How to Create Wealth as Income Grows
My name is Ashley Russo, and I am a licensed financial advisor with Northwestern Mutual, a leader in financial planning. In my role, my primary focus is to prepare women with the tools and confidence necessary to achieve their financial goals. I am your peer and your advocate. Like you and many of my peers, I’ve faced setbacks and challenges and have worked hard to overcome them. Life, like the stock market, isn’t a perfectly straight and predictable line. With planning, you help to set yourself on the path to achieving your goals and taking control of your financial future.
As lady bosses and leaders, we simply want more details and information in a language we can understand. A question on most women’s minds is how to create wealth as income grows and still be on top of day-to-day responsibilities.
Have you spent that time with your finances? Six in 10 women said they feel too busy to think about long-term goals1. But if we don’t take the time, it may be impossible to create lasting security, peace of mind and have an understanding of how to create stability or wealth.
The good news: women are doing incredible things:
Thirty percent of global wealth is held by women (http://time.com/money/4360112/womens-wealth-share-increase/ )
We are the largest emerging market in the world – greater than India and China combined! (http://fortune.com/2010/10/07/the-biggest-emerging-market-women )
Four in 10 American households with children under age 18 now include a mother who is either the sole or primary earner for her family (http://www.nytimes.com/2013/05/30/business/economy/women-as-family-breadwinner-on-the-rise-study-says.html )
Among the Top 50 Companies nearly 25 percent of corporate executives are women, https://www.businessnewsdaily.com/3893-top-companies-for-female-execs.html
More than More than 9.4 million firms are owned by women, employing nearly 7.9 million people, and generating $1.5 trillion in sales as of 2015. (https://www.nawbo.org/resources/women-business-owner-statistics )
With all that momentum, it’s important to know how to protect and grow your hard-earned dollar and create long-lasting wealth.
Let’s start with protection. You can build the best financial plan in the world, but if you can’t show up to do your job due to illness or injury, where will the money to maintain your lifestyle come from? Risk management is an overlooked part of planning. Women may need to be even more proactive then their male counterparts with protecting against the unexpected, from pregnancy complications to anxiety and depression to cancer. Protecting the ability to reach our goals against the things that are out of our control is the foundation. This also includes having an emergency fund for the unexpected expenses we can’t plan for.
We also have to be mindful of all three-time horizons:
Short-term dollars: One bucket often used is your savings account, which should hold 3-6 months of living expenses.
Mid-term dollars: These are dollars that are typically held within investments and are not incredibly risky but allow us to earn above inflation, based on an individual’s risk tolerance. Cash has a negative return and is very expensive as it doesn’t keep up with the actual cost of the dollar. Beyond our savings, we need our dollar to earn to create wealth.
Long-term dollars: These dollars are may be meant for retirement and can be more aggressive as we shouldn’t need to access them, dependent on your risk tolerance. We must be mindful of tax consequences with these dollars by being balanced in our savings approach, this is also based on an individual’s risk tolerance.
Here are a few other things to note:
Far too often, not having a financial plan prevents women from reaching their goals. Fear is often eliminated when you have a plan, accountability and the guidance to reach your goals.
Despite what it may look like, nobody has life completely mapped out or can predict the future. It’s important to have an experienced financial professional to help you prepare for the future, plan for life’s financial milestones and work to reach your financial goals.
Financial strategies can change over time, depending on changing life experiences. This may include going back to work or leaving work to care for children or older relatives.
Volatility in the investment markets can significantly affect your retirement income and savings. Cash reserves, long-term planning, guaranteed income sources and proper asset allocation through a risk adjusted investment profile can help mitigate the markets impact. For many, taxes are one of the largest annual expenses in retirement.
My advice to you is this: Find yourself a financial advisor who can help you navigate your financial planning journey.
I know from my own experience that even the brightest, most independent women I meet often seem hesitant to work with a financial advisor because they don’t know where to start or what to expect. You can’t just create a plan and stick in on a shelf. It’s essential that you revisit it over time and update it as your circumstances and your priorities change.
Starting when? Your first paycheck. People think you need an advisor once you have made it, but it’s the opposite. It’s about building a solid foundation, structure and habits early on to help you get where you’re going with a little less sweat and tears.
1 Planning & Progress Survey, 2013
Ashley Russo | Financial Advisor