Women Are Financially Confused

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Financial confusion among women

Lack Of Confidence|Lack Of Knowledge

Knowledge Is Power

Some women fear investing, stock markets, mutual funds, retirement plans, annuities, etc.   All that market “stuff” confuses some women.

This confusion puts them behind financially.   Women need to understand that their fears stem from the unknown and if they would take the time to tackle the unknown, these financial fears would vanish.

The worst thing women do to themselves is shut down and do nothing.   By shutting down they are forced to continue working because they fail to save enough money to afford retirement.

Markets go up, markets go down, it’s okay.   Understanding why that happens and how to balance out market turbulence will put women in charge of their financial lives.

Women Need Financial Education

There are investment “tips” and there is market knowledge; you’re better off with market knowledge.

When your broker, boss or neighbor talks about market conditions, diversification or asset allocation don’t you want to understand what they are talking about?

Your financial knowledge starts with a basic understanding of financial terms.   Here is a list of commonly used financial terms:

  • Annuity:

An income producing long-term investment designed to give you a guaranteed stream of income.

  • Asset Allocation:

Spreading your investments among stocks, bonds and cash equivalents to help minimize your risk.

  • Cash Equivalent:

Money markets, certificates of deposit, savings accounts.

  • Capital Gains:

The difference between the price you purchased and the price you sold the security at.   It you made a profit or a gain when you sell the security, you will be taxed on that gain.

  • Capital Loss:

If you have a loss when you sell the security it is a capital loss and you can take a tax write-off on the loss.   Talk with your accountant.

  • Compounding:

Your money earning money.

  • Deferred Annuity:

You pay into the annuity at regular intervals and receive the pay outs at a later date.

  • Dollar Cost Averaging:

Buy securities at different prices by investing the same amount of money at regular intervals, regardless of market conditions.   This type of investing averages out the overall prices paid for the securities.

  • Fixed Annuity:

You receive a guaranteed rate of return and pay out.

  • Immediate Annuity:

You pay into the annuity and your pay outs begin immediately.

  • Index Fund

The investments in this type of mutual fund matches an index (ie) the S&P500.  Your expenses are lower with an index fund.

  • Mutual Fund

A mutual fund is managed by a fund manager.  The fund manager takes the combined money of many investors and buys stock and bonds, almost at a group rate.   Different mutual funds have different risks and objectives; fees and expenses.

  • Rebalancing

This keeps your investments on track.  When your original allocation shifts due to market conditions, you have them automatically balanced back to your original target allocation.

  • Retirement Calculator

This investment tool is used to determine how much money you will need to afford retirement.

  • Retirement needs careful thought and planning
    photo by gogirlfinance

    Retirement Plans

Your money is invested into retirement plans for the long-term.  They are not savings accounts where you make deposits and withdrawals.   If you make withdrawals before retirement age you will face stiff penalties and taxes.   Types of retirement plans include 401k’s, 403b’s, Individual Retirement Accounts (IRA’s).

  • Roth IRA

Your contributions are made with after-tax dollars.  Your withdrawals at retirement could be tax-free.  Check with your accountant.   You can still contribute to a Roth IRA after age 70 1/2.

  • Traditional IRA

Your contributions are made with pre-tax dollars.   You may be able to take a tax deduction.  Your withdrawals are not tax-free.  You cannot make any contributions after age 70 1/2.

  • Target Date Fund

A type of mutual fund that automatically rebalances based on a specific date, usually your retirement date.

  • Variable Annuity

You receive a variable rate of return because it is based on the performance of the investments within the annuity.

Go To It

Now you should have a better understanding of some financial terms; thus be less fearful.   You can be your own worst enemy and there’s no need to be.   To help yourself even more, take a financial class, pick up some financial books, never stop learning.   Knowledge is power.

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