If you’re a woman over 40, you’re probably already doing a lot. You might be raising children, taking care of a home, working outside that home or caring for aging parents — or all these things. But you need to take care of your financial affairs, as well.
Understand these basic money principles for 40-somethings, then continue reading for things women in particular need to know.
Click through to learn 40 things about money you should know as a 40-something woman.
40. Know What You Have — or Need — for an Emergency Fund
The standard rule of thumb for an emergency fund is to have three to six months of expenses set aside in case something comes up. Three months’ worth is probably fine if you’re 20 with no dependents, but at 40, with a couple of kids, you’ll want to be able to cover six months of expenses in an emergency. When calculating expenses to estimate your emergency fund amount, include housing, food, utilities, transportation, healthcare, personal expenses and debt repayments.
39. Understand the Implications of Having and Using Credit Cards
Credit cards can be an effective money management tool — if you use them wisely. Get a card that gives you rewards for things you actually buy, that you can redeem for things you actually want. Each month, pay off the balance in full.
38. Know How to Get Out of Debt
Debt is a part of life, but it shouldn’t be a stressful part. If you need help to get out of debt, it’s available. But beware of scams that purport to provide debt help. The Federal Trade Commission has reliable consumer information on how to reduce your debt and keep from getting in over your head in the first place.
37. Know How to Budget Your Money
Knowing how much money comes in and how much goes out each month is the first step in financial awareness. Dozens of online tools are available for budget help; look around to see which one works best for you. They all can do the necessary calculations, so choose one that makes sense to you so you’ll actually use it. All the bells and whistles mean nothing if you don’t use them.
36. Grow Your Income
“While you are putting in effort to bring down expenses and increase your savings, also ensure your earnings are a perfect match for your experience and efficiency,” said Stacy Montes of Single Mom Financial Help. “Not many years of service are left. Therefore, it is important to look for ways to make your salary grow appropriately. Growing income can help you to attain financial freedom pretty quickly.” Beware of easy ways to make money and look for reliable ways to grow your income.
35. Know What Your Retirement Will Cost
Use an online retirement calculator to estimate how much you’ll need to retire, and determine whether you’re on track to meet that goal. You still have time to make adjustments if you’re falling short.
34. Know How to Save for Retirement
When you first started working, you probably saved what you could for retirement — that was the right approach. But now you should be thinking about increasing your retirement savings. If you’re not taking full advantage of pre-tax opportunities such as a 401k plan at work, start there. Make sure you contribute at least enough to qualify for the company match — that’s free money.
Shoot for saving 12 to 15 percent of your pay. Married couples should be saving this much of both their incomes. Be extra diligent about saving if early retirement is in your sights.
33. Know How to Balance Multiple Saving Priorities
“Focus on your retirement and emergency savings before college savings for your children,” said Emma Johnson, blogger at WealthySingleMommy.com and author of the upcoming book, “The Kickass Single Mom.” “There are countless ways to finance an education. Not so much for retirement.”
32. Know How You’ll Be Taxed in Retirement
Retirement accounts such as 401ks and IRAs are funded with pre-tax money. This means you don’t pay income tax on the money you put into these accounts. Instead, this money will be taxed when you withdraw it in retirement. To avoid having to pay a big tax bill when you’re retired, consider putting some money into after-tax investments. You can contribute after-tax money to a Roth IRA, for example, but you won’t pay taxes on the money when you take it out, thereby reducing your overall tax obligation when you’re retired.
Find Out Now: 10 IRA Withdrawal Rules You Need to Know
31. Know How to Save for College
You can save for your children’s college education with a 529 savings plan. You can deposit money into this type of account and you won’t pay taxes on the money that’s earned on your investment as long as you use the money for qualified college expenses.
30. Know How to Pay for College
If you have children approaching college age, think about how you will pay for college. Very few people can simply write a check for college tuition, and most students don’t get full scholarships. What paying for college looks like for most people is a patchwork of savings, financial aid, loans and current income — both yours and your student’s.
Some students go to community college for two years and then transfer to a more expensive school for the remaining two years. There are lots of ways to cover the cost of college, but it’s best to have a plan.
29. Understand Your Short-, Medium- and Long-Term Financial Goals
The first step in financial planning is to define your goals. Perhaps you want to pay off your credit cards or your car loan. You might also want to save to buy a bigger house. Then there are goals such as college and retirement. Writing them down and then prioritizing them is the first step. Recognize that you can save for multiple goals at once. You might want to open a separate savings account for each of your long-term goals, and have a little money from each paycheck direct-deposited into those accounts.
28. Know What You Really Want to Do
It might be time for a new career or business. For women who have been at home with children, or working in jobs that were more suited to their families’ schedules than their abilities or passions, now might be the time to look toward more rewarding pursuits. This could mean taking a different job or starting your own business as a full- or part-time venture.
According to the Kauffman Index of Startup Activity, 25 percent of new entrepreneurs in 2015 were ages 35 to 44. You can find hundreds of entrepreneur ideas, money-making ideas, ways to make money from home and ways to earn money online — just beware of scams.
Start Now by Learning: How to Prepare Your Finances for a Job Change
27. Understand Your Net Worth
“It is important to look at your financial profile in the aggregate — not just on an account-by-account basis — to gauge your financial health,” said Nancy Doyle, CFA and author of “Manage Your Financial Life: A Thoughtful Organized Approach for Women.”
“Remember that assets minus liabilities equals net worth. Total up all of your assets and all of your liabilities or debts to determine your net worth,” Doyle said. “When you are making decisions, it is helpful to think of the impact on your net worth: Will the impact of this decision make your net worth increase or decrease?”
26. Understand Your Parents’ Financial Situation
“Now is a great time to talk to your parents,” said Bobbi Rebell, author of “How to be a Financial Grownup: Proven Advice from High Achievers on How to Live Your Dreams and Have Financial Freedom.”
“Find out where they stand financially, and make sure there is a plan in place for when they need it,” Rebell said. “For example, who will pay their bills if they get injured and are out of their home? Make sure you are able to access their social media accounts so you can communicate with the people who care about them if there is health news they want to share.”
25. Understand How Your Current or Former Partner’s Income Affects You
“Always focus on financial independence, no matter your marital status,” said Johnson. “The other party’s income — including child support and alimony — could disappear at any time. And by relying on that income, you give your power to another person and hold yourself back professionally and financially.”
24. Understand Your Savings Potential
“It’s time to lean into your savings goals,” said Carla Dearing, CEO of SUM180, an online financial wellness service. “It’s never too late to save, and chances are, as a woman over 40, you are at or near the peak of your earning power. Make the most of this window of opportunity. Create and implement an accelerated savings plan to fatten your retirement nest egg and pay off lingering debts.”
23. Know How to Protect What You’ve Earned
“Make sure you have enough insurance,” said Dearing. “Financial security is more about growing the balance in your bank or retirement account. Safeguarding your financial health for the long-term means expecting the unexpected. Review your home, health, life and auto insurance policies to make sure you have enough coverage to protect your savings and your family in case of a medical or legal emergency.”
Get Covered for Less: 10 Ways to Save on Insurance
22. Focus on Yourself First
“When it comes to money, put on your own oxygen mask first,” said Dearing. “Too many women put off saving for retirement and instead support their kids by picking up costs like car insurance or cell phone bills.”
“If you’re a woman in your 40s who has not yet reached your retirement savings goals, you may need to rethink your current priorities — including taking the difficult step of reducing or even eliminating financial assistance to adult children,” Dearing said. “It may feel counter-intuitive, but your security in retirement is something your children want for you, too.”
21. Have an Emergency Financial Plan
“Everyone should create an In Case of Emergency (ICE) plan with instructions to someone who can act on your behalf and according to your wishes in the event of an emergency,” said Doyle. “Write down the names and contact information of your lawyer, banker, insurance agent, accountant and investment advisor. Prepare a list of all your accounts and note the location of your safety deposit box and key. Note the best sources of cash and any bills that are on auto-pay.”
20. Know Where Your Money Is Going If Something Happens to You
“Check your beneficiary designations to make sure they are consistent with your estate plan,” said Doyle. Doing this is especially important if you’ve gotten married, had children or gotten divorced since you opened any of your accounts.
19. Understand How Long Your Retirement Could Last
“Plan for a longer life and a longer retirement,” said Doyle. According to the Social Security Administration, a 65-year-old woman can expect to live 21 more years, and more than one in four 65-year-olds will live to 90. For a married 65-year-old-couple, one spouse has a 50/50 chance of living past 90.
18. Consider Delaying Social Security
“The age when you start taking Social Security has a big impact on what you will receive,” said Doyle. “If you take benefits at 62, it reduces the amount you receive by 30 percent and the amount your spouse receives as a survivor by even more.”
“If you work past the stated retirement age and delay taking benefits until 70, the annual increase in your monthly benefit is 8 percent,” Doyle said. “It is important to supplement your retirement savings so you can delay Social Security, if possible.”
17. You Might Be Able to Collect Social Security Based on Your Ex-Spouse’s Earnings
“Women who were married at least ten years, who got divorced and did not remarry, can claim Social Security based on their ex-husband’s earnings,” said Dean Hedeker, Principal, Hedeker Law. “Many women don’t realize how large the benefit can be, even if they are divorced.”
16. Read the Terms of Your Divorce Settlement Agreement Carefully
“In some marital settlement agreements, there can be a provision which says that the alimony is to be reviewed periodically,” said Hedeker. If the alimony doesn’t get reviewed, it expires.
If you have such a provision in your settlement agreement, make sure the court reviews it. Many people are unaware of this provision because they don’t read the fine print of their marital settlement.
15. Know How Child Support and Alimony Work
“If you are getting divorced, consider the allocation of payments between child support and alimony,” said Hedeker. “Child support is tax-free, while alimony is taxable. So the knee-jerk reaction is to make everything considered child support, and thus tax-free.”
“The downside to this is that, in many states, child support may end at 18, while alimony may continue beyond that,” Hedeker said. “If the kids are young, the divorcing spouse would probably want to treat more of the payments as child support, whereas if the children are older, alimony is probably a better choice.”
14. Alimony Is Income
“Alimony is considered earned income for the purposes of IRA contributions,” said Hedeker. “To reduce the tax impact of alimony payments, make an IRA contribution from the income and claim it as a deduction.”
13. Understand How Divorce Affects Your Estate Plan
“If you are considering a divorce, or in the process of getting one, see an estate-planning attorney,” said Hedeker. “I had a client who was in the course of divorce when she died. Her soon-to-be-ex-husband was still the beneficiary of her million-dollar life insurance policy.”
“An estate planning attorney will help you time things so your financial affairs are in order in time for the cutoff,” Hedeker said. “Divorce attorneys may not be familiar with spousal rights.”
12. Know Which Assets You Want in a Divorce
“Different assets have different tax attributes,” Hedeker said. “When you’re trying to pick assets to divvy up in a divorce, the worst assets to get are taxable assets. If a husband has half a million dollars in a retirement plan and half a million in an investment portfolio, the wife is far better off getting the money that is not in the IRA, because it is not taxable.”
11. Understand the Tax Implications of the Date Your Divorce Is Finalized
“Your marital status is determined as of the last day of the year. If you’re not married on December 31, then you’re treated as single for the whole year,” said Hedeker. “This means that you will probably pay a higher tax than if the divorce was finalized three days later. The reason is that tax rates for single people tend to be higher than tax rates for married [people]. This needs to be considered if your divorce is being finalized at the beginning or end of any year.”
10. Know How Much Social Security You’re Entitled to Receive
If you stayed home with children or had a much lower-paying job than your spouse, you might be able to collect a Social Security spousal benefit based on their income. A spouse is entitled to the larger of their own benefit or 50 percent of their spouse’s benefit. So, if your benefit is determined to be $800 a month and your spouse’s benefit is $2800 a month, you could collect $1400 as a spousal benefit rather than the $800 you would have collected on your own earnings record. Your spouse would still collect their full benefit of $2800.
9. Understand That You Might Be Single Again
The average age at which a woman is widowed is 55. In the U.S., there are 374,000 widows under age 45. And about 40 to 50 percent of American marriages end in divorce. There’s a good chance that, if you are married now, you’ll be single again in your lifetime. Think about how this will affect you financially, and discuss it with your spouse. It’s a difficult conversation, but a necessary one to avoid suffering financially if you find yourself suddenly single again.
8. Consider Your Future Healthcare Needs
There’s about a 50 percent chance that you will need long-term care in your lifetime. Health insurance and Medicare do not cover this cost. You will need to either pay for it with your savings or buy long-term care insurance.
Long-term care insurance is less expensive if you’re younger when you buy it, but you’ll pay premiums for that much longer. But if you wait, you run the risk of being turned down for health reasons. It can be a balancing act, but most financial planners suggest you purchase long-term care insurance in your 50s — so you might want to start looking into it now.
7. Know Your Credit Score
Your credit score indicates to lenders how good a risk you are for a loan or credit card. A poor credit score can mean you will pay a higher interest rate and find it more difficult to borrow money. Knowing what your credit score is — and how you can improve that score, if you need to — is important to your long-term financial plan. You can get a credit report from each of the three credit reporting agencies through AnnualCreditReport.com. Some banks and credit cards also track your credit score for you.
6. Know How to Protect Yourself Against Identity Theft
Stories of security breaches are constantly in the news, and identity thieves are becoming bolder and more brazen. To protect yourself, keep an eye on your credit report to detect unusual activity. Review your bank and brokerage statements carefully for transactions you don’t recognize. Shred old statements and other documents that contain personal information. And never, click on a link in an email that purports to be from a bank or other company asking to verify your personal information. Call the company at the phone number you have for them — not the one in the email — and ask if the request is legitimate.
Better Safe Than Sorry: 6 Best Identity Theft Protection Options
5. Talk to Your Children About Money
Teach your children about money in an age-appropriate way. They can set up a savings account by about six years old, and by the time they are teenagers, they should be able to create a budget. Have a conversation about credit cards before they leave for college — and be sure they know they can come to you for money advice at any time.
4. Know What You Earn and What You Spend
“By the time you reach 40, you should be clearly aware of how much you earn and how much you spend,” said Montes. “Follow the basic rule of finance, which is the outgoing should never surpass your incoming.”
“Keep track of your spending each month,” Montes said. “A little bit of patience and calculator is all that is needed to strike a balance between earnings and expenditure.”
One good way to avoid overspending is to set aside a monthly budget that covers essentials and lifestyle choices, according to Montes. After taking care of all the expenses, if you’re able to save just $25 per month, by the end of the year you’ll have saved $300.
3. Shop Around for Health Insurance
“As you are growing older, it will be wise to be prepared for sudden illnesses that might crop up and make a big hole in your savings,” said Montes. “Shop around meticulously to find a health insurance plan with the lowest possible annual premium. Think about [the] long term while choosing a health insurance. Although you’re too young to consider nursing or homecare services, there is no harm in securing your future.”
2. Take Advantage of Health Savings Options at Work
“Make good use of the wellness programs available at your workplace,” said Montes. You can set up either a flexible spending account or a health saving account. Each of these tax-protected accounts can help you to save money to cover unexpected medical costs.
1. Know What You Don’t Know
Older women sometimes hesitate to ask for financial help, but no one knows everything there is to know about money. Taking a personal finance course can help you learn more. Sometimes, especially if you’re married, you need objective financial advice or budget help. Ask friends for recommendations, and find a good financial advisor to help you through the financial challenges that lie ahead.
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