Three Smart Things to Do—or Not Do—with Your Money

Quinn, Jane BryantLet’s be clear from the get-go: “Women are not any better or worse than men at managing their finances,” says Jane Bryant Quinn, a personal finance expert and author of new book How to Make Your Money Last: The Indispensable Retirement Guide. “For example, it’s been reported that women are more conservative investors than men [so they, in effect, are preserving wealth rather than building it], but when you look at women who have actual investing experience, they are not more risk averse.”

Perhaps the only difference between the sexes is that women are more willing to read articles on how to do things better. Here, the three most common mistakes that people make. Start off the new year right by not being one of them!

Mistake #1: Saving too little for retirement

Smart Thing to Do: “Max out your 401(k) contribution, and if you can’t afford to put aside the $18,000 [the maximum allowed for people under 50 for 2016], at least sign up for automatic annual increases,” Quinn says. If you work in the gig economy or are an entrepreneur, open a solo 401(k), SEP IRA or ROTH IRA, and sign up for contributions to be taken automatically from your bank account. “Women earn less than men but research shows that we save a higher percentage,” Quinn says. “Still, we all need to save more—there’s nothing more important. The key is pitching your lifestyle to what you have left in your paycheck after contributing to savings so that when you retire, you can live comfortably.”

Mistake #2:  Not investing enough for growth

Smart Thing to Do: Invest more in equities. To find out how much, subtract your age from 110; the difference is the percentage of your retirement savings that should be in the stock market. “The classic calculation was to start with 100, but people are delaying retirement and living longer,” says Quinn. “Generally, if you won’t touch the money for 40 years, there’s no reason not to go as high as 80% in equities. You’ve got the time to ride out any market downturns.” So that you can get on with your life and not worry about the market, Quinn recommends index mutual funds, which outperform two-thirds of actively managed funds—a mix of total US and total international stock market funds.

Mistake #3:  Buying life insurance when you don’t need it

Smart Thing to Do: “The only people who need life insurance are those who have someone dependent on their incomes,” Quinn says. “Buying it when you don’t have children makes as much sense as getting auto insurance when you don’t own a car.” It will cost more when you get older, but probably not much more—and besides, you might not have children. “Until you actually need the coverage, you’re better off investing that money for yourself,” Quinn adds.

▶ Read more from the January 2016 newsletter.