You Don’t Need A Broker: 9 Keys to Investing Successfully On Your Own

I’m sure there are investment brokers worth their high commissions and fees, but I haven’t experienced one. I burned through five brokers before realizing that no one cares as much about my money and my future as I do. Brokers are salespeople. Naturally, they care more about their bottom line than mine.

Most people I coach don’t realize that they’ve been paying a 5-6% sales commission every time they buy new mutual fund shares because the commission is built into the price, making it difficult for the investor to “see” it. And paying a sales commission has nothing to do with the performance of a fund; you aren’t buying a better fund simply by virtue of paying more for it.

Each year, I’d compare my broker-managed portfolio’s performance with the stock market indexes (Wilshire 5000, S&P 500, Dow Jones Industrial Average, NASDAQ, MSCI EAFE, etc.). I found that despite paying a decent sum to brokers for their expertise, my portfolio usually under-performed the standard index benchmarks. In 1999, I decide that it was worth my time and energy to learn how to manage my own investment portfolio. My efforts have paid off very handsomely. Here’s a down-n-dirty summary of what I’ve learned:

1. Start Today

Start as early as possible to take advantage of the astounding power of compounding growth. By reinvesting the gains you receive from the money you invest, you can double your money in less than eight years assuming a 10% average annual return. Take a look at the following example, then try this calculator to see how much postponing your savings plan could cost you.

Start Now:
Save $10,000 per year for 30 years
@ 10% annual rate of return
= $1,809,434 ending balance

Start Later
Postpone saving for 10 years, then save $10,000 per year for 20 years
@ 10% annual rate of return
= $630,025 ending balance

Cost of waiting = $1,179,409

2. Put Your Investment Contributions on Auto-Pilot

Instruct your bank to automatically transfer at least 10-20% of your gross income to your investment account each month. If you don’t think you can afford to do this then you can’t afford your lifestyle! Get creative, cut expenses elsewhere, and start paying yourself first.

3. Maximize Retirement Account Contributions

How taxes are applied to an investment can make a big difference in the long run. There are tax advantages to retirement accounts which is why (in most cases) you should maximize your contributions to these accounts first, then add to your taxable accounts. Additionally, some employers match your contributions — which equals free money. This calculator compares a normal taxable investment to two common tax advantaged situations: 1) an investment where taxes are deferred until withdrawals are made, and 2) an investment where taxes are paid on money that goes into the account but all withdrawals are tax free.

4. Be Mindful of Fees and Do It Yourself

Invest $10,000 each year and use a broker to place your order and you might pay $575 per year in sales commissions. Alternatively, learn to place investment orders yourself and your commission savings, compounding 10% annually, would be an extra $104,042 in your pocket in 30 years. Invest in a low-cost equity portfolio using no-load mutual funds, Exchange Traded Funds (ETFs) and index funds. Even a small difference in the fees you pay on your investments add up over time. Use this calculator to see how different fees can impact your investment returns.

5. Diversify and Build a Balanced Portfolio

Speculative investments are like eggs: when they fall, they make a mess. Don’t place your bet on a single stock or sector. Spread your risk into a variety of market caps and styles as well as domestic, foreign and emerging markets. Proper diversification helps your portfolio weather any ups and downs the market can take. Asset allocation accounts for 94% of the variation in portfolio returns, while market timing and stock picks account for only 6% (Gary Brinson, Randolph Hood and Gilbert Beebower). Review and rebalance your portfolio annually to maintain your desired allocation percentages. The Asset Allocator calculator is designed to help you create a balanced portfolio of investments. Your age, ability to tolerate risk, and several other factors are used to calculate a desirable mix of stocks, bonds and cash.

6. Don’t Invest Money You Can’t Afford To Lose

Rises and falls in the stock market are normal and frequent. Don’t invest your emergency fund into the stock market because you don’t know when you’ll need to use it. Money you may need within the next few years doesn’t belong in the stock market either. Investing for portfolio growth is your long-term goal.

7. Cover Your Ass

Protect your growing wealth with adequate insurance. The number one cause of bankruptcy is major medical expenses. In addition to medical insurance, consider coverage for disability, life (consider a term policy rather than whole life), auto, homeowner/renter, business, and personal liability. Buy policies with the highest deductible you could afford to cover from your emergency fund — and invest what you save from the reduced rates.

8. Understand Your Assets and Liabilities

Most people consider the home they live in as an asset but the truth is, it’s a liability. And if you are counting on future home appreciation, it’s speculation. Stop thinking of your home as a savings account. Don’t believe the sales-pressure hype that homeownership is your best investment: you’re spending money on a property that isn’t producing income. If you insist on owning real estate as a part of your investment portfolio, buy an investment property that produces a positive monthly cash flow.

If you’re finding it difficult to squeeze your budget for investment contributions, downsize to a smaller home. Invest any remaining home equity, plus your new-found monthly savings, into your long-term-growth portfolio.

9. Don’t Invest Until You Understand

Question every piece of advice you are given through the filter of “what’s in it for them?” Unfortunately, there is no shortage of people who are skilled at separating you from your hard-earned money. It pays to be suspicious. If you aren’t committed to learning how to self-manage your investments, consider hiring a FEE-ONLY financial adviser (rather than a commissioned-sales broker) to assist you.

What I’ve offered today is a summary. I’ve shared my opinions and experiences. But don’t just take my word; ask questions and read investing books and web sites. Learn about different investing strategies and styles, assess your own personal risk tolerance, make a plan, then stick to it. Use your head — not your emotions — to guide your decisions. Practice investing first, using virtual online applications (not real money), as you wean off of your high-commission broker.


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New Year’s Task List

Yesterday I encouraged you to use the New Year to reflect and proactively plan ahead. Today I’m presenting a list of specific tasks that I refer to this time of year. I keep track of these tasks (and all others throughout the year as well) with a neat online application called Remember The Milk. This application is flexible, customizable, easy to use, and it’s free! Make sure you take advantage of the repeating event feature and the reminders.

Below, I’ve included the items I find relevant for the New Year:


  • Schedule reoccurring family finance meetings and put them on the calendar
  • Reconcile year-end account statements (bank, credit cards, investments)
  • List debt liabilities with current balances, interest rates, minimum repayments, terms, credit limits
  • Check your credit profile and report. Important! is the ONLY website you want to use to order your free annual report! Dispute any errors online through each credit bureau.
  • Ask for an interest rate reduction on your credit cards. Be sure to mention if you received a credit card offer in the mail with a lower rate, and threaten to transfer if they won’t negotiate.
  • Compare 2009 actual expenditures with 2009 spending plan
  • Reevaluate your priorities and modify your spending plan accordingly for 2010
  • Update net worth statement: list all assets and all liabilities, subtract liabilities from assets = net worth
  • Fund retirement accounts and HSA (health savings) accounts
  • Rebalance investment allocations
  • Set up automatic bank transfers and automatic bill payments
  • Pursue outstanding credits promised
  • Purge file cabinet: set aside 2009 tax papers, box up 2009 files (label box)
  • Prepare for annual tax return and schedule an appointment with accountant
  • Evaluate and price-compare insurance policies: auto, home, medical, personal liability, disability, term life. (If you have a suitable emergency fund, raise deductibles to save money on premiums.)
  • Evaluate and price-compare services (phone, cable/satellite, banks, credit cards, etc.)
  • Update Will and Medical Directives
  • Take computer data back-ups to off-site safety deposit box
  • Change all passwords (online and off)


  • Install fresh batteries in smoke and CO2 detectors
  • Change furnace filter
  • Clean carpets and furniture coverings
  • Touch up wall paint


  • Purge each room of things you didn’t use in 2009. Sell (I use Craigslist), consign, or donate these items.
  • Sort and label 2009 photos
  • Recycle magazines, newspapers, catalogs and other paper clutter


  • Update 2010 calendar: add birthdays, anniversaries, due dates and reminders. (I use and set up the reminder feature for each event.)
  • Schedule routine annual exams: wellness, dentist, optometrist


  • Update contact list
  • If you didn’t send a holiday letter, connect with your family and friends by phone, or send an email newsletter and a few photos.
  • Schedule reoccurring date nights with your sweetie and/or kids

Readers. if you notice something I’ve missed — or have an additional suggestion — please include it in the comments section below. I will update this list accordingly. Thanks!

Putting 2009 To Bed and Making New Plans

I love this time of year when the calendar provides a fresh clean slate. Snow falls softly outside my window, the house is quiet, and I am in a reflective mood. I take a look backward at the previous year and evaluate how I spent my time, focus and energy. Then I “archive” it. After putting the past year to bed, I imagine forward into the new year and make note of sparkling new intentions and plans.

You may have noted that I haven’t mentioned the word “resolutions”. For me, that word feels too absolute, confining and final. I like flexibility. I relish the freedom to change my mind about things, and I do change my mind, often. This said, I do like brainstorming, analyzing my options, and setting a course. Without a roadmap, I feel wishy-washy and ineffective. But I need the freedom to detour because I know that if I DON’T WANT to do something, I will procrastinate endlessly, it won’t get done, and I’ll feel crappy about it. On the flip side, when I DO want to do something, I jump in with both feet and get ‘er done. I’ve learned to set my course with intention, then go with the flow.

Here are some questions I like to address this time of year:

What were the highlights of 2009? Create a collage to celebrate and remember. These are the memories you want to carry forward into the new year. Use them as momentum for more.

Lowlights? If this list feels like a dark cloud or is full of disappointments, ceremoniously burn the list after it’s done. You are encouraged to start the new year without this baggage!

Did I accomplish what I intended? If no, why not? Be wary of excuses that hide the truth. For me, excuses usually mean I changed my mind, or didn’t want to do it bad enough. Sometimes it’s because I feared I wouldn’t do it good enough.

What would make me happier? Be concrete and start small: “I want to save money” isn’t nearly as effective as “I will set up an automatic bank transfer from my checking to savings account, every payday, for $100.”

What established habits do I want to keep? Stop?

What do I want to do each and every day for the next 30 days? This time period allows me the opportunity to establish a new habit without feeling confined by it. If I still value this new habit after 30 days, I renew my commitment.

What items do I want to cross off my task list this year?

What would my ideal day look like? Imagine anything is possible. Address every moment: from waking through bedtime, the environment, your relationships, the activities, your emotions.

What news do I want to share in next year’s holiday letter? This is where I address the specific accomplishments I hope to achieve by year’s end. Be specific, and write the letter in present tense, as if it were already true.

Readers, do you make New Year’s Resolutions? Why or why not?

Note: One of my new “each and every day for the next 30 days I will…” commitments is to write for my blog or book every day for at least 20 minutes. Please help me with this endeavor by letting me know (via the comments section or private email) what you’d like me to address. I welcome specific questions.

How To Track Your Expenses

Money flows like water. It can gush like a raging river or drip like an annoying leaky faucet at midnight. If we use this precious resource mindlessly, we face drought. However, if we first observe the ebbs and flows, effective management becomes a simple matter of design. In other words, you NEED to know where your money goes in order to manage the flow. Once you know where your money flows, you can design a realistic budget plan and start making conscious spending choices for your hard-earned dollars.

Create an expense tracking system and establish a routine. January is the perfect month to start. I’ve tracked my expenses for over 15 years. It really doesn’t require a lot of time (~5 to 15 minutes a week). I pay my bookkeeper to do this task for me now and at about $1.25 to $3.75 a week, it’s worth it. If you have kids, this can be an educational task to delegate to them.

Expense tracking options include:

  • save all receipts and file them into large envelopes labeled by expense category
  • write each expenditure under a category column in a ledger book
  • write each expenditure in a pocket-sized spiral-bound notebook (carry it with you when you leave home)
  • use a software spreadsheet like Microsoft Excel or Open Office Calc
  • use a personal finance software program such as Microsoft Money Plus Premium or Quicken.
  • sign up for an online application such as Mint.

While all of the above methods work, I use personal finance software (specifically Microsoft Money Plus Premium because I like their Lifetime Planner tool). Both Microsoft Money and Quicken include a wide range of helpful tools to make personal money management tasks easy. Specific to this particular task of tracking expenses, Microsoft Money Plus Premium and Quicken personal finance software:

  • connect to thousands of banks and update your expense transactions automatically
  • automatically categorize your transactions and compare them to your budget
  • show you exactly where your money is flowing using charts, graphs and reports
  • let you see the big picture or drill down to the details

Four Tips:

  1. Make the most of on-line banking. To make tracking your expenses easy and accurate, pay for everything with a check, debit, or credit card. Check your account often and set up as many automated transactions as possible. (Important Note: If you pay routine expenses by credit card, pay off your account balance in full each month!)
  2. If you must use cash, keep your receipts and enter each transaction into your expense tracking system.
  3. Make it a habit to track your expense transactions regularly. Designate a time weekly for this task and at the end of each month, total the amounts spent by category. In my case, it only takes about 10-20 minutes per week to confirm my automatically downloaded expense transactions and to reconcile my downloaded bank account statements.
  4. Here is a comprehensive list of expense category suggestions. Modify my list to fit your own needs and lifestyle:

    Auto -repairs, gas, insurance, registration, tolls…
    Auto Payments
    Bank Account Fees
    Beauty -hair cuts, manicures, makeup…
    Child Care
    Debt/Loan Payments -create a different account/category for each loan
    Dining Out
    Finance Fees
    Home Improvements/Maintenance/Repairs
    Household Furnishings
    Insurance (Disability)
    Insurance (Health)
    Insurance (Homeowner/Renter)
    Insurance (Life)
    Insurance (Medical)
    Insurance (Personal Liability)
    Liquor/Tobacco -if applicable
    Mass Transportation -bus, train, light rail…
    Medical -everything except health insurance premiums
    Misc -avoid this category as much as possible!
    Mortgage Payments/Rent
    Savings (Education)
    Savings (Emergency Fund)
    Savings (Retirement)
    Savings (Specify Purpose)
    Storage Unit
    Subscriptions, Books, Software
    Taxes (Federal, State, Local)
    Tax Preparation Fees
    Toys (purchase, repair, insure) -includes boats, electronics, bikes, jewelry…
    Utilities (Electric)
    Utilities (Gas)
    Utilities (Internet)
    Utilities (Misc)
    Utilities (Telephone)
    Utilities (Trash)
    Utilities (TV Programing)
    Utilities (Water)

Questions for readers: Where does most of your money go? If you currently track your expenditures, what method do you use?

The Economy Relies Upon You Being A Good Consumer!

thanksgiving turkeyYou are an individual. But you are also a member of a global community. Most important of all, you are a Consumer. As a member of this community, it is your DUTY to consume.


Because the system would collapse if you stopped spending and the consequences would be AWFUL. The system that runs your country relies upon you being a Good Consumer. This film will show you how:

I jest, of course! Before you head out at the break of dawn this Black Friday to gobble up merchandise, do yourself a favor and watch this fabulous video. (Email subscribers, you’ll need to visit my blog to view the video embedded in this post.)

Should you choose to go shopping anyway, perhaps you’ll remember the turkeys you watched here and it’ll help you curb your spending. Or print the following list of questions and suggestions and review them before exchanging your hard-earned dollars for crap products:

Before you buy, ask yourself:

  1. Will I change my mind? Advertisers and retail stores are notoriously skilled at making shoppers believe that they need something– even when it isn’t true. When I find an item I want, I leave the store to think about it for a day or two. During this brief period of time, I usually find that I stop wanting it.
  2. Can I buy it for less? Comparison shop. Find it on sale. Negotiate. Look for a recycled one in the newspaper, at garage sales or consignment stores, on ebay or craigslist. Avoid the mall. I bought all of my daughter’s Christmas gifts through craigslist last year and filled the space beneath the tree for a total of $30.
  3. How long am I willing to pay for Christmas? Your loved ones would rather spend quality time with you during the holidays than have you run up your credit card balance and pay for it all year long. Give the gift of time instead.
  4. Can I trade something for it? Swap with a friend, neighbor or family member. Ask a seller if she wants something you have in exchange for the item or service you desire. We’ve traded plumbing repairs for health club dues, computer work and pizzas. Create a toy exchange with other parents. We’ve traded “new-to-you” toys for our kids.
  5. Can I borrow it from someone? Borrow books, music and movies from the library. Ask your neighbor if you can use her seldom-used yard tools or specialty cooking appliances. Just make sure you are willing and able to repair or replace damaged or lost items.
  6. Can I share the expense with someone? Co-op with your neighborhood to buy one set of yard maintenance equipment. Consider car-sharing. Ask your babysitter for a reduced hourly rate for watching your child along with another.
  7. Can I cut back on another budget item instead? If what you want to buy doesn’t fit into your budget, choose to spend less on something else for awhile. Use the money you’re saving on that budget category towards what you want to buy instead. I often cut back on dining out the month before a vacation because I’d rather use the savings generated to enjoy special meals at our travel destination.
  8. Can I sell something to come up with the extra money? Sell an item you no longer use, then use the money to purchase the item you want. Try a sales listing on craigslist, ebay, community bulletin boards or your local classified ads. Here’s an idea for toy-hungry kids (or adults!): declutter, hold a garage sale, then buy something new with the proceeds. Better yet, make “found” money go further by using tip #2 above.
  9. Can I make a green choice? Look for products that make less impact on our environment. Choose a less toxic alternative, one with less packaging and more recycled content, or something that can be reused for something else when you’re done with it.

So don’t be a turkey… Have a Happy Thanksgiving!

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Read More:

How To Revolutionize Your Spending Habits

Giving holiday gift cards? Give someone the power to change lives!

5 Things The Marshmallow Test Can Teach You About Money Management

How to Make Money Management a Family Affair

Debt Is Slavery

photo credit: Zellaby

Five Ways To Reduce How Much You Need To Retire By $300,000

This is a guest post written by Todd Tresidder.

If the idea of accumulating a million dollars (or even half of a million) for retirement is daunting then consider this: for every $1,000 reduction in monthly retirement spending you will similarly reduce how much money is needed to retire by $300,000. That is a big deal because most people will find it much easier to retire with bliss and happiness on $1,000 per month lower income than to figure out how to put away an additional $300,000 in retirement savings.

Enjoying Retirement

If this all sounds a little confusing rest assured it is just basic math. You can use an online retirement calculator or visit your favorite financial advisor and odds are very high that you will be told you can spend somewhere between 3% and 5% (depending on assumptions) of your savings each year during retirement and remain financially secure. To keep things simple we will assume a very middle-of-the-road 4% of retirement savings spent each year. What that means is you need roughly 25 times your annual spending in savings – otherwise known as the “Rule of 25” – to support this 4% spending habit. You may find this math mundane, but the implications can be very exciting to your retirement plan.

This same rule also tells you how much less you need to save for retirement if you are good at finding happiness and bliss in life while spending less. For example, if you can figure out how to reduce your retirement budget by just $1,000 per month ($12,000 per year) the rule of 25 says you just reduced how much money you need to retire by a whopping $300,000 ($12,000 * 25 = $300,000).

Spending a little less certainly sounds a lot easier than coughing up another $300,000, especially if retirement is just around the corner and your nest egg is not as robust as you might like. By learning to live more simply, you can enjoy financial freedom during your golden years. The key to retiring successfully on less is to find an appropriate level of spending that suits your needs and lifestyle without sacrificing happiness. The only limit here is your own creativity. If you can stay focused on your core values and determine the things that are really important you could completely transform your vision of retirement.

To help get you started, here are five easy ways to save $1,000 a month during retirement without sacrificing happiness:

1) Downsize

Since the kids are grown and out of the house, you don’t need five bedrooms anymore. A smaller house means a smaller property tax bill, lower maintenance costs, lower insurance premiums, and less hassle. Take it a step farther and downsize to a condo or townhouse close to the urban core and you can eliminate the cost of owning one or both of your cars while eliminating all yard and exterior maintenance work. Renting a car for occasional trips out of town is far less expensive than auto repairs and insurance. Following the rule of “less is more,” less stuff to care for means you have more free time to enjoy your retirement, and a combination of downsizing strategies should be able to save you at least $1,000 per month.

2) Move to Mexico

Retire to MexicoIf you’re willing to leave the country then Mexico is a logical choice since it is close (you can drive there, after all). Not only is the cost of living much lower but the climate is appealing, the infrastructure is more modern and advanced than in much of Latin America, fresh fruit is in abundance, and you can surround yourself with other expatriates if you choose. Numerous websites offer logistical advice on relocating to Mexico and other inexpensive retirement havens outside the United States.

If Mexico isn’t your cup of tea then consider relocating to any number of places, foreign or domestic, that are less expensive than your current hometown. Money Magazine lists Sequim in Washington, Dunedin in Florida, Durango in Colorado, Fort Smith in Arkansas, and Janesville in Wisconsin as some of the most affordable places to retire in the United States. If you plan to travel a lot, where you call home may be of minimal importance and the savings could make a huge difference in how much money is needed to fund your retirement. Just do plenty of research before packing your bag: there are many valuable resources on the web to help you find just the right place for your retirement needs and budget – any one of which could save you at least $1,000 per month.

3) Trade Your Home For a RV

Retire as RV FulltimerIf your retirement plans involve extensive travel, consider selling your home and living in an RV. Unburdened by the labor and costs of home ownership, you’ll be free to travel as much as you like or stay put for months on end. Getting rid of your home means no more property taxes, homeowners insurance, maintenance costs or monthly payments, and the home equity is freed to produce investment income. With an RV your home and mode of travel are one and the same. Many retirees even find seasonal employment in national parks and campgrounds that provide a bit of income and social life. The rest of the year they’re free to follow the weather or the grandkids. An RV is easy to store while you travel abroad and you won’t have to worry about home security or frozen pipes. This lifestyle change can easily lower your costs by $1,000 per month and possibly raise your investment income by the same – two for the price of one.

4) Live Healthy

Eat Healthy Save MoneyHealth care costs eat up an increasing proportion of spending as you age. Although some medical issues are unavoidable, you can significantly reduce your health care spending by staying fit and living a healthy, active lifestyle. Eating low on the food chain is good for your body as well as your budget; prepackaged and processed foods often come at high prices with lower nutritional value. Similarly, regular exercise and a low-stress lifestyle can mean fewer trips to the doctor and fewer prescription medications that can quickly break your budget.

5) Make The Little Things Add Up

A thrifty shopper can easily save $1,000 a month on things like groceries, gifts, and recreation. As a retiree your time is flexible thus allowing you to take advantage of midweek savings on green fees, matinee discounts on movie and theater tickets, and early bird discounts in restaurants. Travel off-season and you will not only save money but you’ll encounter fewer crowds.

Develop the habit of asking for discounts and never paying full price. Don’t wait until December to do all your Christmas shopping—pick up items throughout the year at sale prices and give them at the appropriate time. Buy your wrapping paper and seasonal trinkets at the after holiday sales when prices are usually less than half. Or cut out gift expenses altogether and donate a fixed amount to charities or provide a charitable service personally in honor of your loved ones.

Become a grocery store “perimeter shopper,” avoiding the center aisles that are full of sugar, processed foods, and unhealthy snacks. Almost everything you need is around the perimeter of most grocery stores—produce, bread, milk, and meat. Buying certain items in bulk also saves cash. If you pick and choose from these and many other money saving strategies you could easily figure out how to live happily on $1,000 less per month.

Reduce How Much You Need To Retire By $600,000… or more!

Now that you see how easy it is to reduce your spending during retirement by $1,000 per month without sacrificing your happiness, try combining several of these cost saving strategies to double-down or triple-down and really make a big difference in how much money is needed to retire. It’s not hard to imagine a happy lifestyle living out of a motorhome, eating healthy, and enjoying off-season travel and recreation discounts.

Or if an exotic location is more to your liking then a low-cost lifestyle somewhere down in South America might just do the trick. Similarly, if you find it hard to shave expenses by $2,000 per month you may find it easy to pick up the equivalent in part time or temporary income. The math is the same. You might enjoy being a campground host in a beautiful national park, or maybe you are good at taxes and wouldn’t mind working for a few months each year during high tax season when the winter storms are raging.

The point is to get creative and figure out ways to simplify your life so that you spend less, reduce stress, and slash the amount you need to save so that you can retire now with financial security. Once you get past the notion that you have to keep up with the Joneses, you just might discover that you can enjoy retirement a whole lot more by spending a whole lot less.

About the Author

Financial expert Todd R. Tresidder retired securely when he was just 35 years young. His ebook, How Much is Enough to Retire?, shows you the next step beyond simple retirement calculators and traditional retirement planning. Check out his web site for more free retirement planning information and resources.

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Photo Credits: goingslo, VideoVik, Koocheekoo, Aylanah

Why Women Need More Money Than Men (and how to get what we need!)

Women need more money than men. Why? No, not so we can buy more shoes, handbags and manicures. We need more money because we live longer than men, make significantly less salary than our male peers, and are more likely to be single parents raising a family on one income.

Having a child is now the single best indicator of financial collapse.

Women comprise 87% of the impoverished elderly. A woman who works full-time for 40 years will earn $523,000 less than her male counterpart. At age 65, that extra half a million dollars could keep her from becoming one of the elderly poor.

What do these grim statistics tell us? They tell us that women, especially as they become older, are not prepared to take care of themselves financially. Yet nearly 90% of all women will end up managing their finances alone at some point in their lives.

Despite a woman’s greater potential for financial need, it appears that many factors hamper financial equality between the sexes.

What can women do to beat these alarming odds?

Here are a few of my own – perhaps unique – ideas:

Delay motherhood. Or, if it suits you, don’t have children at all. My husband and I purposely waited until we had achieved financial freedom before adopting our daughter because we didn’t want to repeat our own parent’s experiences. We both grew up with work-all-the-time, struggling young parents and quite frankly, that often stunk. We didn’t want money to interfere with our parenting.

Forming a family through adoption rather than pregnancy was a decision I made when I was a mere teenager. The way I figured it, why “make my own” child when there are countless orphans dying for a family already?  Since my husband and I chose to create our family through adoption, my biological time clock wasn’t a ticking time bomb.

One’s forties are the usual peak earning and saving years. By switching the typical order of things, my husband and I experienced our peak financial years ten years earlier than most. This allowed us to put the power of compounding interest and growth to work early. Consequently, we don’t need to earn or save as much money over the course of our life because time is on our side.

Today, financially free, our family hasn’t set an alarm clock in years. Whether it be work, parenting or play, we wake with the sun, eager to spend each new day doing whatever we choose. We waited until we could afford to commit to parenting 100%, together. For our family, the wait has been worth it.

I realize the path we chose isn’t a good fit for many but I do think it’s sensible for parenthood to wait until certain things are in order. Consider taking the time to first:

  • finish college, establish your career or launch your business
  • pay off your credit cards and other consumer debt
  • build an emergency fund
  • protect your growing wealth with insurance policies like disability and health
  • start your retirement account
  • build a solid partnership with your significant other

Share parenting and careers with your child’s father. I have two biases to confess right off the bat: One, I think most kids grow up best when raised by their parents (as opposed to day-care providers); and two, women need to know how to make money (see the statistics referenced in this article, above).

My ideal parenting-career model looks like this: Mom and Dad divide childcare and career hours between the two of them. Rather than settle for the stereotypical full-time working father and the stay-at-home mom, each parent works part-time (20-25 hours each), during different shifts, while swapping care of the kids.

Consider the benefits of this arrangement:

  1. Kids grow up spending quality time with both parents
  2. Both Mom and Dad get to spend quality time with the kids
  3. Both parents have the opportunity to pursue their own career paths
  4. No childcare expenses are required
  5. Mom hasn’t given up her earning power

I recognize this isn’t an easy arrangement for everyone. Many families feel they both need to work full-time to support their family. Some don’t think their employer would allow them to work part-time. Others are single-parents who can’t count on reliable child-support or parental care from the other. It’s not the perfect solution for everyone. But if it sounds like an appealing idea to you, see if you can eliminate the “yes-but’s” and figure out a way to make it happen anyway.

Refuse to be underpaid. Remember– a woman who works full-time for 40 years will earn $523,000 less than her male counterpart.  When you perform the same work, why in the world should you settle for less pay? Demand what you deserve.

Become financially literate. Almost 90% of all women will end up managing their finances alone so it’s foolhardy to allow the man in your life to handle your finances. Read books, take classes, find a money mentor.

Come to grips with the emotions behind money. The “How To’s” of personal finance are the same for women as they are for men. What is different is our feelings and beliefs about money. It has been demonstrated that most women are raised to nurture and seek acceptance and view money as a means to create a lifestyle. Women spend on things that enhance day-to-day living. Conversely, most men grow up learning to fix and provide. They view money as a means to capture and accumulate value, like a house and retirement. Men don’t spend, they invest. Men don’t want something, they need it. Theirs tends to be a future-money orientation.

Modify your money mindset to a more functional one.

Create a lifetime financial plan. I use Microsoft Money’s lifetime financial planning tool. (Too bad this useful software program has been recently discontinued! Anyone know of a replacement that includes a lifetime planner?)

If you are married or in a committed relationship, invest in it. Money ranks as the first most argued topic for many couples. It has been estimated that an astounding 80% of divorces are the result of money disagreements. A good marriage takes effort. I’ve been married for 22 years, so believe me, I know.  We schedule regular date nights (sans kid) and see a counselor for “maintenance tune-ups”. Money and time well invested, I assure you.

Push for national change in Congress, state legislature, public schools and at the corporate level. Support systems that will help to ease financial differences between genders.

Readers, how do you think women can beat the odds? Please add your ideas in the comments section.

Statistical information for this article was obtained from the following sources:

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