Pension Management

Have you ever built your own house or added an extension to it? If you have you wouldn’t expect your builder to build without a set of house plans, even for the smallest of extensions. If he did the kitchen might get overlooked altogether or have your water supply in the lounge or day room. A plan is essential for any builder.
If a NASA rocket scientist began the construction of a new space rocket without a detailed set of design specifications how high do you think it would fly? Do you think it would get off the ground? Or do you think Congress would pull the plug on all that spending if they did it without any plans. Of course they would.
If you went to your bank wanting to borrow for a new business what would be the first thing they ask for? A business plan.
Even the most mundane activities benefit from planning. Going to work every day you have a plan of how to get there. OK the plan may be in your head but you don’t go out of your drive and take whatever road takes your fancy. You’d never get to work.
Yet most of us organize our lives without so much as a thought or an inkling of an idea about our finances and without any financial planning at all. It is the only are of peoples lives where planning is thought irrelevant. How often is your month longer than your pay packet but when you try to figure out where it went you have no idea?
Not very clever of us, is it?
You need a money plan. A money plan is normally called a budget and it is crucial to have one for you to get to your desired financial goals.
Without a budget you will be financially drift without direction and end up marooned (broke) on a distant financial reef. Your dreams will remain dreams and you’ll spend your life wondering “what if”.
So how do you set a budget, a financial plan? Get yourself a budget planner. You can find many budget planners on the internet by typing into your favourite search engine “free budget forms”.
Print one out and work on it with your family and remember, to be successful all of you will have to be happy with the final result and feel like it’s something you can stick to.
First, if you have a partner or a significant other, you should make your budget together. Sit down and work out what your joint financial aims or goals are – long term, medium term and short term. Don’t just throw ideas around. Work out what you really want to happen and the cost. If you want to retire at 50 what will it cost?
Then plan your route to achieve those goals. Every journey, financial or otherwise, begins with one step and the first step to attaining your financial goals is to make a realistic budget that both you and your family can live with.
Unless you are really heavily in debt and have no option a budget should never be a recipe for financial starvation. That won’t work in the long term. Break it down into detailed allowances but plan reasonable allowances for food, clothing, housing, utilities and insurance etc.
Then set aside a reasonable amount for entertainment (including drinks and smokes) and the occasional luxury item. After that debt repayment and savings should always come before any further spending or saving.
Once you’ve worked out how much you need to live on each week or month then work out your income. Include everything you can depend on. If you get tips regularly then add them in but if it’s only the occasional tip ignore it. Don’t plan on an annual bonus – it might not arrive.
Work out what you have spare. Then work out how to save it. Don’t put all your spare money into a pension when you have debts to pay. Pay your debts and reduce the interest costs then save where it remains accessible.
Even a small amount saved will help you to reach your long term financial goal and if you start saving a small amount early it makes life much easier later on.
Planning for the future is not difficult but to be successful can involve difficult choices. The earlier you make those choices the easier the journey.

Ever wondered why there are numerous articles written about women and money management. The reason is working women find themselves in unique situations – home maker, mother, caring for the elderly. Working women experience greater disruption in earnings in their life as they take career breaks for different reasons – relocation due to marriage, to raise children, tend to their elders or accommodate family contingencies et al. Statistically it is found that women generally spend seven years out of the work force to have and raise children. In the long term however, such disruptions hurt the family’s wealth creation and though a woman and a man may have started their careers at the same time, she ends up earning far less when they both retire.

Also, studies across the globe show that periodic income disruptions make women risk-averse. This means that they invest in lower-risk and fixed-income investment options such as fixed deposits and bonds for fear of losing money due to factors such as stock market fluctuations. The outcome of the preference for fixed-income assets is obvious. The woman’s savings will not suffice in her old age, and she’ll have to depend on the retirement funds of her husband, or other sources. And then there is the reality of a divorce which can be even more painful for dependent spouses. Regardless of how modern the majority claim to be, studies indicate that they lag significantly behind in one area compared to their male counterparts -   that area is financial planning. Most women leave the management of their finances to their fathers/husbands. Failure of marriage, unequal inheritance of wealth, non avoidance of old age, etc all the more necessitates us to be self reliant.

However, taking into consideration the above factors, women need to have a holistic financial plan, that too from a very early age in order to make good the time lost in such career breaks . In the current scenario, personal empowerment and financial independence are the need of the hour. After all financial independence is true empowerment. You know you are empowered when you do not need anyone to tell you how to live your life or spend your money. Also, whether or not a woman has her own income, she still needs to know how her family’s money is invested. Therefore, all women need to step up and learn how to play with the boys. There is no longer a justification for you to not participate in the financial planning that will lend itself to your future.

The following are money management tips (though not exhaustive) which will help women mange their finances better:

Begin Early: One should take managing their finances early on. There is some magic to be found in “compound interest”. The earlier you start the smaller amounts you can invest for a higher gain. Also, when you start early (and continue to invest) you can take greater risks (like investing in equities, equity mutual funds). But remember that compound interest can only work its magic if you give it time. So, start saving now, if you have not started yet! Inflation and interest rate risk eat into the purchasing power of your money if you parked your money in lower risk investment instruments. So investing early in growth assets like equities and equity funds is imperative. Don’t limit yourself to conservative investments such as money market accounts and CDs. Use asset allocation to diversify your portfolio.Build an emergency fund. Ideally 6 months’ monthly expenses could be put in a liquid fund. Without one, losing your job or incurring a large unexpected bill could force you to take on heavy credit card debt, and could put you into a financial hole that will be difficult if not impossible to dig your way out of.

Cut down Expenses: Cutting down on impulsive expenses and spending money prudently and training the same to children goes a long way in sensibly managing your money.

Invest in Insurance: Insurance is a must investment to protect yours and your family’s health costs and your physical assets. Also to provide financial security to your dependants in your absence. Insurance helps transfer the financial risk from one party to another, i.e., from you to your insurer.

When together, plan your finances together: Invest jointly with your spouse. Share expenses. Ensure expenses are covered by one income, try maximum to avoid loans to help you quit your job if needed. Ideally all money matters should be discussed by couples. Be prepared for the worst; even if you don’t want to take complete charge of your financial future, try and understand where the money is coming and where it is going.

Educate yourself: Personal financial planning and management is not complex. All you need to do is to understand your life goals and plan as per your requirement. You could read some useful books to educate yourself about the subject. Then even if you hire a financial consultant due to lack of time to self manage, you would understand what he/she is doing with your money. Suggested books are given at the end of the article.

Become aware of benefits given to women under different laws: The following are the benefits given to women under different laws:

The rates of income-tax for FY 2009-10 (AY 2010-11):

Estate planning (Wealth Transfer): An effective estate plan can be made by the couple jointly. As the surviving spouse (generally the wife) is likely to end up being the executor of her husband’s estate plan, so ignorance cannot be afforded. It is useful to keep a record of inventory of assets and their beneficiaries for smooth transition of assets to the intended beneficiaries.

These are some important things to consider in your financial planning that are not very different from how a man may approach the same subject. The key is to start early and continue being invested. As a woman, you have a longer life expectancy than a man does. Therefore, your financial planning must encompass the fact that you have more years to fund. Having your finances in order is just one way that you can move toward your ideal lifestyle. Maybe your goal is purchasing the home of your dreams, or going into business for yourself. An active and independent retirement is also a goal. Many people no longer feel confident that they will be able to rely on pensions or social security checks after they have retired. Most goals take more planning than just a savings account and good intentions. Financial Planning involves long term strategic involvement … but it is worth it.

By sticking to your financial plan you can avoid excessive spending and unmanageable debts. You will have a sense of freedom from financial worries that comes with lack of planning, so that you can use your spare time in activities you desire to do but don’t have the time for.As quoted by Diane Ackerman, an American poet, “I don’t want to get to the end of my life and find that I lived just the length of it. I want to have lived it the width of it as well.”

You can take the help of a good financial planner to manage your money. To streamline the paperwork and administrative work of financial planning, many of today’s best advisors turn to technology. Investmentyogi provides you with a personal financial software that aggregates all of your financial investments, savings, accounts, etc. onto one easy-to-use web page – giving you 24/7 access to all of your financial information in just a few clicks of a mouse. Check it everyday, check it once a month, check it once a quarter, it’s up to you. The point is that it is there, organized and at your fingertips, when you need it.

For more information go to investmentyogi.com

As financial worries increasingly prompt Britons to attempt to review their finances and reduce their debts, one aspect that may be overlooked is the pension. With various surveys demonstrating the extent to which people are finding themselves having to cope with mounting credit card bills and loan payments, thoughts about saving for retirement could be pushed to the back of minds.Yet it could well be that the current economic problems highlight just how important careful financial planning is. This is certainly the view of the Association of British Insurers (ABI), which has produced a guide aimed at addressing the issues and concerns consumers may have.Simply entitled ‘People need pensions’, it intends to make just that point. The ABI observed that confidence is the most important factor in pulling through the recession, but investments and long term savings have taken a knock due to stock market falls.Director of consumer strategy at the organisation Maggie Craig explained that pensions remain an excellent prospect, particularly as savers can benefit from “free money” – both from the government and employers.”Saving for retirement is crucial both for individuals, as it helps to ensure they will have a more comfortable retirement, and for society, as it reduces the burden on future generations of taxpayers,” she remarked.And the importance of having a nest egg in place has been emphasised by a recent study by Help the Aged and Age Concern. Beginning early could be the key, as nearly half of those over the age of 50 told the charities that they are less confident their pension and savings will be enough to fund retirement than they were six months ago. The organisations also cited Office for National Statistics figures showing that the number of unemployed people in this group has risen nearly 50 per cent over the last year, which could mean even more people are relying on their investments.One provider that has recognised the need for investments to be made is Scottish Widows, which has announced the launch of two new multi-manager funds. Through these, customers are being offered the chance to see their money spread across a range of assets – including equities, commodities, bonds and property.This particular approach may not be to everyone’s liking, but the advice from various quarters does appear to be clear – consumers should not forget about pensions despite the economic problems currently taking hold around the world. To this end, Ms Craig stated: “In these difficult economic times, it is especially important that people make the right decisions about their finances, now and in the future.”