This Week in Your Wallet: Financial Planning, Midlife Money Crises & Airline Fees
For years, the research on financial planning has shown one thing consistently: There’s value in it. People who plan stand a greater shot of achieving their goals than people who don’t.
That’s why it’s troubling to read that fewer women are using financial professionals, according to new research from Prudential. More specifically, only 31% of women receive professional guidance, which is down from 48% in 2008. Some are opting for alternative means (i.e. the DIY approach or employer-sponsored resources, the latter may be fine if they’re getting individualized planning), citing insufficient assets and high fees as the reasons why. A more troubling reason, however, is how the financial services industry makes them feel.
According to the study, only 20% of women feel the financial services industry understands their needs. Women want less jargon and stronger ethics.
Clearly there’s a rather large disconnect, here. As Linda Stern of Reuters reported last week, the financial services industry is simultaneously going after women in a hot and heavy way. (Stern compared it to having a target on the back of her dress.) That’s understandable. We earn more. Own more (currently more than half of the investable assets in the U.S.). And stand to inherit more. According to Boston College’s Center on Wealth and Philanthropy, women will inherit 70% of the money that gets passed down over the next two generations. Stern goes on to offer advice for both women and Wall Street.
Since women are known for asking more questions, advisers need to be willing to answer more questions. Female advisers and pink folders aren’t necessary. A male financial advisor, who is straightforward, honest and – let’s not forget – delivers advice that performs will suffice. She pointed out that trying to woo women with high-priced mutual funds won’t work. Considering the fact that many women control the day-to-day expenses at home, they tend to be more price and budget-driven with their investments as well. Finally, she noted the importance of differentiating between fear and ability. Yes, on average women are more afraid of managing money and markets than men. But this doesn’t mean we’re worse at it. A good financial advisor will help a client overcome her fear, not prey on it. It’s well worth a read.
Midlife money crises
Are you in the midst of a midlife financial crisis? And no, I’m not talking about itching to buy a sports car, or wanting to drop everything to live out some Eat, Pray, Love fantasy. I’m talking the financial oversights that happen at midlife.
Where our finances are concerned, we tend to focus more on the beginning and the end of our working lives (i.e. stretching paychecks and retirement). As for the middle? Not so much. Too many people coast. This week DailyFinance offered seven money mistakes 40-somethings make, and how to avoid them.
For example? Don’t blindly pay your mortgage. Automation is great, but with payments like your mortgage, you want to revisit them every so often to make sure they align with your financial goals. When will the house be paid in full? Will that timing affect any other life plans? If so, do you need to adjust your payments?
Also on the list: Neglecting to save for your next car. As you near retirement, the fewer financial obligations you have, the better. Right now the average time it takes to pay off a car loan is 5½ years. Even though your current car might last you well into your 50s, it’ll be better to pay for the next one with cash. That way you’re not dealing with loan payments into your golden years. So, plan for it.
And if you have people who depend on your income (i.e. spouse, children, parents), then another financial faux pas is not having enough life insurance. My most recent Fortune column deals with the changes our delayed life cycle – marrying later, having kids later, empty nest later (if at all) – impose on our need for life insurance. Check it out.
Don’t just fare compare, fee compare too
We hate paying them, but airlines certainly love collecting them. Airlines worldwide brought in $31.5 billion in revenue from fees last year, according to a new survey. In 2007, it was just $2.8 billion. As CNNMoney reports, fee prices have increased at a much faster rate than ticket prices, and are helping airlines stay profitable. That’s why it’s time to start considering them when you’re shopping around for air travel.
We often let ticket prices fuel our buying decisions, but a handful of accompanying fees might make a cheap ticket not so cheap anymore. Take the discount airline, Spirit, for example. According to the survey, fees are the largest share of its business, accounting for over 38% of its revenue. (They’ll charge you to print out your boarding pass and for water midflight.) Just yesterday, TSA’s September 11 Security Fee increased from $5 for a round trip flight to $11.20. While you can’t avoid these TSA fees entirely, there are some ways to offset them. For instance, Brian Kelly of thepointsguy.com, says to avoid layovers longer than four hours, because it will lead to additional TSA fees of $5.60 per person per flight segment. So before you take off, shop around! If you see similarly priced tickets on competing airlines, look to the fees to see where you’ll save the most.
Have a great week,
Jean
