Part two of this three-part series on women and money focuses on investing. You'll read the stories of five women and see how they've approached investing in their respective stages of life. You'll meet Felicia Miller and learn how she got on the same page with her husband to develop a sound investment portfolio. Mary Darlene Edwards shares how she learned about investing basics and the management of household finances after the loss of her spouse. In addition, you'll get expert advice from financial advisers such as Charlotte Stallings, Barbara Stanny, and Kathleen Williams. Many women shy away from investing because of a fear of losing money or a lack of knowledge about how to get started. Consequently, they hand over the reins to their husbands or significant others. We'll show you how to overcome your fear and make your hard-earned money grow. Reading this piece and carefully following our advice is the first step. Even though the nation's economic outlook remains unstable, this special series outlines strategies to help you make smart choices with your money and come out on top. Whether you're single, married, divorced, or widowed, it's vital for you to develop a sound financial plan. In the following pages we'll show you how to manage your money–in good times and bad. Single Without children As 30 approached, Yolanda F. Johnson began to reflect on all the things she hadn't done yet: traveling, putting on a debut singing recital, conquering her fear of heights, and saving for retirement. A classically trained singer, Johnson has supported herself over the years with jobs in event planning at nonprofit organizations such as her current post at the Princess Grace Foundation-USA in New York City. "At 30, you stand at a fork in the road,†says the now 31-year-old Johnson. "I decided that I don't want to have a baby right now, and I don't need to get married. But I have a lot more disposable income than I've ever had in my life, so I need to do something with it.†Johnson hadn't participated in a retirement savings program before. But when she turned 30, retirement suddenly didn't seem that far away. Since the New York resident wasn't confident in her ability to pick the right funds in her 403(b) plan, she sought the advice of a financial analyst friend. Last July, she began contributing 1% of her pay to an all-equity portfolio consisting of large-, mid-, and small-cap stocks as well as international funds, and she plans to increase her savings in about six months. Johnson also opened a high-interest savings account and is actively paying off debt. Her goal in saving is to open her own business, a singing studio. Invest small amounts If investing large chunks of money seems out of reach, try Johnson's approach by starting small and increasing the amount over time. "To save $100 a month, all you need to do is save a little bit more than $3 a day,†says Candace Bahr, co-founder of Bahr Investment Group and Women's Institute for Financial Education. There's another reason to take baby steps: "If you're buying just a few shares of stocks, you need small wins along the way to build up your confidence,†says Kim Kiyosaki, author of the book Rich Woman (Rich Press; $18.95) and wife of Robert Kiyosaki, author of Rich Dad, Poor Dad (Business Plus; $16.95). "Then you can take the next step.†Hit the books Think you don't know anything about money? Join the club. A recent survey by Prudential Financial found that less than a quarter of women feel very confident about reaching their financial targets. But it doesn't have to be that way. Barbara Stanny, author of Prince Charming Isn't Coming (Penguin; $14) and Secrets of Six-Figure Women (Collins Business; $14.95), recommends that women do three things to educate themselves financially: "Every day read something about money, every week have a conversation about money–preferably with someone who knows more than you, and every month save,†she says. Go for Growth When it comes to investing, women tend to be more conservative than men, says Stanny. That can prevent women from jumping on a stock tip or taking unnecessary risks, but it can also make them shy away from investments with long-term prospects for growth, such as stocks. You'll need to take some chances so that your money keeps pace with inflation and provides you with long-term capital. Protect Yourself Disability insurance is important at this stage of life. "Single women often do not have anyone else to rely on,†says Cindy Hounsell, president of the Women's Institute for a Secure Retirement. Emergency savings of three to six months is crucial, she says. In tough economic times, six to nine months might be necessary. Should you get laid off, it may take longer than before to find a new job. And disability could replace a portion of your income if you become disabled and can't work. SINGLE WITH CHILDREN Kirsten Hoyte, author of Black Marks (Akashic Books; $14.95), knows that balancing her future while providing for two small children is not a work of fiction. A 40-year-old English and computer studies teacher at a private high school in Concord, Massachusetts, Hoyte has been investing in her retirement accounts through TIAA-CREF ever since she became eligible for her employer's match of 8% if she contributed 5%. That was 12 years ago, long before her children, Sterling, 5, and Ridley, 2, were in the picture. "I did it because that's what you're supposed to do to save for retirement,†Hoyte says. "I watched my grandmother live on a very limited income and I didn't want to be like her.†Balancing retirement savings with caring for two children can be hard, but Hoyte has never wavered from her commitment to invest 5% of her salary. She also recently started contributing $250 a month beyond the match. Hoyte realizes that her investment mix, chosen when she first began the plan in 1996 and unattended since then, might be too conservative. She plans to reallocate her positions when she meets with a TIAA-CREF investment adviser. Help Yourself First With limited resources, single mothers might be tempted to skimp on their retirement savings in favor of helping their children. "Women, often to their detriment, end up worrying about their kids first and then they think about their own retirement,†says Hounsell. That's a mistake. "Your children can get a scholarship or a grant,†says Jennifer Basye Sander, author of The Complete Idiot's Guide to Investing for Women (Alpha; $19.95). "But you cannot get a scholarship for retirement.†That's what Hoyte thinks too. While she intends for her children to get the best education they can, retirement comes first. "Hopefully my children will be able to go to a college or university that's inexpensive, or one where they'll get significant financial aid,†says Hoyte. "I think it's better to hope for that to happen while saving for my retirement than to save money for their college and then have my children burdened with trying to help me out financially when I'm old.†Hoyte adds, "If there's any gift I can give them, it's that their mother is self-sufficient.†Protect Them As the sole breadwinner, single mothers can be vulnerable if the unexpected happens. They need to figure out how their children will be supported if they become disabled or die. "You need to protect your children's well-being with disability insurance and life insurance,†says Hounsell. Term life insurance policies have come down dramatically in cost in recent years. A 40-year-old woman can buy a policy with a $500,000 death benefit for 20 years for $330 a year. Remember, too, that as a single mother, you'll need to think about estate planning. You'll want to name a guardian for your children should something happen to you. In addition, you need to decide how your assets will be used for their care. Cash is King A cash reserve is important at every stage of life, but for single mothers it can be vital. It's not just you who needs a safety net, but your whole family. "A cash reserve is crucial before you start to invest in a big way,†says Charlotte Stallings, a personal finance expert in Houston. You never know when your child might injure himself and you'll have whopping medical bills, or if you lose your job and ballet class tuition is due. "You need eight to 10 months of savings,†says Barbara Stanny. That's more than the amount experts recommend to singles without children and couples. MARRIED Felicia Miller, 39, was instilled with a sense of fiscal responsibility as a young child. She was given an allowance, but only a third was to be spent, the rest went toward tithing and savings. While she attended the University of Pennsylvania, her mother paid for tuition and housing, "but she said I would have to feed myself,†says Miller, now a professor of marketing at Marquette University in Milwaukee. Miller carried this financial attitude with her to the workplace. When she met her husband, Seaphes, in 1999 when they were both working for Procter & Gamble in Cincinnati, Miller was delighted to learn that they both shared a penchant for thrift. "We were so compatible in terms of our financial values,†she says. They were both regular contributors to P&G's generous 401(k) program, and they both saved outside the retirement plan. In all, they socked away about 10% of their salaries toward savings, plus an additional 5% to 10% for donating to their church. And neither carried any debt. Miller took the reins of their day-to-day finances after they married in 2001, but big-picture financial items are discussed together. Though Seaphes is the more aggressive investor, the couple has decided to follow Felicia's moderately aggressive investment stance. "Short-term, aggressive investing has to be monitored day to day,†Miller says. "I don't have time to do that and neither does Seaphes.†The couple has a 90% equity allocation, evenly distributed among large-, mid-, and small-cap mutual funds, in addition to international and individual securities. Moreover, they own two rental properties. Prudent saving habits enabled Miller to leave P&G in 2002 to pursue a Ph.D. in marketing at the University of Cincinnati. They made do with just one paycheck during her studies. "We were already used to living on 80% of our salaries,†says Miller. "So we were able to make it.†Working Together Couples often struggle with how to meld their financial principles. "The advantage of being in a relationship is that you don't have to make all the decisions on your own, but the disadvantage is that you don't make all your decisions on your own,†says Kiyosaki. Learning how to work together is key. "Robert and I made the decision early on that we were going to learn about money together,†says Kiyosaki. "If he wanted to attend a financial seminar, I was going with him.†Learning About Money Being married isn't an excuse not to have your hand in the family finances just because you aren't interested. Many women don't feel adequately educated about money. That's why it's best to start off in incremental steps. Hounsell suggests having money discussions when monthly statements arrive from a bank or brokerage. When it's time to do the taxes, look through the paperwork together and talk about how you spent your money in the past year. "You don't have to learn every single thing,†says Hounsell. "But you do have to take responsibility.†Preparing for the Unexpected Almost everyone goes to the altar believing that their marriage will last forever, but as statistics show, only half are right. Furthermore, one third of women who become widows are younger than age 65. This means that women must be able to jump into the chief financial officer role of their own lives. "You do not want to be sitting in a place where you have not established your own credit,†says Charlotte Stallings. "That's just not practical in today's world.†A woman who does not work outside the home can still save for her own retirement through a spousal IRA, for example. DIVORCED Sandra Heading-Marchand found herself in the same predicament as many divorced women: She suddenly had more expenses but less income from which to pay them. "My ex-husband had the income coming in. I stayed home; I was trying to develop a home-based business as an art designer. He would put money into my account, and I would handle the household bills.†After divorcing her husband three years ago, the 55-year-old had to figure out another plan. Unlike many married women, Heading-Marchand took on the primary role in managing the couple's finances. She was responsible for paying all the bills and balancing the checkbook. Though he provided the money, her husband took a more passive role. Now that Heading-Marchand was on her own, she worked on building up her business so that she could generate enough income to live on. Until then, she made ends meet by taking on two jobs: one as a jewelry designer and another as a designer at a fashion house. "I stuck to a budget and it was working, but after the divorce all of the money coming in went to bills. I didn't have any extra money. Everything went to property taxes, utilities, and maintenance on the house.†Today, Heading-Marchand has regained her footing. She knows that life is full of unexpected surprises, so she began to ramp up her savings. She now has about $5,500 socked away. Dividing it Up "Divorced women are the worst off financially,†says WIFE's Bahr, who specializes in the financial issues of divorce. "Oftentimes in divorce, a couple is dividing up debt, and then women are trying to dig themselves out of a hole.†The first step in the divorce process is to understand what you're dividing up. "Women need a total understanding of their finances and their financial documents,†advises Stanny, who has been through two divorces. She advises women to talk to an accountant as well as a divorce lawyer and an estate lawyer. Taking Care of You Women often fight for the house because they think keeping it will be better for their children's emotional state. But that might not be the best financial move, says Hounsell. "Within a year they can't afford to keep the house up anyway,†she says. In fighting for the house, many women fail to negotiate a divorce settlement in their own best interest. That means you must think carefully about waiving your rights, such as for alimony. Though increasingly rare, alimony might still get awarded for marriages of 10 years or longer, especially if your spouse earns significantly more than you do. You will not have another opportunity to renegotiate it once the divorce decree is signed, so think hard about it. If your spouse has retirement savings or a pension, by law you might be due half. You may even be able to withdraw this amount without incurring the 10% penalty on early withdrawal of retirement assets. Your Financial Future Getting back on your feet can take years. In addition to providing for your children's day-to-day needs, remember to keep your financial future in sight. If you can, continue to invest in your workplace retirement account. Invest at least enough to take advantage of your company's match. You may need to make hard choices between your own financial well-being and your children's education needs. Your children might land scholarships for college, but you won't have such an opportunity when it comes to funding your retirement. WIDOWED Mary Darlene Edwards became a widow almost five years ago. Her husband, Eddie, was diagnosed with stage four cancer of the liver and died shortly after. In addition to dealing with her husband's death, 66-year-old Edwards now had to handle the couple's finances, a role she was unaccustomed to. "For the most part, Eddie handled things. I wish I had been more involved, but he handled all our finances.†The Detroit resident was also hit with another blow–she now faced $30,000 in medical bills and credit card charges related to her husband's treatment. Though fearful at first, Edwards took action. After paying for her husband's funeral, she used the remainder of the insurance money to pay down debts the couple held together. Edwards, a minister, motivational speaker, and author of the book, Transition: From Widowhood To Womanhood, had no savings or investments of her own, so she had to learn everything she could about money as quickly as possible. She consulted friends, family, and financial professionals for advice. "I really believe the key is to surround yourself with people who can help you, who are strong in areas where you are not. Have a good pastor, accountant, attorney, and doctor. We need to take care of ourselves. I believe I can make better decisions when I have people around me who are more knowledgeable.†Take a Breather "What happens with so many widows is that they become paralyzed. They can't take action, and they don't want to do anything differently from what their husbands did,†says Stanny. "It's hard to learn about money while you're grieving,†echoes Bahr. "I recommend taking some time to gather support around you to make a plan. If you have large sums of money you don't know what to do with, then save it in something like a money market fund for six months.†Major decisions probably shouldn't be made before then. You do not need to decide how you will invest your money right away. Use the time to focus on grieving and dealing with your loss. Build Your Support Network As a widow, you may find no lack of people happy to tell you what to do with your money. But make sure the people you consult really have your best interests at heart. "You've got to make sure that the person is giving you true advice,†says Kiyosaki. "A salesperson only gives you good sales tips, but a true educator will help you learn about money.†That's what Edwards did after her husband died. "I have a really wonderful support group. Many of them are in different walks of life. Many of them have expertise in areas that I don't, and I have expertise in areas that they don't, so we work together very closely.†This group includes an accountant, a financial planner, and a lawyer. Edwards is now using the strength and advice that she gleaned from her network to form a support group called Widows with Wisdom (www.widowswithwisdom.org). Spend Wisely "I've found that widows often don't handle money correctly, in that they use their money to deal with their emotions,†says Kathleen Williams, president of Williams Financial Services Group of Oklahoma City. Identify areas where you may need to cut down on expenses. One area is the home. You may find that you're no longer able to afford your mortgage on just your salary. As emotional as leaving the home you shared with your spouse is, downgrading may make the most financial sense. Williams also cautions widows in their 50s to think carefully about what sources of money they will spend. Money from retirement accounts cannot be withdrawn prior to age 59 ½ without penalty. "That is a gap period,†Williams says. "That hole can be taken care of with insurance.†–Additional reporting by Sheiresa McRae SINGLE WITHOUT CHILDREN Action Plan Save and invest 10% to 15% of your salary. That should get you to the millionaire's circle before retirement. Eliminate debt. Your financial goals will be impossible to reach if you're living under the crushing weight of debt. Give the plastic a rest and pay down debts now. Plan for a long life. Unfortunately, marriages often end in divorce or through widowhood, so it is important to plan for your financial future. Consistency pays off. Investing just a little bit over the span of decades can be powerful due to compounding. Helpful Resources Girl, Make Your Money Grow! by Glinda Bridgforth and Gail Perry-Mason (Harlem Moon; $12.95) offers tips on clearing debt, saving money, and investing. www.360financialliteracy.org: A Website that provides useful information on financial literacy for every stage of life, from childhood to retirement. www.feedthepig.org: Features online tips, quizzes, and resources that will help you reach your saving and investing goals. SINGLE WITH CHILDREN Action Plan Contribute enough to your 401(k) to get the company match. Single mothers often struggle financially. Invest the bare minimum to get the free money your company is offering. Invest depending on your time horizon and your risk tolerance. Keep in mind how many years you have until retirement and know what kind of investor you are. Take advantage of college savings. use tax-preferred accounts such as 529 plans and Coverdell savings accounts. Leave a legacy. Teaching your children to be responsible about money can set them up for a lifetime of good saving and spending habits. Helpful Resources www.singlemothersbychoice.com: An online community of women who have chosen to become mothers on their own. www.wife.org: The Website of the Women's Institute for Financial Education. Lots of articles about financial topics and online "money clubs†connect you with other women discussing money issues. www.savingforcollege.com: Explains how 529 college saving plans work and what is available in your state. MARRIED Action Plan Create a budget. Saving for your financial goals will be easier if you both have a spending and saving plan. Continue saving for retirement. Having children presents financial challenges, but make a point of keeping up with your retirement savings. Get a financial education. Familiarize yourself with common financial terms. Try browsing the Website of the Women's Institute for Financial Education, www.wife.org. Protect yourselves. Whenever your life circumstances change, such as with a marriage or the birth of a child, it's time to review your insurance needs. See if you have adequate coverage for yourself, your spouse, and your children. Helpful Resources Women & Money, Your Personal Finance Guide by financial planner Dee Lee (Flying Pig Publishing; $24.95) helps women make the most of their money. www.geezeo.com: Provides easy-to-use budgeting tools and even allows you to review your bank accounts. www.wiseupwomen.org: An online and offline financial literacy program for Generation X and Y women set up by the U.S. Department of Labor's Women's Bureau. DIVORCED Action Plan Don't go it alone. You'll need a team of professionals to help you through the process. At a minimum you'll need a top-notch lawyer, accountant, and financial planner. "Divorce is not a do-it-yourself time,†says Stanny. Document everything. Rarely is divorce a total surprise. Most people have a clue that this might be in the works. If that's your situation, make sure you have copies of bank and brokerage statements, deeds, pay stubs, tax returns, credit card bills, and insurance policies. Update your records. You'll need a new will once you're divorced. And you'll probably want to remove your ex as a beneficiary from your life insurance policies and retirement accounts. Begin slowly. Just as you did when you were first starting out, work slowly and systematically to rebuild your wealth. Don't give up. Helpful Resources Divorce & Money: How to Make the Best Financial Decisions During Divorce by Violet Woodhouse and Dale Fetherling (Nolo; $34.95) tells you everything you need to know about the divorce process, including how to get your financial house in order. www.divorcenet.com: Provides financial advice and resources.