Published July 2001

Advisers: Set goals,
invest for future

By John Wolcott
Herald Business Journal Editor

Women are making more money today than ever before; more women have MBAs; more women are buying stock; and more investments by women are outperforming men’s, Van Kampen Funds’ representative Kevin Marsh told an audience of women at his recent “Smart Women Finish Rich” seminar in Everett.

His presentation was based on financial adviser David Bach’s book of the same title. Bach is a principal in The Bach Group in San Francisco, manager of $700 million in individual investments. More than 500 financial advisers trained by Bach now teach similar seminars to an estimated 10,000 women each month.

The program’s sponsor, Patrick Swesey, Manager of the Everett office of Dain Rauscher, said the event is a new venture by the brokerage firm to reach out to the investment community with a variety of education seminars.

“My mother never made more than $200 a week, but working for AT&T, she was able to buy stock discounted 25 percent, so she put money aside from a $20-a-week raise, an inheritance from an aunt and my lawn-mowing jobs,” Marsh said. “Now she’s living at Providence Point (in east King County), and her stock is worth more than $835,000.”

That’s the kind of example both Marsh and Bach promote, the importance of investing even when cash is short because of the benefits that accrue over a lifetime.

“Women today own 9.2 million businesses, and 42 percent of households with assets greater than $600,000 are headed by women. Women earn more than $1 trillion a year, and their investments are proven to be twice as successful as for men,” Marsh said.

“In fact, their investments have outperformed men’s in nine of the past 12 years, according to the National Foundation of Women Business Owners, because they do more research than men and they are more serious about handling their money,” he said.

Emphasizing the importance of women investing for their retirement years, Marsh noted that the average age of widowhood for women is 56 and that 25 percent of widows use up their husband’s death benefits in two months.

“The bad news is that typically, men die first but women live longer and end up with nothing. Long-term care planning is essential for women,” Marsh said.

To plan for a solid financial future, smart women adhere to dreams and goals and work toward them realistically, Marsh said, referring to Bach’s “Seven Steps to Living and Finishing Rich.”

“Learn to earn. Take a class, watch a TV show like CNN’s ‘Money Line’ or Bloomberg on TV daily, or read books like ‘Smart Women Finish Rich,’ which has a great reference section of learning resources, such as the National Association of Investors,” Marsh said. “Following these steps gives you great energy, knowing you’re doing something positive about your future.”

“Putting your money where your values are means investing in stocks that will provide the freedom and security you want in future years,” Marsh said. “These types of goals for women usually mean things like paying down debts, buying a house or travel, whereas goals for a man are often set in terms of boats, cars or big-screen TVs.”

Finding out where you stand financially means reviewing your spending, for one thing, he said.

“A woman making $60,000 a year who spends $350 a month on restaurant dining, $300 on clothes, $150 on laundry service and $100 or more for a car phone may find that more than half of her income is going for things that aren’t on her value list,” he said, suggesting dining out every other week instead of three times a week and reducing other costs so money can be used for investing for long-term goals. Writing goals down helps to make them real and makes it easier to reject spending that doesn’t fit with the goals, he said.

Building a “retirement basket” means planning investments such as 401(k) plans with matching funds from employers, Roth IRAs and other tax-saving nest eggs that keep money for your own use instead of paying it to the government, he said. Roth IRAs, for instance, are not tax-deductible investments, but withdrawals in retirement are tax free.

Marsh emphasized the importance of starting early, noting that putting $2,000 a year into an investment with a 10 percent annual return from ages 19 to 26 would produce earnings of more than $1 million by age 65. A person who put $2,000 a year into a similar investment from age 27 to age 65, however, would only earn $805,185.

Using the power of the “latte factor” means avoiding squandering investment funds by paying attention to such things as a daily latte habit that can be as costly as $2,500 a year, enough to earn $1.4 million if the money was invested for 42 years at 10 percent, he said.

“It may not be lattes; it may be other little things; or it may be using credit cards for convenience and forgetting that you’re paying 18 to 21 percent interest to creditors,” he said. “Beware of impulse buying. Some people go to the store for a $20 bag of grass seed and come home with a $450 battery-powered tool under the other arm.”

Building a security basket means having three to four months of income for emergencies, a quick trip home to family or a lost-job period while you’re looking for work, he said, urging his listeners to also have wills or living trusts, life insurance and long-term care insurance.

Creating a dream basket, in Bach’s view, means investing in things like money market accounts and certificates of deposit for less than two years; putting money into bonds, treasury bills and bond funds for two to five years; and investing in stock funds and balanced funds for three to 10 years to have a well-balanced investment portfolio.

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