One of your most important financial tools is a budget outlining your income and expenses. File Image: IOL

JOHANNESBURG – Recent Statistics SA figures show that, on average, women outlive men by nearly a decade or 9.3 years. And this means it is vital for women to take an active role in managing their finances rather than relying on a spouse or partner, because they will need the skills at some point.

Without having participated in managing finances before, suddenly taking over the reins can be daunting. It’s all too common to hear of women being hoodwinked by unscrupulous individuals who pretend to offer their assistance.

It’s crucial that you feel confident enough to do what needs to be done to ensure that you can enjoy your retirement years in comfort. Here is a simple checklist with some advice for women:

  1. A budget. One of your most important financial tools is a budget outlining your income and expenses. This will help you to understand your annual income requirements, as well as where you could cut back. Make sure that your budget allows for space for your hobbies. Doing things you enjoy will keep you young, motivated and healthier. 
  2. Medical scheme membership. Do not cut your medical scheme membership.
  3. Your own bank account. It’s vital to make sure that you and your spouse each have your own account. If your spouse dies, all their bank accounts will be frozen, including a joint account. You could take a loan against your spouse’s estate from the executor, but getting the executor appointed can take six to eight weeks, and even three months. 
  4. A slush fund. Geysers burst, pets fall ill and vehicles occasionally need a little extra TLC, which is why it’s important to have a separate emergency fund with about three months’ income on stand-by. If all your money is tied up in a retirement annuity or pension fund, your income will be limited. Remember you can only adjust the draw-down percentage on a living annuity annually. This means that if you are earning R30 000 a month, an unexpected expense such as replacing your tyres for R12 000 is simply not affordable without falling into expensive debt.
  5. A balanced investment portfolio. Many pensioners fall prey to the mistake of being too conservative with their investments, gradually losing the purchasing power of their income over time as the cost of living rises.  Keeping up with the cost of inflation is critical to maintaining your standard of living. This means that you need to keep a portion of your investments in inflation-beating assets such as equities or even hedge funds. Marry your investments in riskier assets with lower-risk asset classes such as cash and bonds which will smooth your returns.
  6. An updated financial plan. Reread your will at least every two years to ensure that the assets you are leaving behind are still relevant, and that your executor is up to date. You will also want to review your need for life cover, as many pensioners would have paid off their debts and accumulated enough wealth to leave an inheritance for their loved ones, so the need for life cover may diminish with age.
  7. A professional wealth planner. Before taking any decisions on life insurance, consult a professional wealth planner, as you may have assets that can’t easily be liquidated, or you may want to cover the amount payable for estate duty.

Kerry King is an advisory partner at Citadel.