Women’s top financial questions answered

Women typically come well prepared for that first meeting with their financial advisors. Financial advisor, and Director of the WISE Group (Women Inspiring, Supporting and Educating), Nicole Spinelli, asked her advisory board to identify the most common questions from female clients.

What’s the right approach to budgeting?

People have a firm grasp of how much money comes in, but they’re sometimes fuzzy on where the money goes. In order to create a budget, you must know what you’re spending.

Start by tracking your spending for a month or two. Once you identify how much you’re spending, you’ll have a better idea how much more money can be put towards your financial goals like retirement or debt repayment.

To make budgeting simple, try the 50/30/20 method, which has only three big budget categories. First, spend no more than 50 percent of your income on fixed expenses like housing and insurance. Next, aim to save or pay down debt with up to 30 percent of your income. Lastly, restrict your discretionary spending on things like eating out, entertainment and gifts to no more than 20 percent of your pay.

How do I manage debt effectively?

There are two schools of thought on how to pay down debt. One is called the snowball method where you pay just the minimums on your various accounts while aggressively paying off your lowest-balance account first. When that’s done, you move on to your next-lowest account and so on. The early wins help build confidence momentum, and you might end up paying less in interest.

The other method asks you to attack your highest interest rate accounts first, followed by the next highest. A financial advisor or CPA can help you determine which route is better-suited for handling your debt needs.

Am I doing enough to plan and save for my retirement?

Retirement is a marathon, not a sprint. And like a marathon, it’s important to lay the groundwork early so that you can keep your motivation up over the long haul.

Early savings will enable you to take advantage of the power of compounding. Even when money is tight and you have myriad financial obligations, make retirement savings a priority. Even $10 or $20 a week can add up to significant savings after many years.

Aim to replace about 70 percent of your pre-retirement income, including Social Security and any workplace pensions, but don't be afraid to adjust when necessary.

Am I doing enough to save for my children’s college expenses?

Many families struggle with the escalating costs of college. Tuition, fees, and room and board at a four-year public college costs an average of $19,500, whereas a private school clocks in at $42,000.1

Saving for college when your children are small can help grow your money through compounding. Yet even if you’re diligent, you still might not be able to pay the full amount. The good news is that there are other sources of funding for your children, such as grants, work study, and loans. So if the choice comes down to saving for your own retirement or saving for college, choose retirement, since there are numerous routes for paying for education.

You can help your children improve their chances of receiving merit-based aid by targeting schools where they will likely be in the top third of their class. Or help them research scholarship opportunities, or even recommend starting at a two-year college before transferring to a four-year school.

How will financial aid work for my kids?

College applications and financial aid are complicated issues, and while there are some general guidelines, different schools have different ways of determining financial aid.

The first step in securing aid is to fill out the Free Application for Financial Student Aid (FAFSA), a form that’s used to determine eligibility for both federal student loans and financial aid at individual schools. With the FAFSA, schools determine your expected family contribution and then offer aid to fill in the gap. Aid packages vary widely from school to school.

In addition to need-based aid, top-tier students are often offered merit-based aid to entice them to attend.

Finally, if your child doesn’t receive as much aid as you need, your son or daughter can appeal the decision by calling the school and explaining why more aid is needed. It’s always worth a shot.
 

1“Average Published Undergraduate Charges by Sector, 2015-16.” The College Board, Annual Survey of Colleges. Accessed December 2015. http://trends.collegeboard.org/college-pricing/figures-tables/average-published-undergraduate-charges-sector-2015-16.