Article by Faye Watts
While it is almost impossible to generalise about the finances of women in their 50s, one thing for sure is you’ll be unlikely to be looking at your money with the same easy come, easy go attitude that you had in your 20s. Whether you are comfortably sitting on useful equity, or panicking over whether it’s too late to start a pension, business strategist and tax advisor Faye Watts of www.fuseaccountants.co.uk has some tips and advice that may help.
If you’ve paid off or are well on your way to paying off your mortgage…
Many women in their 50s are in the wonderful position of having a large chunk of equity but they just don’t realise what a useful thing this can be. At the very least a priority should be to look at alternative mortgage providers to see if you can get a better interest rate; I’ve occasionally encountered women who haven’t changed their mortgage provider for years and they are paying well over the odds. With a better loan to value than when the mortgage was first taken out and together with current low interest rates, you could get a better deal and reduce your monthly payments or pay the mortgage off quicker.
For those who have slightly more of a risk friendly attitude to money, there is the option of using some of that equity to invest in buy to let properties, and you could be well on your way to building up a substantial portfolio generating additional income into retirement. This is not advisable for those that want a quick fix as it is a long term strategy, but I would certainly advise looking more closely towards a buy to let portfolio for a future income stream rather than moving into property development. Despite how simple it can look from the outside, unless you have some experience and a natural talent, development is a highly stressful and financially risky option and for every success story I’ve seen many lose money and come out licking their wounds.
If you’re a business owner…
If you’ve started to get jaded by the idea of doing the same thing day after day or are just not feeling the energy necessary to keep ahead of the game, consider taking on a complementary or younger business partner. This can free you up to do some of the other things you want to do with your life, whilst still providing you with an income. If you have children the right age, this could be a great time to bring them into the family business, and keep your legacy alive.
Now is the time to consider and plan your exit strategy and how you can maximise value within your business to be able to sell it on, as it’s never too late to build on your business brand.
If you have children…
If you haven’t already, now is the time to consider some inheritance tax planning if you have a valuable estate.
Whilst one of your goals may well be to pay off your mortgage as soon as possible, if you were to die this could result in a hefty amount of inheritance tax left to your children to sort out. With any surplus cash, rather than paying down the mortgage, you could gift some to your kids now to help with things like a deposit for first home or university fees, so avoiding inheritance tax and helping them when they really need it. You’ll need up to date expert advice on how to do this though as it can get complicated and laws change regularly. If you have paid off your mortgage, you could still release equity to get your hands on some cash.
If you’re thinking about a pension…
It’s never too late to consider your pension options for tax saving and retirement planning. If you’re paying a high rate of income tax this can be a really beneficial thing to do, as the tax relief can be generous. At 55 you could get access to 25% of your pension totally tax-free, and with the new more flexible arrangements recently introduced, you can plan to get your hands on the remainder of your pension sooner, and can time plan this around your other earnings to minimise tax.
Many people don’t even know they have a pension scheme, which you could have got from an old employment or even on a divorce. Do review all your financial paperwork and take financial advice.
If you are worried your pension income isn’t going to be enough…
I’ve mentioned building a buy to let portfolio as an option that can help you build up an additional stream of income; and it’s never too late to start your own business. You may have had an idea for something you’ve always wanted to do and that’s great. If you haven’t then think about creating something like an ebook or eprogramme that you can sell again and again and again. Other options might be to look at network marketing, tutoring or taking a non-executive directorship, but ideally anything that can create a passive income.
Even if you have to invest time and money in retraining it is not likely to go to waste and in today’s high redundancy climate, gives you some extra options should the worst happen.
If you’re nervous about your finances…
Many women in their 50s leave their money decisions to their spouse/partner and that’s simply not wise. Women live longer than men so you’re probably going to have to face up to this one day, and better to learn sooner rather than later. Start reading the financial sections of the newspaper, financial websites like http://www.moneysavingexpert.com/ or using free resources like the Money Advice Helpline.
It may be hard but start talking about money more. You don’t have to pry into what your friends are earning, or compare yourself to them, but having financial conversations may create surprising ripples, such as agreeing to create a shares club with your buddies.
If you’re stuck in a rut…
Finally, try to cultivate a courageous attitude to your finances. Keeping your money in the building society without considering other options is crazy. It could be doing so much more for you, whether that’s on the stock market or in property. However, there is risk and risk can be scary but don’t be afraid and learn the difference between good debt and bad debt. Do your due diligence and assess whether you can afford this. Being a little more adventurous with your money can be a challenge, but it sure beats giving up your daily latte in an attempt to save the pennies!
Faye is no ordinary accountant and tax advisor. Her background with creative industries and seven years as a freelancer in the fitness industry, followed by running her own accountancy practice since 2008 means that she has a real life understanding of the pressures of running and growing a business. As well as her work in tax consultancy and business planning, Faye sits on the advisory boards of a number of companies, including Funny Women and Sister Snog.
http://fayewatts.com and www.fuseccountants.co.uk