hesitate to ask for support – especially for kids. Sometimes we let pride get in the way of good financial sense. Don’t avoid asking the courts to order support, particularly if it’s child support. Your kids deserve to grow up with every advantage possible even if pride tells you not to take money from your ex.
  • Consider assistance programs – particularly if you feel like you’re in danger. Many charity organizations exist that are designed to help women get a fresh start. If you are in an abusive or dangerous situation, look into assistance programs that can help you get out and get set up on your own.

Feminine Facts

Women face an average 37% drop in household income after a divorce and the percentage of women in poverty doubles following separation.[3]

Sources:
[1] http://www.huffingtonpost.com/2014/08/18/cost-of-raising-a-child_n_5688179.html
[2] https://www.transamericacenter.org/docs/default-source/resources/women-and-retirement/tcrs2015_sr_womens_retirement_outlook.pdf
[3] http://www.census.gov/sipp/workpapr/wp156.pdf