prenup

Women and Financial Education: Start Learning Now!

It is crucial that women make financial decisions as if they were the sole keeper of their personal finances in all phases of their lives. Women have something in common when it comes to their money: At some point in their lives, they will need to manage it on their own. Unfortunately many are ill-prepared to do so because they haven’t taken the time to learn about personal finances. Whether a woman is single, married, with a life-partner, divorced or widowed it is smart to be informed and active in personal financial management.

Women and Money

As an advisor focused on women clients, I often hear statements such as:

“My dad invested my money for me, and I haven’t looked at my accounts since he died.”

“My brother is managing my money, and I’m not sure how it’s invested.”

“I handled the bills, and my husband took care of everything else.”

“I’m embarrassed about my finances and how clueless I feel about my money.”

“I don’t understand investing and I don’t know where to start….”

By seeking out an advisor, these women acknowledged they needed help, but there are many who don’t seek help and miss out on opportunities to save and invest wisely—possibly undermining their financial health.

Because of these realities, I believe it is crucial that women make financial decisions as if they were the sole keeper of their personal finances in all phases of their lives. Learn from these women and their stories:

Single, Urban and Underpaid

Mary is a single woman living in an expensive urban area. She is 35 years old and has a job that she loves. However, her pay covers her living expenses—and that’s about it. She isn’t saving for retirement and has $15,000 in a savings account, earning next to nothing. She feels she is underpaid, but she is very loyal to her employer and is always willing to take on extra work for no extra pay.

Advice: As the sole steward of her finances, Mary owes it to herself to ask for a raise – at least enough so that she can contribute to an individual retirement account. Or, she could ask her employer if they would contribute to a retirement savings account for her.

If she can’t get an increase in pay or benefits from her employer, then her only options are to find a higher-paying job or to reduce her living expenses. Then she can afford to save for retirement and other financial goals.

Middle-aged and Widowed

Sally is 57 years old, the mother of a teenage daughter and a recent and unexpected widow. She gave up her career to raise her daughter and now works part-time for very little money.

For the first time, she is forced to handle the finances: understanding her investments and figuring out whether there is enough money to last through retirement. As she becomes more educated, she realizes that her husband left some money on the table. For example, he wasn’t contributing the maximum to his 401(k) plan or contributing enough to get the full employer match. In addition, he invested his 401(k) savings in stable value funds as he was extremely risk-averse. Given the number of years he worked, the 401(k) balance is disappointing.

Fortunately, he worked for a large corporation, and there were other retirement income benefits. Sally and her husband were frugal, and she thinks she will be able to get by, but she is actively looking for full-time work.

Lesson: Women who disrupt their careers to raise children also disrupt their ability to save for retirement. However, there are several things that wives can do even if they aren’t earning money:

  • Get educated about basic investments, and understand the investments in spousal retirement and joint accounts.
  • Make sure their spouse is fully maximizing employee benefits (especially employer match to a retirement plan), life insurance, and disability benefits.
  • Learn about and take advantage of the spousal IRA.
  • Have jointly owned, as well as individual, bank and credit card accounts.
  • Know where all the money is, and keep log-in credentials for all accounts stored safely.
  • Open a Roth IRA and contribute any earned income from part-time work.

Successful and Divorcing

Jane has a lucrative corporate career in technology. She is 45 and has made six figures since her late 30s and receives generous company benefits. She has a large balance in her 401(k) plan and substantial investments outside of her 401(k).

Her husband, who is a writer and stay-at-home dad (they have a 7-year-old son) announced unexpectedly that he wanted a divorce. Jane, focused on her work, did not expect this and realized too late that she did not prepare for this possibility. She has hired a lawyer to help with a property settlement.

Lesson: If a woman is coming into a marriage with wealth, it pays to consider executing a prenuptial agreement beforehand. Prenups are not a romantic proposition, and it might seem like they’re meant only for the super-rich, but that isn’t the case.

At a highly emotional time, she will be required to make decisions that will affect the rest of her life, as well as that of her child. A prenuptial agreement would have made this process a lot less stressful and ensure a fairer outcome.

It’s time to stop sabotaging yourself

These three scenarios are just a few examples of ways that women sabotage themselves financially by relying on others to do the right thing or take care of them. This isn’t to say that spouses, partners or bosses are bad people; it’s just the reality of life.

As women enter each new phase of their lives and are required to deal with different realities, it is critical to their financial health that they look out for themselves. The choices are clear: Get educated about finances and take action, and seek out help from trusted advisors—or leave things to chance and hope that they work out. What seems like a better choice to you?

Do you want to manage your money (and life!) better?

The Happiness SpreadsheetIf you want to think differently about the relationship between your spending, your values and your happiness, then sign up to get your FREE copy of The Happiness Spreadsheet.

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Do You Need a Prenup?

According to news reports, when Katie Holmes and Tom Cruise announced their divorce, there wasn’t much of a question of how the couple’s assets would be split. That’s because a detailed prenuptial agreement outlined exactly what would happen, financially speaking, if the couple split. It’s been said that Holmes walked away with only those assets that she brought into the marriage.
Do you need a prenup? | Curtis Financial Planning

Prenups aren’t unusual for celebrity types or the super wealthy, but they aren’t as common for the simply well-off folks who aren’t in the spotlight. This could be a mistake. There are social trends that make having a prenup a very smart idea. Instead of creating tension for a couple, a prenup can actually create peace of mind that financial matters will be settled fairly and quickly in case a marriage doesn’t work out.

You may see yourself or someone in these circumstances:

* Going into a marriage with significant assets or liabilities: People are getting married later in life (the average age for a first marriage is the highest it’s ever been, at 26.5 years for women and 28.7 for men, according to the Pew Research Center), time enough to accumulate wealth on one’s own.

* Inheriting a large sum of money or other assets: Baby Boomers and Gen Xers are often beneficiaries of their parents’ or grandparents’ estates, creating instant wealth for one or both partners.

* Divorcing after age 50, sometimes referred to as the “gray divorce”: A gray divorce typically involves an empty-nester couple who stayed together for the sake of the children. Or, since we are all living longer, a marriage that would have ended with the death of one spouse now ends in divorce. Whatever the exact cause, statistics show that the divorce rate has more than doubled in the past 10 years. Today, one-quarter of people who get divorced are over age 50, according to the National Center for Family and Marriage Research.

Prenup Basics

Prenuptial agreements are legal documents that specify how certain financial issues will be handled in the event a marriage ends (either in divorce or death). Prenups are especially popular when one partner has substantially more money than the other going into the marriage.

A prenup might be a good idea even if you don’t have movie star money. You should consider a prenuptial agreement if:

  • You own a business.
  • You expect to receive a significant inheritance.
  • You have assets such as retirement accounts, a home or stocks.
  • You have children from a previous relationship.
  • You don’t make a lot of money now, but you expect your future earnings to be significant (for example, you are currently in law school or medical school).
  • You have more unusual assets that you want to protect (for example, you are an author or musician who owns the copyright to your creative works, you have a collection of valuable art, etc.).
  • One half of a couple has significant debt.

A well-crafted prenuptial agreement will specify how these assets and liabilities will be handled if a marriage ends.

The Well-Crafted Prenup

Just having a signed agreement between two parties doesn’t necessarily mean that you have a valid prenup. For your agreement to be enforceable, you need to do certain things:

  • Sign the agreement well before the wedding. If a prenup was signed just days before a marriage, it may look like one party was coerced into the agreement.
  • Fully disclose all your financial information. If one person withholds information, it could make the prenup unenforceable.
  • Make sure your prenup is equitable. Courts may not look fondly on an agreement that leaves one party completely broke. For example, even if one person waives his or her right to alimony payments, a court could still decide to award those payments if it determines that’s the fairest option.
  • Keep it reasonable. Don’t include frivolous, non-financial demands in your prenup, such as clauses that require one spouse to not gain weight, specify where to spend holidays or dictate how children will be raised. Prenups that contain these types of clauses may be invalidated. You also can’t make decisions about child support or custody in a prenup, since those issues are decided separately by the courts.
  • Hire a lawyer. Informal agreements are far less likely to be enforceable. Each party should hire their own lawyer who looks out for their own interests and is familiar with marital laws in their state. The lawyers can then work together to hash out an agreement that works for both you and your fiancé.

Think About Finances Before You Say “I Do”

If you’re engaged or thinking about getting married, you should seriously consider sitting down with your partner and have a conversation about a prenup. This can be a sensitive topic, and it’s possible that your partner will react negatively when you raise the issue. If that’s the case, try explaining that a prenup is a way to minimize conflict and ensure that everyone is treated fairly in the unlikely event the marriage doesn’t work out, not a way of saying that a marriage is doomed to failure.

Even if you and your fiancé decide a prenup isn’t for you, having a conversation about it can allow you to talk about financial concerns—something that many couples fail to discuss before marriage. Bringing up issues of debt, assets and future earning potential now allows both of you to go into a marriage with eyes wide open, and can mean a smoother, happier partnership in the future.

Sources:

http://www.pewsocialtrends.org/2011/12/14/barely-half-of-u-s-adults-are-married-a-record-low/
http://ncfmr.bgsu.edu/pdf/family_profiles/file108695.pdf
http://www.bankrate.com/brm/prenup.asp
http://family.findlaw.com/marriage/what-can-and-cannot-be-included-in-prenuptial-agreements.html http://www.smartmoney.com/spend/family-money/i-do-however–13917/

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