Creating a carefully thought-out financial plan is critical to adequately preparing for those issues we just outlined-and if done well, such a plan will help see women through the extra years they may experience in retirement, says Fidelity’s Kapusta. “Having a financial road map is a big stress reducer,” she points out.
But how does one get started creating a plan, and what does it encompass? Think of your plan as something of a life road map; it includes a lot of different things, explains Kapusta.
Generally, this effort begins by identifying and writing down your goals for three years down the road, 10 years down the road, and even 20 or more years down the road. Think about what you’re trying to achieve for each of those timelines. Of course, the more detail you include, the better. But start by simply identifying each goal. For instance: “I want to retire in 30 years.” Or “I want to establish a comfortable emergency savings within five years.”
Writing goals down helps make them real. In fact, when you write things down, there’s a 42 percent higher chance of attaining success with that goal, according to Fidelity.
Next up, you’ll need to get a grasp of what you currently own, and what you owe, Kapusta says. This step involves writing down in one column on a piece of paper all of the things you own, whether it’s a retirement account, a checking account, or a savings account. Put all of these things in the left column on your paper. In a second column on that same piece of paper, on the right side, write down the value of each of the things you own.
Now, list all of the things you owe money for, in the first column on the left. (Think student loans, credit card debt, and so on.) And in the right column, write down exactly how much you owe on each debt. Once completed, this exercise should help you see clearly where you stand financially.
Additional parts of the financial-planning road map effort Kapusta referred to include getting a true handle on your month-to-month budget-and once you’ve completed all the other steps, it’s time to look at how you’re invested to achieve your goals.
“Doing all of this gives you a foundation. If you take these steps to develop goals and a road map to organize your financial foundation and have all of that laid out for 10 years, 20 years, and beyond, then you can invest in yourself,” explains Kapusta.
Shuffman, of UBS, offers a similar perspective, noting that comparing assets to liabilities offers a way to better understand one’s net worth.
“Women should start taking stock of their financial situations and really dig in to understand where they stand across their income, spending, current assets, and debt,” she explains. “Understanding one’s income, in comparison to spending, will paint a clear picture of current cash flow-including any overspending or areas of opportunity to save or invest further.”