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Research shows that financial security is a top priority with women when it comes to their finances. Confidence and security about any topic come from knowledge about that topic. This is especially true in the area of protecting your savings. Smart women know how much risk exposure their money has, and the different types of risk involved with each of their investments.
Risk management is investing lingo for protecting your money. Protection takes the form of fairly simple strategies that can be put in place to limit every type of risk. You can do this yourself, or, if you work with a financial advisor, she can implement risk management strategies for you. The most common types of risk are listed below.
- Market Risk
- Company-specific Risk
- Principal Risk
- Interest Rate Risk
- Industry Risk
- Inflation Risk
- Currency Risk
- Liquidity Risk
There is one more type of risk that is particularly common among women; I have named it “Lifestyle Risk”. Lifestyle risk usually occurs suddenly and dramatically. It commonly occurs with the loss of a spouse from either divorce or death. This risk can be every bit as devastating as the other, more market influenced types of risk. Fortunately, there are risk reduction steps that can be taken to reduce, if not eliminate, this risk completely.
Develop the capability to manage your own assets. While women are becoming more involved than ever in their wealth management, more often than not, I work with women who have avoided this important area of their lives because they are busier than ever with their career, families and home management.
Become knowledgeable when times are normal. No woman wants to add learning about managing her finances during a time of increased stress due to the loss of a spouse. A study by Citigroup revealed that 90% of women will be in charge of their finances at some time during their life. If you don’t already have basic knowledge about your finances and investments, there is no time like the present to change that.
Be involved in your wealth management. Examples of this include meeting with any financial professionals that are a part of your money management, regularly reviewing your cash flow and net worth, and taking control of actually managing finances at least one month out of the year if this is not your regular responsibility.
Consider life insurance. Decide if this is something that you should have in order to continue supporting your lifestyle in the unfortunate event of losing your spouse. Everyone’s situation is different.
Protect your money by knowing which types of risk exposure your investment accounts have. Take the simple steps that limit your exposure to loss so you can reach your financial goals at the time you desire. Financial women proactively manage their investment risk.