After more than 30 years participating in professional workplaces and earning high incomes, many women are now entering a phase of wealth accumulation.
A research by the National Centre for Social and Economic Modelling released in late 2013 supports this trend and shows women are now primary breadwinners in a quarter of Australian households. In 2013, 22 per cent of new appointments to ASX 200 boards were females.
This rise in responsibilities and assets, as well as the uncertainty created by the GFC, has led many senior executive women to become more hands-on with their finances in order to improve their financial future.
But it seems the battle hasn’t been won yet… Statistics show women are 2.5 times more likely to live in poverty in retirement. Considering the fact this gender represents 66 per cent of the population by age 85 (figure below), it means many women will find themselves on their own, at a later stage of their life, needing to be financially independent.
Therefore, there is an urgent need for women to understand their finances better and make educated financial decisions. The resulting outcomes would not only be a better and more secure financial future, but it would allow them to re-direct their resources (time, effort, money) towards individual passions and higher level needs of the community (for example, philanthropy and volunteerism).
Five tips to help women proactively maximise their financial outcome:
1. Understand your financial situation
The first step towards financial security is to gain a good understanding of your financial situation. Although we always pay close attention to the business’ profit and loss statement and cashflow forecast, our own financial reality can sometimes be a little vague. Start by doing a review of your bank balance, budget (income and both fixed and variable expenses), assets and borrowings.
2. Follow the golden formula
INCOME ≥ EXPENSES
However simple this formula may seem, it can often be put aside in order to fulfil our consumption desires. Regardless of your income, if you regularly spend more than you earn, you might be living above your means. One way to assess this is by verifying if your bank balance is equal, lower or higher now than it was one year ago.
3. Manage your risks
If you lost your source of income tomorrow due to redundancy, business failure, accident or illness, what impact would that have on your assets? It is important to review how your assets are structured and make sure the risks associated with any changes in circumstances can be minimised and managed adequately.
In addition to preserving your assets, you should also verify that your will is kept up-to-date so your family and possessions are looked after just the way you would like them to be beyond your life.
4. Pre-empt changes in your life
How likely is it that you will be in your current position in five years time?
Many people will experience change in their career between age 45 and 55. It may be triggered by their company (e.g. a restructure) or themselves.
For executives, it can be a rewarding choice to use their years of experience to pursue a career as a professional non executive director. Others will choose to devote more of their time to volunteer in the community.
Whatever your choice is, by pre-empting this inflection point and planning ahead of time, you will be able to put the right processes in place to protect your assets and structure them to improve cashflow.
Remember that most peoples’ wealth comes in the last 10 years of their working life, once school fees are no longer, the mortgage is manageable and the salary earnings have peaked. So planning and protecting your finances ahead of that period of time is crucia
5. Seek professional financial advice
If your financial affairs are complex and you’re looking for a more disciplined approach to your finances, seeking a professional advisor may be the right way to go. Select an advisor who understands your situation and needs – whether because they have been in your position before or have clients experiencing a similar situation.
By understanding your financial situation, earning more than you spend, managing risks and pre-empting changes, you will gain much greater financial awareness. A financial advisor could then help you put the right structures in place to help you become the CFO of your life.
The financial freedom gained from following these tips will empower you to have the lifestyle you choose – now and in the future – and re-direct your resources towards individual passions, family projects, philanthropy and other fulfilling goals of your choice.
 Source: Population by Age and Sex, Australian States and Territories, 2009 ABS report, table 9; Get on board for super equality, Fin Review Oct 2012; information from SPAA presentation