With all the money pressures piling up on us right now, you could be forgiven for just putting your fingers in your ears and singing lalalalala at the top of your voice. Spiralling bills, sandwich generation-related aggro from both ends, salary failing to keep up, all drive us into denial about the long term.
Well stop that right now.
It’s time to take control. To pull on your financial Spanx, and give yourself the right underpinning to put in place the right financial strategy to fulfil all the plans and dreams you have for your future.
Where to start
Start by visualising how you would actually like to spend your future. This year, the next few years, your retirement. What do you actually want to do? Set up your own business or maybe go part-time? Travel? Buy that dream home by the sea?
It’s all about you now, perhaps for the first time in decades. To quote Cynthia Nixon from And Just Like That, “I feel like the fifties should be, frankly, a really golden time in a woman’s life. It has certain things in common with adolescence: you can return to yourself and ask, ‘Who am I? What do I wanna be?’ There is a chance to look at your life and make some changes or draw some boundaries.”
Here at Noon we believe in empowerment. As Eleanor Mills, our founder, puts it: “’We want to help women in their 50s to a more optimistic and positive future and change the narrative. Women in their 50s can’t move into their best life if they don’t do the financial underpinning.”
You’ve got this
The good news is, you’ve got this. According to Laura Suter, Head of Personal Finance at investment platform AJ Bell, it’s not too late, you absolutely can turn around your financial future. And the sooner you start, the better the outcome. Even if the cost of living crisis means battening down the hatches for a while, you can still plan for those future sunlit uplands. Besides, the money-saving habits you have developed over cozzy livs (as Gen Zs archly put it) will help you achieve your longer term objectives.
The bad news is, many of us have a high mountain to climb. Government statistics show that the pensions gap between men and women is a shocking 49 per cent, in the 45-49 age group. Spells out of the workplace, part-time work and lower pay, plus a tendency to prioritise everyone else in the family except ourselves, all conspire against us.
Work out where you are now
The first step is understanding your current position. What have you already got in terms of pensions, savings, debts, mortgages, insurances? Break the task down into chunks if this all seems to much. Track down your old pension pots one day. Peer into the debt abyss another. With a stiff drink if that helps.
Next, put some numbers on those future plans. As in, how much you will need to fund them. For a starting point, the Pensions and Lifetime Savings Association estimates a single person needs £12,800 a year for a very basic standard of living in retirement, or £37,300 for a comfortable one (it’s £19,900 and £54,500 for a couple). The State Pension will provide a decent amount of this (currently about £10,600 a year), but the rest is down to you.
Once you know your target, it’s time to start planning how to get there. And fill in some gaps.
If you’re time poor, have spare cash or require guidance, a good IFA could coach you through. The Government offers relatively basic mid-life MOTs at https://www.moneyhelper.org.uk/en/everyday-money/midlife-mot, and a free pension advice one-to-one session, at https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise?source=pw.
Addressing any debt should be your priority. There is no point saving zealously, when you’re haemorrhaging huge interest repayments. The last thing you want to do is get to retirement beset by credit card bills and loan repayments.
Similarly, you’ll have a bumpy ride stopping work whilst still paying off the mortgage, so think about over-paying the loan, to try and free yourself by then.
Where’s your wealth?
Sam Secomb, a chartered financial planner and founder of Womens Wealth, says women are well advised to tap into their housing wealth by trading down the family home, to pay for their future. She warns against sticking on to the four or five bedroom property merely for the sake of hosting Christmas dinner – so-called “dining room table syndrome”.
Other sources of wealth are pensions savings in workplace or private pensions, property income from a buy-to-let portfolio, the state pensions, and savings in tax-efficient savings vehicles like Individual Savings Accounts (ISAs).
Beware leaving too much in the bank, if you can avoid it. With current ruinous inflation rates and savings interest failing to keep up, the value of your savings is shrinking in real terms. Anyone with more than five years left until retirement will probably do better keeping just six months’ money in cash, plus funds for planned expenditure in the next five years (like a kitchen), and put the rest into stocks and shares, within pension or ISA wrapper for maximum tax efficiency.
You will need to learn about stocks and shares at this point, and/or consult an IFA. Secomb says beginners might put funds into a cheap global tracker fund (a fund which tracks a broad range of share indices across the world) to start off with, and go more diverse later on.
Don’t miss out
Make sure you check your National Insurance record – 35 years’ contributions is the threshold to qualify for the full pension, which currently pays out £203.85 a week for those retiring today. Individuals with shortfalls should explore buying extra years – it will come at a cost but could pay off in the long term. Secomb also encourages women clients who have missed out on wealth accumulation because of family responsibilities to get husbands to contribute to their wives’ pensions before their own.
Consider “term” life assurance if you still have dependent children or a large mortgage – workplace pensions usually offer some protection. Or income replacement insurance in case you fall ill. But only where you can afford it, and don’t if you already get cover through work. And read through the small print very, very carefully.
Finally – of course finally – wills. Please do get one. When your circumstances change, do another one. Or risk intestacy laws messing with your family. For example, without a will, most of your assets go to your husband – not great if you’re divorcing. In a second marriage? A will can protect your kids from the previous relationship. Everyone with children under 18 must use the will to appoint a guardian, or the courts will decide for you. And remember, if you’re not married to your partner, they won’t receive a penny should you die without a will.
Your Queenager financial Spanx checklist:
What do you definitely need to do?
- Start putting yourself first
- Set clear financial goals, for short, medium term and retirement
- Set a budget for now, plan savings and pensions for the future
- Pay off unsecured debts
- Consider clearing your mortgage as soon as possible by overpaying
- Too much money in the bank means you’re losing money in real terms, consider what savings and/or investments you could put it into
- Learn how to invest if putting money away for five plus years.
- Get the right insurance to secure your finances
- Make a will
What should you think about?
- Your partner could consider funding your pension to fill any gap you might have from taking time out of contributions with family duties. Get advice on this
- Sharing care responsibilities for ageing parents equitably between siblings. It’s often the case that daughters end up with most of the duties, or paying a disproportionate amount for care out of guilt.
- Beware over-generosity with kids. Explain the bridezilla wedding will see them looking after you in old age!
- Downsizing to free up cash
What are the nice-to-haves?
- Retire early
- Buy a holiday home/relocating
- Lovely kids’ weddings
- Further study
What are the red flags to beware of?
- Ignoring your finances
- “I feel stupid about this so I’ll pretend it’s not happening”
- Large debts
- Whopping gaps in retirement savings
- Keeping it all in the bank as it’s “safe” – inflation danger
- “I’m not going to worry about this because he’s got me” Don’t assume anyone else will take responsibility for your finances.
By Dido Sandler