Women, make sure you know the family finances

By HEIDI CENAC
Thursday, April 19, 2007

"Somebody should have knocked me on the head 40 years ago," said Kathylynn Holliday, 56, to other women at a finance seminar.

It wasn't until Holliday's husband died that she learned how little she knew about managing her finances. She's not alone.

Most people spend more time planning their next vacation than they do planning for retirement, and for women planning ahead is especially important.

Women face challenges statistically that men don't. We still make less on average than men. We typically spend less time in the workforce, therefore accumulating less into our retirement. We also live longer.

Women are three times more likely to be widowed and nine out of 10 women will be solely responsible for their finances at some point, said Scott Hughes, a regional marketing director for The Hartford Mutual Funds.

Hughes offered these tips:

1. Identify and set priorities for your goals. Do you plan to pay for you child's education? Do you want to be able to pass on wealth to your kids? What are your travel plans after retirement?

2. Once you've set your goals, develop a strategy to reach them. Start by creating a realistic budget and getting rid of high-interest debt.

Think seriously about where retirement income is coming from. If it's from a 401K, think about contributing the maximum your company allows, or at the very least, up to the point where they will match it.

Did you know that buying coffee every morning can add up to more than $15,000 over 15 years? Imagine if that money was earning interest in an IRA or retirement fund.

3. Learn the fundamentals of investing.

Think about the effect of inflation. Inflation _ the rate at which the general level of prices for goods and services is rising _ is about 3.5 percent now so your investments should be earning more than that.

Also think about the effect taxes have on your money. Retirement contributions are pre-tax deductions, so you're unlikely to notice your take-home pay getting significantly smaller if you increase your contribution by 1 percent a year.

Finally, diversify your investments. A combination of cash, bonds, stocks and cash helps people sleep better at night because it doesn't jump as much, but it can also beat the S &P 500 over time, Hughes said.

"The biggest thing is don't fear it," he said.