I recently absorbed a wealth of financial information by tapping into the know-how of the wise and talented Elke Brink, a wealth advisor with PSG in Stellenbosch.
It is a privilege to pay that forward to our loyal followers with regular content from Elke on money matters and financial well-being. Here follows just a handful of her pearls of wisdom. Watch this space for more to come.
Women & Wealth
Do you regularly have more month than money? If so, you are not alone. Budgets and finances often get neglected, along with investments and retirement planning.
To live long and prosper
When one considers that women outlive men by about five years, many of us will have more years to our lives than funds to our name.
It is critical to make your financial well-being a priority and build a resilient investment portfolio. Whatever our present circumstances, we cannot afford to not invest in the future. A solid budget, no matter its size, will always include retirement planning.
Staying a step ahead
Financial planning should also be responsive to our various life stages. As our priorities and needs change so our plan should adapt. You may be building a career, launching a business, getting married, starting a family, taking an employment break, investing in your children’s future, adapting to an empty nest, becoming a grandmother, or scaling down. Wherever you are on your journey, your financial plan should evolve alongside you to help you make the most of every stage of your live.
Why women must be even wiser when it comes to wealth:
● Women mostly live longer than men. Our life expectancy is between 4-5 years longer than men. So, not only do we need to plan for a longer retirement, we are also likely to manage the household wealth at some stage. Women currently hold 40% of global wealth.
● Many women earn less than men. In many occupations, we still earn less than our male counterparts.
● Women often have interrupted careers. We take time from work to raise a family, which means we spend less time in the workforce and earn less income.
Women out-invest men
Warwick Business School completed a study including 2 800 UK men and women, tracking their performance over three years. The men outperformed the index by 0.14%, whereas the women outperformed it by 1.94%. That’s a 1.8% outperformance compared to the men. The same Warwick study concluded that women also trade less frequently than men. On average, women traded nine times as opposed to 13 times for men over three years. The key outtake is that when a situation calls for patience, women are better at sitting on their hands, which is why we manage investments exceptionally well.
Women taking the reigns
The reality we need to plan for is the longevity of women. Because we tend to outlive men, our plan must cater for an extended retirement period and the probability that we will have to manage the family’s wealth at some point. I have quite a few widowed clients who are currently managing everything. This scenario requires pre-planning.
Sharing duties and responsibilities
Part of any healthy relationship or partnership is dividing the household duties. Because we have only 24 available hours in a day, dividing responsibilities makes sense. In many relationships, one partner, usually the woman, raises the children while often juggling a career and household responsibilities, and the other partner, usually the man, manages the financial aspect and planning. The risk we have with outsourcing something completely is that we are not involved and will have no insight into the decisions made.
Staying financially savvy
1. Get involved and stay informed. You and your partner need to sit around a table and determine what financial provision and investment planning are in place for each of you and whether it is sufficient. This includes your investment portfolio, risk planning, medical aid, and estate planning.
2. Work with a financial adviser from the start. This brings an objective opinion to the table and creates healthy neutral ground for the partnership. It also helps to remove emotion and subjectivity from managing an investment portfolio and makes it easier to address challenging topics like death, illness, or divorce.
3. Review your personal portfolio. As women, our financial and retirement planning goals will look different. Many of us spend less time employed, earn a lower income, and live longer. We need to plan differently. Make sure you are optimising your annual tax benefits, that you have an emergency fund in place, and that you are planning for the pleasures of life too. Yes, you can have a portfolio in place that is just for holidays or weekend getaways.
4. Ensure you are investing in the right places. Not only should the appropriate investment products be chosen, but asset classes become extremely important when investing. The reason why we are not just investing in the bank is that of returns. Including growth assets or equity exposure in your portfolio is the only way to outperform inflation. Ensure your capital is growing sufficiently over the longer term. With inflation at an all-time high, you are essentially losing money daily if your cash is slumbering in the bank (because the interest you are earning is lower than inflation). On this note, ensure your short-term debt is well managed too, or you may find that the interest you are charged on outstanding credit card debt far outstrips the interest your earnings on savings.
5. Ensure you have sufficient risk planning in place. These are the products that protect you and your loved ones. Elements to consider are severe illness cover, income protection, disability cover, and education protection should you have children. Having this in place helps ensure that should anything impact your ability to earn an income, your family and yourself are taken care of.
6. Educate yourself. Despite the hesitation, some women may feel around managing investments, women are good at it once they take that leap. Investing does not have to be your passion, but it is critical to have the basic knowledge to protect yourself. Aim to understand the basic investment principles, know the norm of fee structures and portfolio returns, and determine the financial provision required for you to reach your personal goals.
Eyes on the prize
As with any life goal, you need absolute clarity around the desired outcome. Whether the aim is to lose weight, run a marathon, start a family, or launch a business, we need to know what to do now to achieve the ultimate result later. When we fail to plan, we plan to fail. Many investors are guilty of not knowing what their end goal looks like or which next steps to take to get there. Working with an adviser helps define goals and requirements so that your objectives are achieved one step at a time.
I highly recommend Elke as a financial advisor. To get in touch with her you can contact her on 0795236891.