Give women credit where it’s due

Dispelling the stereotype of women as credit-bingeing big spenders, the Credit Bureau Association (CBA) this week released statistics revealing that South African women are a better credit risk than men: women have less negative information (such as default judgments) on their credit reports than men, and fewer women are in debt counselling than men.

The CBA’s figures were released on Women’s Day and a week after the publication of the Old Mutual Savings & Investment Monitor, which revealed that one in three women still consider men to be better at handling finances than women. And almost two-thirds of men think so too.

Old Mutual researcher Lynette Nicholson says this perception among women shows that they need to develop the confidence to take charge of their finances.

Credit expert Jane Strydom says the CBA’s research shows that although women in general are a better credit risk than men, married women come out tops all round.

“Married women are a better credit risk than both married men and unmarried women. But unmarried men are a better credit risk than unmarried women,” she says.

This correlates to some extent with Old Mutual’s findings, which show that unmarried women with children are the most financially vulnerable.

One of the key findings of the Old Mutual survey was that among all women with children, 56 percent of them are single mothers – and about half of single mothers do not receive any financial assistance from the fathers of their children.

For these single moms, their incidence of holding life assurance, retirement annuities, short-term insurance and medical cover is well below the average for the metropolitan working population.

Old Mutual’s research also found that women with children feel particularly financially vulnerable and dependent on their partners: 57 percent of mothers with a partner versus 31 percent of fathers with a partner fear not being able to cope financially if their partners were to leave them.

Financial planner Natasja Norval Hart, the recipient of the Financial Planner of the Year award in 2010, says the golden rule for women is: “A man is not a financial plan.”

Apart from the high risk of losing a partner in divorce, women have a longer life expectancy than men, which makes it all the more important for women to plan to be financially independent, she says.

“Women need to take control now and make sure they are equipped to take care of themselves,” Norval Hart says.

Catherine Currie, who has a Certified Financial Planner accreditation and is the owner of Catherine Currie Financial Services, says more than half of her clients are women and for all of them financial independence is their top goal.

Currie says although she doesn’t like to differentiate between her clients on the basis of gender – because all aspects of financial planning apply equally to both sexes – there are some obvious differences between men and women.

The things that make women different – and potentially vulnerable – according to Currie, include:

* The fact that women live longer than men, on average.

* Women tend to have interrupted working lives due to the commitments of motherhood.

* Women, unfortunately, like the feeling of being looked after and often only take control of their finances when forced to.

* Women tend to concentrate on the wellbeing of children and other dependants at the expense of their own finances, including retirement savings.

* Women often are the ones who pay for day-to-day expenses, while men are responsible for the mortgage bond, vehicles, insurances and the building up of household assets. So women cannot always account for their expenses as easily.

* Some women don’t have their own bank accounts or savings in their own names, so they don’t have anything to show for their hard work, whatever it may be, and don’t have funds available for emergencies.

Norval Hart says women also need to watch out for unhelpful attitudes towards money. “Women are often taught that money is about power and that good girls don’t talk about money – lest they be regarded as power-hungry.”

This thinking makes women reluctant to speak up for themselves in financial matters or to negotiate salary increases or discounts.

“It’s important to consider your earliest memories of money and to know how you view it and how you relate to it. If you don’t know where you come from, you don’t know where you’re going. Objectively assess your attitude towards money and your spending behaviour.”

She says financial pitfalls for women include:

* Failing to take ownership. Norval Hart says taking ownership of your finances is about having a financial plan, which isn’t the same thing as having investments. “It’s about being on top of your affairs, managing debt, keeping good records and having a will that’s up to date. And annually revisiting your plan to assess what has changed and to ensure you are adequately covered in all areas.”

* Failing to budget. Norval Hart says the cornerstone for any individual’s financial plan is a proper budget.

“Have a list of expected and actual expenditure and review it on an ongoing basis. Know your fixed and variable expenses and apply your budget. Very few people actually enjoy their bonus because they rely on it to fund necessities such as school fees and school uniforms. A budget alleviates a lot of emotional pressure associated with spending,” she says.

* Failing to set goals. Setting goals for yourself and your family is vital, Norval Hart says.

“The important thing is that your goals are realistic and measurable. Let’s say you want to save for school books and uniforms so that you can pay cash for these. When you attain your goals, it’s good to reward yourself.”

* Self neglect. Norval Hart agrees with Currie that women tend to put the family first, at the expense of themselves. “Your salary is for your family, but a portion of it must go towards providing for your own future. You need to pay yourself and look after yourself. It must be in your budget.”

Six steps to becoming financially independent

Women seeking to achieve financial independence need to cover all the key areas of financial planning. Financial planner Catherine Currie, who owns Catherine Currie Financial Services, says if you aim for these six goals, you’ll be covered.

1 Eliminate debt. This is the most important goal to achieve. Most people cannot own their own home without a mortgage bond, so this is a necessary debt. It makes sense to repay slightly more each month than what the bank requires. Once this repayment has been put in place, other forms of savings are required.

2 Build savings. Your savings should include savings for |short-term (less than one year), medium-term (one to five years) and longer-term (five to 10 years and beyond) needs, Currie says.

Different products cater for different needs, she says. Unit trusts are investment vehicles that suit all forms of savings as they are cost-effective, have high levels of transparency, and there are funds for various growth prospects and levels of risk.

3 Save for retirement. Most people have to carry on working after normal retirement age (of between 55 and 65) because they haven’t made adequate provision for retirement. Having sufficient savings to carry you for up to 30 years is a huge task, Currie says. Start saving for retirement as early as possible and base your target on a proper calculation of the capital required, taking into account your best assumptions of your likely monthly income requirements, an estimated inflation rate, and the possible values and the growth in your investments.

Retirement is one area that prevents people from consulting a planner, Currie says. “They’re afraid of bad news. But it’s better to have something to aim for. As the saying goes, ‘The danger is not of aiming too high, but aiming too low and reaching it’.”

4 Cover your risks. Make sure you have adequate cover for inevitable risks. Most people need: life cover for debt and to take care of dependants; income protection, which pays an income if you can’t work due to illness or accident; lump-sum disability cover to supplement income protection; and severe illness cover to help pay for additional expenses incurred or to compensate for time taken off work.

Currie says she finds it odd that people who wouldn’t dream of driving a car that is not insured don’t feel the need to cover their bodies. “What’s the point of being able to fix our cars after an accident if we are unable to drive the car?”

5 Join a medical scheme. Given that women live longer, they need to take good care of themselves with annual check-ups in all areas. It’s best that you have medical cover. As you get older you need to upgrade your cover, which often works contrary to how much disposable income you have.

6 Have a will. Currie says an up-to-date will drawn up by a professional is a must. “Every person should have their own will, and not a joint will.”

Top tip

Financial planner Catherine Currie has the following advice for women: “Find a registered financial planner with whom you feel comfortable. If your partner has one, get to know the planner better. Share in all meetings concerning household financial issues. Sharing financial goals and fears is one of the most personal discussions you can have. You need a financial planner whom you feel you can trust – someone who is knowledgeable, has integrity and is, above all, caring. A motto I, as a planner, follow is: people don’t want to know what you know; they want to know that you care.”

‘Too much reliance on hubby’

Many more women are becoming professionals, but they still often leave much of their financial planning to their husbands, Mike Jackson, chief executive of PPS, says.

Addressing the PPS/Personal Finance Professional Woman of the Year award function this week (see “R50 000 to worthy winner”), Jackson said some 100 000 of PPS’s 280 000 members are women and 40 percent of new members the society signs up are women. These women are typically self-employed and become PPS members to buy cover against short-term illness.

However, Jackson says when it comes to dread disease cover or saving for retirement, these educated women often rely on their husband’s financial planning.

This leaves them vulnerable if they can no longer rely on their husband as a result of disability, death or divorce, he says.

Jackson says professional women should have their own free-standing financial plan that offers them disability and dread disease (severe illness) cover and provides for their retirement. This plan could be devised with your husband or partner, but as a woman you should be aware of the details, and the plan should protect the lifestyle to which you are accustomed.