Midlife Changes For Women

After 40, Many Re-evaluate Life, Including Jobs And Marriages

(CBS) 

She also addressed other questions about how women should handle their finances at this stage of life.

When should you consider hiring a financial planner — and how do you find one?

Answer: I am not a big fan of traditional financial planners who plan for a fixed or hourly fee and then place clients in mutual funds for a commission. Women need to recognize how important expenses are to net return and not be so blasé about that portion of their plan that deals with actual investing. I am a strident proponent of hiring fee-only financial advisors, be they financial planners or investment managers.

Financial Planning has to do with wealth creation and preservation. Regarding wealth creation, a good plan will help you do an analysis of income and spending with a goal to help you build investment assets. Financial planning also includes analysis of your estate and insurance needs. I think a financial planner can really help at this phase, if only to help organize thoughts and commit goals to paper. The key action steps for building savings and investment assets out of income are as follows:

1. Reduce spending and recognize that the short term-gratification comes at the expense of financial security and freedom.

2. Max out on 401(k) or other available retirement savings vehicles.

3. Get rid of debt.

Critical steps in managing investment assets are:

1. Do not presume you have to use investment products to allocate your investment dollars. At the heart of mutual funds are stocks and bonds. Buy directly.

2. Watch expenses like trading commissions and fees. Never buy a "load" mutual fund.

3. Where possible, consider building your own portfolio of stocks and bonds. You are as smart as any broker. There are nine sectors of the S&P 500. Pick three stocks (using your knowledge of products and services people like) in each sector, buy them in equal proportions and rebalance them every six months. You would be shocked at how well you can do.

4. Think for yourself.

5. If you decide you don't want to build your own portfolio, hire a professional to do it for you and choose one that must comply with the legal standard of acting in "your best interest". Registered investment advisers must adhere to that standard but brokers don't have to. Brokers only have to adhere to a standard of "suitability." Insist that the adviser tell you how they'll go about managing your portfolio, insist on paying them a management fee instead of commissions, thus aligning your financial interests with theirs, and insist on seeing their performance on similarly managed portfolios. How else would you judge the quality of their services?

6. Avoid an adviser that is just going to place you in managed mutual funds. You can do it yourself more efficiently using exchange-traded funds.

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