An article from the Smart401k Women’s Series
During the month of May, Smart401k will place extra emphasis on women and investing. One element of our Women’s Series will be a set of blog articles that highlight women’s opinions, challenges, interests and unique situations with investment, budgeting and general finance. We will meet three women who are in different phases of life with distinctive financial situations. Amy is in her 20s with a successful career and an independent lifestyle. She has been cognizant of remaining within her budget, and she actually has faced challenges because of her prudence. Shannon is a married mother of two who is more than 15 years into her career. She grew up in a single-mother household. Ellen is a mother of grown children who is preparing to retire this year from a full career. She also is in the midst of a divorce.
Shannon was living on her own with student loans and trying to save money for graduate school immediately after graduating college. Like most new graduates, her job was entry-level. In Shannon’s chosen profession of social work, that did not translate into enough income to cover her bills. After a year of struggling, a friend offered to provide her a reference with a company that could offer great long-term potential for advancement. With loans, savings and basic living expenses in mind, Shannon made the career change that would turn out to be a good move for her then-present and future budgeting and saving. She worked her way through that company for more than 13 years, beginning in customer service and moving into communications and product development. Only recently did Shannon leave to accept a new challenge.
Finances of a divorce and a single-parent household
The budgeting effects of her parents’ divorce and her subsequent single-parent upbringing clearly resonate with Shannon to this day. Money was tight, but her mother did stay within her means. Shannon and her sister worked to save money for college and to pay for any of the extras many teenagers expect.
“We discussed our family finances openly. My mom was very honest about the amount of money she made, what it took to run the house and the cost of anything extra we needed. It was important to her that she raise her daughters to be independent and self-sufficient. We were very aware of what could happen if her one salary was taken away, and she stressed that being independent was something we should take seriously,” Shannon said.
During her divorce, Shannon’s mother opted to not request any share of assets. Having been a stay-at-home mom, she had to completely reinvent her life and start at the bottom of the career ladder. That meant returning to square one with savings.
The lesson Shannon gleaned from her mother’s situation: “If one spouse doesn’t work outside the home, they should still prepare themselves for saving and retirement. I believe in financial independence,” Shannon said.
Budgeting today
Like many couples, Shannon and her husband have combined finances.
“We both shared common beliefs about personal finance, so combining our finances wasn’t an issue. We don’t carry credit card debt, we only buy what we can afford and we talk about major purchases,” she said.
The couple scheduled their bills to be paid with online bill pay, and they move unused money at month-end into a “rainy day” account. That account has funded vacations, home improvement projects and big-ticket purchases like cars. Currently the family is saving for home improvement work.
“We don’t like to use credit, so we won’t start the project until we have enough money saved.”
Additionally, both spouses participate in their companies’ 401(k) plans. Each of them began contributing at the beginning of their respective careers. We will see in future blog articles that this has given Shannon and her family an enormous advantage toward reaching retirement goals.
Lessons women can learn from Shannon’s life
- Live within your means
- Each spouse should have a retirement savings account – even if one spouse works in the home
- Avoid the planning practice of relying on one person to handle all of the finances – each member of a couple should be equally aware of the budgetary situation
- Assess savings on an ongoing basis
- Stay-at-home parents should consider maintaining relevance in their former profession with continuing education, reading, volunteering, free-lance work and networking; this is a safe-guard in case it becomes necessary to return to work
More to come …
Look for more about Shannon during the month of May. Her views about and experiences with investing, retirement planning and estate planning will appear in other May blog articles.
About Smart401k
Smart401k is a Web-based investment adviser providing unbiased advice to help employees invest in their employer-sponsored retirement plans. Smart401k provides service to almost 11,000 clients who collectively have more than $1.5 billion in assets. Individuals receive personalized investment recommendations based on the funds in their plan and support of professional investment advisers available to answer all investment questions. Based in Overland Park, KS, Smart401k can be found at Smart401k.com.
