It’s well established that women face barriers throughout their lives when it comes to gaining financial parity with men, with unique financial challenges such as gender inequality in pay, longer life expectancies and more caregiving responsibilities contributing to this situation.
Being in control of your finances can help you navigate these challenges. Not doing so may mean you sleepwalk your way into relative poverty in retirement. Many women also find themselves in financial difficulties if their relationship/marriage breaks down.
What does being in control of your finances actually mean?
It’s about learning to balance the needs you have now with the requirements you will have in the future, making confident and informed decisions about the future.
It’s not sticking your head in the sand and telling yourself you’ll deal with it when you have more time or when you’re older. It’s all about taking control now and being proactive.
Being financially independent can enable you to make your own choices and pursue your own interests without having to rely on someone else for financial support, as well as helping you plan for your future and ensure long term financial security for yourself.
If you’re not able to answer ‘yes’ to all of the questions below then you may not be in control of your finances:
Do you know what your incomings and income streams are?
Do you know your total household income?
Do you know your monthly outgoings? How much is your mortgage/rent?
Do you know how much you spend on utilities (gas, electric, water, council tax, TV licence, phone etc)?
Do you know the value of your assets?
Do you know how much you owe?
Do you know if you qualify for a full state pension?
Are you contributing to a private pension?
Do you know what your income in retirement will be?
Do you have an emergency fund?
Do you have defined, measurable financial goals for the future?
What do we mean by Financial Goals?
It’s about creating a future vision for yourself and defining where you want to be in the next phase of your life.
For example, are you saving to buy a second home or do you want to save enough in retirement to travel around the world?
If you have children, do you want to support them through university or help them with the first house purchase?
Being in control of your finances and knowing how much money you have now and how much money you’re going to need to in order to fulfil these goals is critical.
What does Retirement mean to you?
Do you know what sort of lifestyle you want in retirement and how you will fund it? And crucially, do you understand how much money you will need to be able to generate the income you will need once you retire?
Often people say that their home is their pension. But when the time comes you may not want to be forced to move in order to release capital to live off. Equally, you may not have sufficient equity to buy a smaller home & release enough money to live off for the rest of your life.
Maybe you have a private or occupational pension? If you do, are you confident this is on track to provide sufficient retirement income?
If you don’t have your own pension provision you will be living off a state pension of £10,600 per year for the 2023/2024 tax year (assuming you qualify for a full state pension) which is £203.85 a week. Is that enough to fund the lifestyle you want?
For example, in order to have a moderate income of £20,200 per annum, you would need a pension pot of £266,333 for this standard of retirement¹.
How can you take control?
No matter what age you are or what stage of life you’re in, it’s not too late to take control.
Find out the answers to the questions above and create your own list of outgoings and incomings. You may find there’s more going out than coming in, but at least you’ll know and you can start doing something about it.
Go to the gov.uk website and check your national insurance record to see if you qualify for your full state pension. You may be eligible to claim or buy back missing years.
Work out your retirement goals and then give yourself a retirement savings health check. This will help you understand what income you will need in retirement for your chosen lifestyle and the best way to get there.
Take financial advice
Speaking to a financial adviser will help you work out your financial goals and your vision for your future. More crucially though, they will help you work out a plan to get you there.
And furthermore, research by the International Longevity Centre supported by SJP* shows that there are significant mental health benefits to taking financial advice.
Adding a financial adviser to your support network can help remove some of the mental load that comes with financial planning for your future.
The research shows that women in particular can feel more confident about long-term goals, more in control of their financial future and enjoy a greater sense of overall wellbeing after taking advice.
(*International Longevity Centre. Peace of Mind. Understanding the Non-financial Benefits of Financial Advice. November 2020).
It’s all about the plan
Smart financial planning using cashflow modelling software will align financial plans to your future vision, and help you define how much income you will need to be able to retire.
Cashflow modelling helps you visualise your potential financial future, modelling your income and expenditure annually from today, into and throughout your retirement.
“What if” scenarios can be created to see what effect a simple change in investment decisions or contributions to your pensions/investments now, can make to your financial situation later in life.
For example, this could be increasing your pension contributions marginally whilst in your 40s/50s, meaning you may be able to afford to retire earlier, if that is the desired goal.
Another scenario could be investing regularly into tax efficient investments such as ISAs to provide a tax efficient stream to compliment your pensions in retirement.
It provides a structured order which will help with your decision making and steer you along your financial road map towards long-term financial security, & sufficient pension income to be able to enjoy your retirement.
Most importantly it will give you financial control.
About Sarah Siddons
Sarah is an award winning Chartered Financial Planner (Best Businesswoman in Financial Services at the Best Businesswomen Awards 2021) and Principal of Siddons & Co Financial Planning. She is a VouchedFor Top Rated Adviser 2022/2023 who is passionate about empowering women to take control of their financial lives. She specialises in divorce planning for women.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
¹ Source. Retirement Living Standards, Pensions and Lifetime Savings Association, published 2021. Figures are for a standard single person net income, calculated in an annuity of £4,800 per £100,000 and include an assumed State Pension of £9,339 per annum (2021-22 figures). The income figures do not take into account any housing costs, ie. mortgage payments or rent. The pension pot assumes any tax-free cash has already been taken.
Siddons & Co Financial Planning is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/products.
SJP Approved 27/6/2023