"Risk comes from not knowing what you're doing." - Warren Buffett, investor.
BY JULIA ANDERSON
My parents trained me by example to manage money and think long-term. Living on a farm, they had me working little jobs (pulling weeds in the bean field) and saving for college when I was 8 years old. As a teenager, 4-H beef projects gave me early “business” experience with the basics of profit and loss, record-keeping and expense management. My seven years of 4-H beef projects paid for college.
A college degree in education and journalism gave me career opportunities that fit my interests.
Investing in dividend-paying stocks was painless. My mother began giving me small amounts of stock (10 shares of IBM) when I was in my 30s. She saw nothing complicated or mysterious about buying stock for the long-term and reinvesting the quarterly dividends. She loved seeing her net worth grow. She was a confident investor.
Early on she taught me the “Miracle of Compound Interest,” earnings from both stock investments and certificates of deposit at the credit union. Growing a long-term nest egg, saving, and investing are a key part of my financial plan. I became a confident investor by sticking to what I understood.
I never passed up free money. I made sure that I saved enough inside my 401(k) plan at work to win the employer matching money. With an eye on the long-term, I picked moderately aggressive investment funds.
I started my own self-managed Individual Retirement Account and separate stock account. I learned by doing. I didn’t wait until retirement to start managing my investments. At retirement, I moved my 401(k) money to an online self-managed brokerage account where management fees are low and there's no charge when I buy or sell something.
I sought out mentors. My mother was the first. She shopped for bargains at the store, was careful with credit cards, looked for the best CD savings rates even if it meant changing banks. She bought shares in companies that she understood (McDonalds). My mentors were themselves confident investors. Money advice came from people who were not selling me something or charging a management fee. For me, it's simple -- Reinvest earnings – dividends or interest. Don't get into something that you don't understand. Check out management fees and commissions.
When I retired, I expected to be in charge of my money. I learned the basics sooner than later so I had the confidence to manage my money and make reasonable trade-offs between risk and financial reward.
I could have planned better for unexpected challenges. I did not expect to divorce at age 60. I lived through it, kept the house, and soldiered on. It has worked out. My advice -- plan for the worst, expect the best. Have your own money. As they say at WIFE.org, "A Man is Not a Financial Plan." A spouse may become seriously ill or die. You may divorce. Meanwhile, you may inherit assets from your mother or aunt. Have a plan for how those assets will be managed. Have a plan for how you would manage on your own.
Look ahead to retirement by knowing what your expenses will be and how much income you will have. (See worksheets on this website). Don’t ignore Social Security as an important income stream in retirement. I claimed benefits at 64. That was too early.
My 80/20 (stocks vs cash) investment strategy has served me well. I continue to trust that the U.S. stock market will over time deliver an annual average return of about 10 percent. I keep management fees low. I don’t try to “time” the market by getting in and out. I don’t panic when markets sell off. The U.S. stock market and the American-based companies it represents with its regulated capitalistic environment will reward those who are patient. I believed that as a kid. I still believe it. I am a confident investor.
I meet women all the time who face job and money transitions and who want to do them right. It’s about building confidence and taking charge of the future. This is your money. No one cares more than you do!
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