Professional females and their path to Financial Freedom

Many women and men for that matter are simply unprepared financially for both the planned and unplanned events in life.

So says Carol Brick, MD of CWM Wealth Management who has spent the last 16 years in the financial services industry advising self-employed professional contractors and has recently established a dedicated financial advisory service for women called HerMoney.

The tide is turning slightly with regard to women’s awareness of how to future proof their finances, but recent research for HerMoney has shown over half of women are still taking a back seat when it comes to their finances, Carol Brick explains.

“While money management entails the same approach, women’s financial needs are largely different to men’s. Women still generally earn less than men even in the same roles; they are more likely to take breaks from the work force and on average live longer”, she says.

Being financially savvy means providing for both the planned events in life such as study, travel, buying a house and of course retirement but also the unexpected events in life such as the diagnosis of serious illness, reduced circumstances, premature death of you or your spouse.

For women conducting a full financial health-check is absolutely essential, Carol Brick has the following advice:

1.     Plan for Retirement Now!

Take out a pension now if not yesterday! Contributions to revenue approved pension schemes attract very generous tax relief (up to 51% for company directors!).

With the contributory State pension currently at around €12,000 a year, (if you’re even entitled to it), this represents a major income drop for the majority of people and the age at which you become entitled to the state pension is being pushed out further so the bigger your private pension pot the better!

Review your existing pension arrangements to ensure that you know this pot is working for you and that the fund will realise your retirement objectives in terms of paying you your expected annual income from your chosen retirement age. Shockingly, a recent HerMoney survey revealed that 45% of women surveyed claimed to have pension policies in place from previous employment contracts but 52% of these had never having reviewed these policies with no idea about how they were performing or how much they were worth!

The average maturing pension pot in Ireland is approximately €100,000 but the minimum pot required at normal retirement age is actually closer to €400,000. This pot would provide an additional private retirement income of approximately €12,000 per annum at Age 65 (approx. the same as the state pension).

Pension funding is the most tax efficient way of building wealth and pension schemes attract a whole package of generous tax benefits at the beginning, the middle and the end of the process. Over 50% of Irish Women surveyed by The HerMoney survey were totally unaware of these facts.

Brick came across a very useful working example of how tax relief on pension funding actually works recently at a presentation by Pensions Expert Kevin Fitzsimons. He demonstrated how “pension magic” can immediately turn €6,000 into €10,000! So if a higher rate tax payer invests €10,000 in a revenue approved pension scheme, they can immediately claim tax relief at 40% and receive a refund of €4,000. They would have otherwise needed to invest this same capital in a deposit account at current dismal rates for approximately 52 years to gain the same return! I think that this fact speaks for itself!

2.     Protect your earnings

The same HerMoney survey showed that a staggeringly low number of women have income protection policies. Only 20% of respondents, all women either self-employed or in a profession, had income protection cover in place.

As almost 40% of those questioned earn between €40,000 and €75,000, and are significant contributors to the household income, the risk to the overall family finances in the event of them being diagnosed with a serious illness or being hit with an unexpected injury is considerable. 

Life Cover is also a fundamental part of having a sound financial plan and few people are aware of that fact that it is quite cheap which means there’s no excuse not to get covered now. The purpose of Life Cover is to provide you with the comfort of knowing that a lump sum of money will be available to protect your loved ones in the event of your passing. It is especially important in the case of parents with young children. It is essential to have cover in place to cover any outstanding debts, like the mortgage, credit cards and car loans and other expenses including funeral and burial costs

Talk to an advisor to discuss your best options in this regard.

3.     Start Saving

Everyone should start with a savings goal – the main thing is to be realistic here. Think of a specific purchase or benchmark you could realistically reach in 12 months (e.g. that dream holiday, a new car or maybe just a rainy day fund).

Either way your goal should require self-discipline and a little sacrifice when it comes to spending.

In order to not lose track of this goal, a good idea might be to get a family member to hold you accountable, or write the goal down in a place where you'll see it every day, like a post-it on the fridge or in your diary!

Ideally, everyone should have four times their net monthly salary in an account where it can be accessed immediately for unexpected events.

Having a steady amount taken directly from earnings is the least stressful method of saving. It doesn’t have to be a large sum, but needs to be regular, realistic, and in line with personal overheads.

Women are traditionally better at saving, but negative interest rates impact the value and return on standard savings with banks, so talk to a financial advisor about investment products that will make your regular savings work harder. 

4.     Invest in the Markets

Financial markets deliver better returns than bank deposits over time, especially with current low or no-interest deposit accounts.

If you have a nest egg or inheritance, make your money work harder for you and enjoy better returns

Talk to an Advisor and choose a plan that you can invest in on regular basis and which you can tailor to your changing life goals and investment needs.

Once your attitude to risk has been assessed by your advisor, they will explain the different types of investment funds available to suit your requirements. 

5.     Asses Overheads Annually

The cost of household overheads from school fees to insurances, is constantly rising. Make a point of assessing your outgoings against your income once a year and do not assume it will be a static picture. 

Make a note in your diary of when your main insurance policies are up for renewal and then about one month beforehand, start shopping around as most people leave it too late and end up committing to perhaps an overpriced policy for yet another year.

Shop around for the best deals in utilities and yes it is possible to save considerably by switching providers of telecoms or other utilities by simply by asking for a better deal!

As Benjamin Franklin once said “Beware of little expenses – A small leak will sink a great ship”! After you have reviewed the big ticket expenses, examine where exactly the rest of your pay check is going and which areas you're over spending on and eliminate any unnecessary items of expenditure.

As a result you'll feel more in control of your money, and this is a key step in achieving that path to financial freedom!

6.     Get Professional Financial Advice

Unlike the ‘financial spring clean’ which we can take care of ourselves, many people don’t have the expertise to assess the bigger costs like mortgages.

Checking that you are still getting the best rate or whether paying a lump-sum payment from a no-interest deposit account will save you more in the long run are all areas that need the expertise of a professional mortgage advisor. There is generally a decent return on the small fee invested in proper financial expertise.

If you are mortgage holder who took out your loan in 2011 when variable rates were at their highest at 4.4%, you might now qualify for a rate as low as 3.1% if your loan to value is less than 50%. This could mean huge savings over the total mortgage term!

A review of your associated mortgage life cover should also be factored in here.

7.     Manage your own money

Some women make the big mistake of leaving control of their finances to the men in their lives. If they then end up single later in life due to separation, divorce or death then they are not in a good position to take back control of their finances.

Women should manage their own money at every stage of their life. They should have at least one bank account in their own name in order to build their own credit history. They should know the details of your family's finances, investments and debts.

Knowing all of these details can greatly help you to come out of a possible negative situation and reduce the financial strain that could easily have been avoided

8. Adopt a Foolproof Credit Card Strategy

Make this the year you finally tackle that nasty credit card debt once and for all. This is an area completely within your control. Every time you pay off a card with a 16 percent interest rate, you get a 16 percent return on your money which in the current climate of low deposit rates is a no brainer!

Check to see if you qualify for a balance transfer to a card that offers a low or 0 percent introductory interest rate for the first six to 12 months. If you do manage to get a good deal, move your high-rate debt to that new card.

Try and not use the card for any new expenses and if you do, push yourself hard to pay off the balance as soon as possible.

9. Think before you Buy!

Much easier said than done but try your best to make wise buying decisions. Consumers spending decisions are processed more by emotions than by the numbers.

Knowing the difference between a “want” and a “need” can greatly save you money. Many of the items we buy are items that we don’t have to have in order to survive i.e. a Want so avoid over-extending yourself and think before you act.

10. Know Your Tax Credits

Everyone should be aware of all the tax credits and allowances that apply to them. Too Much money is being left in the hands of revenue in the form of unclaimed taxes.

Women returning from maternity leave should review their tax credits to ensure that they are correct as their tax credits should increase to reflect that fact that they are no longer in receipt of Maternity Benefit.

For further information on all tax credits and allowances available see www.revenue.ie

Feel better already? Follow these steps and no matter what the future brings, you will be in control of your financial destiny and there really is nothing more valuable. 

ABOUT HERMONEY

HerMoney is a new division of the long established CWM Wealth Management Ltd. and provides tailor-made financial solutions to Self-Employed Professional Women all over Ireland.

Their bespoke advisory service covers Retirement & Protection Planning, Savings & Investments.

With offices in Cork and Dublin, HerMoney offers consultations nationwide and also offers workplace presentations followed by One to One Consultations by their team of all female advisors.

HerMoney Managing Director Carol Brick is a UCD graduate and qualified financial advisor and has specialised in the area of asset and wealth management for the past 16 years.

See www.hermoney.ie or www.cwmwealthmanagement.ie for more information.

CWM Wealth Management Ltd. trading as HerMoney is regulated by the Central Bank of Ireland.

FOR MEDIA INFORMATION: Sharon Bannerton

Managing Director, BANNERTON

Direct: + 353 1 5311000  

Mobile: + 353 87 673 1100

Email: Sharon@BANNERTON.ie