As a financial advisor, I see so many women who are hurt because they are not in control of their own finances. Many of these women are like my mom was—they never felt the need to focus on money because their husbands had always taken care of that side of things. In today’s world, however, women have no choice: If they don’t take charge of their own finances, they could lose everything.

I wrote this article to help women learn the skills, questions, and vehicles they can use to create a secure and abundant financial future.

STEP One - Get Motivated: Why You Absolutely Must Take Control of Your Own Financial Future.

The first, most necessary step to achieving financial security is for women to wake up to the need to manage their own money regardless of their current situation. Because of divorce, widowhood, and lack of adequate planning and saving for retirement, most women are doomed to experience a lack of financial security (if not outright poverty) at some point in their lives.

STEP TWO - Get Your Financial House In Order.

In the past, women in particular have all too often allowed society to decide the "man of the house" should take charge of the family’s financial security. Obviously, men have not done a great job in this area or the dire statistics of women and money would be very different! Most investors today are worrying and focusing on a distant financial future when they have no clear idea where they stand today.

STEP THREE - Take Your Financial Temperature.

Most Americans have no idea what true financial health is. All too often they focus on the end result of investing without first evaluating where they are today and where they want to arrive tomorrow.

STEP FOUR - Learn What True Wealth Is.

Step Four is really about living with an "attitude of gratitude." Ask a room of 1,000 women if they are wealthy, and often less than 10% will raise their hands. If you then talk about the realities of life in a non-industrial nation, suddenly 90% of the room feels wealthy. This step concerns the emotional aspects of money. It defines true wealth as something that comes from living a life of purpose with loving and caring friends and family.
 

STEP FIVE - The Latte‚ Factor: Create Massive Wealth With Just a Few Dollars a Week.

The Latte Factor is the powerful way in which the small things we spend money on every day add up to a whole lot of money in the end, and can mean the difference between ending up a millionaire or ending up broke. It doesn’t matter how much or how little you make, if you don’t save a portion of EVERY dollar you earn, you will never live a life of financial abundance. Winning the "money game" is really very simple: You start by paying yourself first. Start today by automatically putting 10% of what you earn before taxes into a retirement investment vehicle, ideally one you will never touch until you actually retire.

STEP SIX - Put All Your Eggs In Three Baskets.

Grandma always told you, "Never put all your eggs in one basket." Unfortunately, most Americans forget these powerful words of wisdom when it comes to investing.

1. Basket One. What You Absolutely Must Do to Protect Yourself and Your Family. This discusses the necessity of wills, disability insurance, life insurance, and other strategies for protecting your family’s financial future.
2. Basket Two. How to Invest to Create a Secure Financial Future. In this basket, you will determine specifically how much it will take you to be financially secure upon retirement. Then you will be introduced to the most effective investment vehicles to achieve her "critical mass", including retirement plans like IRAs, SEP IRAs, Keoghs, and company-sponsored retirement plans like 401(k)s.
3. Basket Three. Designing and Reaching Your Life’s Dreams. This basket goes beyond goal setting to what I call "dream setting." All too often as adults we forget to dream. We lose the juice of our life and the passion that makes us think everything is possible. This section helps the reader bring her dreams back to life and begin a specific investment plan to achieve them.

This step offers a series of six specific strategies women can use to fill all three of their baskets.

Strategy #1. The 7 Biggest Mistakes Investors Make . . . And How You Can Avoid Them!

Sometimes the most important financial strategy is to know what not to do. Most people fail financially because they are led into making inappropriate investments by banks, brokers, insurance salesman, and often well intentioned but misguided friends and family.

Strategy #2. Everything You Wanted to Know About the Market—But Your Parents Never Told You

The stock market is not a gambling vehicle, yet most Americans use it as such. Statistics show that the average American who invested in a "no-load" mutual fund in the last fifteen years lost money—even though the market has had annualized returns over 15% and mutual fund returns averaged over 12.5%! How is this possible? The average investor always buys high and sells low—the exact opposite of what you are supposed to do. It’s not timing the market . . . but time in the market that builds wealth.

Strategy #3. How to Buy a Home Without Mortgaging Your Family’s Future

Today women are running the majority of households in America. They are paying the bills, caring for the family and, ever more frequently, paying the mortgage. However, no one ever taught them how to select and pay for what is probably the biggest expense they will ever have! Mortgages are sold by banks which have their own best interests at heart, not their clients’. The average American woman today is funding a 30-year mortgage that will increase the cost of her home by literally hundreds of thousands of dollars. Pay it off in the most advantageous time frame.

Strategy #4. Building Your Financial Future "Totally Tax-Free"

Taxes are the biggest barrier for most women seeking true financial security. The average American woman today works until May 6th each year just to pay her tax bill!

Strategy #5. Should You Do It Yourself or Hire a Financial Advisor?

There are obviously advantages and disadvantages of "doing it yourself" or hiring a financial professional. You have different types of investment support currently available, including the Internet; no-load mutual funds; dividend reinvestment stock purchase plans; full-service, discount, and deep discount brokers; etc. Pick the one that works best for you.

Strategy #6. How to Interview and Hire a Personal Financial Coach

What should you look for in a financial advisor? What should you ask? And most important, what should it cost (do they charge fees or take a commission on the products they sell)?

For example, when you meet with a financial advisor, you should do most of the talking. If the advisor spends a lot of time telling you how great he/she is, how much money he/she makes for his/her clients, and how powerful his/her firm is, thank him/her politely for his/her time and continue with your search.

The Cost of Waiting!

The number one question I get in seminars and in my office is, "Isn’t the market too high to invest right now?" There are specific costs of waiting to become an investor. Taking control of your own financial future requires action. Get started immediately to take the essential steps to create and protect your own financial future now!

©1999 David Bach, Orinda, CA. All Rights Reserved.

This article is excerpted from David Bach’s book, Smart Women Finish Rich: 7 Steps to Achieving Financial Security and Funding Your Dreams (Broadway Books). David is one of the country’s leading financial advisors and educators. A senior vice president of a major New York brokerage firm, Bach is a partner of The Bach Group in Orinda, CA, which manages more than $600 million for individual investors. To learn more about how you can take control of your financial destiny, read Bach’s book, Smart Women Finish Rich, or call him toll free at
877-ASK-BACH.