Sitting Pretty... or Sitting Duck?: Financial Self-Defense for Women

By Vernai Dantzler Smith

For the first time in history, women control more than 50% of the private wealth in the United States. As they lay claim to this unprecedented amount of wealth, have they taken all the steps necessary to protect their shares from waste, squander, or depletion? Many have not and will let a good portion slip through their fingers.

Whether you are 30, 40, 50, or 60 years old or older are married, divorced, widowed, single, or partnered... or have kids, a job, a business, or an inheritance... if you do not use precaution in handling your financial affairs, you could find yourself with lighter pockets. Many women have seen their fortunes destroyed by failing to put measures in place to ward off lifes inevitable attacks on their financial resources.

Sitting Pretty or Sitting Duck lays out what a woman needs to do to protect herself financially no matter the economic times, and no matter the personal circumstances. For, how well you defend and protect your money today may determine the quality of your life tomorrow.

• Language: English
• Publisher: AuthorHouse
• Release date: Apr 7, 2010
• ISBN: 9781452002163

Vernai Dantzler Smith

Vernai Dantzler Smith is a nationally recognized finance attorney, and CEO of Women, Money & The Law, an advisory firm focusing on protecting the financial assets of women.  Having begun her career on Wall Street, Vernai has more than twenty-five years of finance law experience she now would like to share with her readers.

Book preview

Contents

1 You’ve Come A Long Way, Baby

STRATEGY 1

2 Know Yourself… First

3 Know Your Money

4 Know Your Theater

5 Know The Times In Which You Live

6 What’s Law Got To Do With It

STRATEGY 2

7 Wishing And Hoping Is Not A Strategy

8 Block Economic Blows To Your Heart Strings

9 Manage Your Risks - Use Protection

STRATEGY 3

10 Ready, Set… Action

Appendix A

Appendix B

Appendix C

Appendix D

Appendix E

Selected Notes

1 You’ve Come A Long Way, Baby

Time and tide wait for no man.

- Mark Twain

Vanishing Acts

Did you know…

There was a time when you could not write a check, take out a loan or retain an inheritance? Not as a married woman, you couldn’t. You were powerless to buy, hold, or sell property, enter into contracts, or retain your own wages. Your husband controlled your assets and called the financial shots.

If you were unmarried, you fared no better. For, although you may have had financial rights as a single woman, when you married (as women were encouraged to do) those rights, along with any property you may have had, vanished into your husband as well.

What a quandary women faced… they could stay single and have financial freedoms…or marry and hand them over.

You’ve come a long way, baby, and now stand subservient to no one. Having transcended a state of economic, societal and legal inequality, your strides have been impressive. As women, you have moved from survival, to independence, to real power:

•   You are worth more than $5 trillion in consumer spending power—larger than the entire Japanese economy.

•   Thirty-six of you are billionaires; more than a million of you are millionaires; and almost 10 million of you earn more than your husbands earn.

•   You control more than 50% of the private wealth in the United States.

•   You write 80% of all checks, and carry 76 million credit cards -- 8 million more than men carry.

•   You own 87% of the homes (either solely or jointly), and purchase 62% of all cars sold.

•   You generate more than $2.5 trillion in annual revenues from the more than 10 million female-owned businesses you have created.

And, you don’t stop there. You can expect to control even more wealth.

•   Over the next decade or so, more than $40 trillion in assets will be headed your way.

•   You will inherit 70% of all estates at the average age of 56.

Not bad, eh? You are making money, have money, and are inheriting money. But… are you holding onto your money? Your financial status is pretty much a culmination of a lifetime of personal and economic decisions, and one bad move can wipe out your entire life savings in a matter of moments.

So, ask yourself this critical question:

Am I taking all the steps necessary to protect my wealth from waste, squander, or depletion?

As with many women, you probably are not… and will let a good portion of your money slip through your fingers. Let’s find out how vulnerable you really are.

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When my accountant said I have ‘nothing’ to worry about, I did not know he meant, I have nothing!

Are You A Sitting Duck For Financial Disaster?

Whether you have billions, millions, thousands, or hundreds of dollars, you need to use precaution in handling your financial affairs. Hosts of women have seen their fortunes destroyed by failing to put measures in place to ward off attacks on their financial resources. Women think they are sitting pretty, but in actuality, they may be a sitting duck for financial disaster.

Several high profile women have had their financial difficulties exposed in the news recently. According to reports:

•   mystery novelist lost more than $30 million she handed over to financial managers to control

•   photographer and mother of three young children found herself more than $20 million in debt and in jeopardy of losing her home and her life works

•   1970s tv actress in financial ruins after purchasing a home she could not afford

•   pop star takes home more than $700,000 each month, yet appears to save none

These examples are just a tip of the iceberg—there are millions of women with financial woes who have not made front-page news. Take Nia for instance, age 56.

Nia thought she was set for life – at least according to her 401(k) statement. She worked for a firm that sponsored a defined contribution retirement plan. With such a plan, Nia had her own individual account. Her benefit at retirement depended on the amount she contributed and on the investment performance of her account through the years. The investment risk rested with her because she had an opportunity to choose from a number of other investment options.

Nia’s company matched contributions to her 401(k) with company stock rather than cash. She self-directed her contributions to be invested in company stock as well—making all her 401(k) assets firm stock. The company’s stock was a highflyer, and Nia had been accumulating shares from the ground floor. As the stock made continual new highs, so did Nia’s account balance. When her statement reflected $1.2 million in retirement savings, Nia grinned… she was a millionaire.

Her grin did not last for long, though. Before Nia could opt out of the stock, the credit markets collapsed and forced her firm into financial failure. Down went the stock’s value, and with it went Nia’s fund balances. Fifteen years of contributions shrunk to nothing. Like that, Nia’s 401(k) account was worthless and she was broke. With this sad reversal of fortune, Nia found herself at midlife with no job, no retirement savings, no clear way of meeting her financial obligations, and an ailing mother now dependent upon her for financial support and care.

Nia’s case is not unusual. Other women have played financial roulette with their future. Take Jada, age 43.

Jada was a contract designer. She provided custom residential and commercial interior designs for clients across the globe. The real estate industry was booming, and Jada’s services were in high demand. Her star rose quickly.

Wanting to take advantage of the market, Jada purchased a number of properties in planned unit developments while they were still in the construction phase. She was looking to hold them long enough to appreciate and then sell at a profit. She also sold her mortgage-free home and used the proceeds as a down payment to purchase a luxury home she felt was more befitting of her new lifestyle.

As goes it with the economy, the bottom fell out of the commercial and real estate markets. Jada’s client base dried up, and so did her money. Jada had variable mortgages on the properties, including her new home, and was upside down in the financing. Unable to sell or hold the investment properties, she lost them along with all her investment capital. Broke, Jada is now in jeopardy of losing her personal residence as well.

And, let’s not forget Kelli, age 39.

Kelli wanted to get married. She wanted to be in love and have children. She felt her biological clock ticking. She was waiting for Mr. Right, but he seemed to be taking a long time to present himself. In the meantime, Kelli was professionally successful. She owned a home, a nice investment portfolio, a small yacht, and some real estate. For Kelli, life was financially comfortable.

While at a horse show, Kelli met her husband, and in a whirlwind romance, they married. Kelli did not know much about him – she went with how she felt. The couple moved into Kelli’s home and shared in all Kelli’s assets. Kelli put his name on the title of everything she owned. Against advice of counsel, no pre-nuptial agreement was executed. A few years into the marriage, Kelli realized she had made a mistake. Not only did they not have any children, but her husband had run through a good portion of her assets. In order to get out of the relationship, it will cost Kelli a sizeable sum.

Did you know middle-class women are the fastest growing demographic of bankruptcy filers in the U.S. today? Once the smallest group of petitioners (17% in 1981), women now out-pace men in their race to the courthouse for financial relief.

Why are so many otherwise successful, well-educated women finding themselves in financial messes? Everyday, women are taking risky chances with their money and financial future. Why do so many leave themselves so exposed? so vulnerable? Don’t they know gaining a financial foothold is one thing, but holding on to it can be everything?

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Wait… come back! Stay home… don’t go!

Put Together A System To Make Money…Not A Recipe To Go Broke

Now, let’s talk money. Have you considered what the financial impact on your wealth would be if:

•   you divorce, are widowed, or remarry?

•   your investments tank... or worse yet,

the economy moves against you?

•   your parents need your financial support or care?

•   you are sued?

•   you suffer a major illness or disability?

Have you given it thought? Do you have a plan? If you have not… and do not… you are not alone. It is surprising how many women have not carefully weighed the impact of a what if, have no plan, and are totally unprepared to face the consequences of any such occurrence. Yet, left unaddressed, a what if has the potential to wipe you out financially. Some of the brightest, most capable women have seen their fortunes dissipate to nothing…nada…zero by ignoring the ramification of a what if.

What ifs can, do, and will strike with no respect of person. A woman has a 70% chance of facing at least one what if at some point in her life. Don’t be lulled into thinking your life will be the exception, and a what if will never happen to you -- just look around at the women in your circle or day-to-day dealings. You will find:

•   more divorced women than divorced men

•   more widowed women than widowed men

•   women with substantial and deep devaluations in their 401(k) and/or investment portfolios

•   women with a living parent providing some sort of care and/or support for that parent

•   women with assets, who deal with the public, or are involved in a high risk profession, being targets of lawsuits; and

•   one in three women suffering an injury or major illness while still working

And, that’s not the end of it. There is more.

The Good…The Bad…The Ugly

In addition to dealing with what ifs did you know you can expect to live to be old, alone, and in a declining functional and/or cognitive state? Many women will live to be well past eighty. Their longevity, however, may be bittersweet. A majority will be alone – either widowed, divorced, or never married. With their longer life span, 70% can expect to encounter some degree of chronic disease or disability. As you age, the quality of your life may depend upon earlier decisions you made regarding your money.

It is a sad state of affairs to advance in life old, alone, sick, and broke because you did not plan, or you allowed your life resources to be squandered, depleted, or lost, by failing to protect them!

Take Blanch, age 60.

Once financially comfortable, Blanch struggles daily to make ends meet. When she was working she made tons of money. But, with no plan for saving, or serious thought of the future, Blanch spent… and she spent large — whether her cash or proceeds from debt financings. She bought dead assets (items that do not appreciate), gave away large sums of money (to family, friends, strangers, and causes), and indulged herself-lavishly. Life was good then…but not so much now.

A few years ago, Blanch stepped out of the work force to care for her Mom. However, when she tried to re-enter the job market she was not met with much success. The economy was in a downturn and posed an impediment. Hiring was all but at a halt… especially for those Blanch’s age. Try as she may, she could not get re-engaged at the level she once held. Broke, Blanch struggles daily trying to make ends meet. Although her health is good now, she worries that the constant stress may eventually break it down. Oh, how she wished she had taken better care of her life resources.

Blanch’s financial future is in jeopardy. Although educated, Blanch is yet another woman who has made a host of decisions that have landed her at midlife with no consistent income, no savings, no retirement plan, no 401-k, credit card debt, a hefty mortgage, and an ailing mother completely dependent upon her for support.

Blanch’s case illustrates the devastation women experience as a result of not knowing themselves and making poor choices about money. No matter what your walk in life, age, or income level, if you do not use precaution in handling your financial affairs you will find yourself on a fast track to financial struggle.

Financial preparedness or lack thereof, is a common theme that runs throughout the lives of millions of women. Let’s test your knowledge.

What percentage of women, 50 and older, do you think, have not saved enough for their future needs?

   a. 12%

   b. 35%

   c. 68%

Approximately, what amount of money do you think women as a whole spend annually on clothes?

   a. $100 million

   b. $2 billion

   c. $21 billion

What has been cited as the number one fear of women?

   a. dying

   b. not having enough money for health care

   c. winding up in a nursing home

Trump What Ifs Before They Trump You

A what if will come knocking at your door—you can count on it! Your best defense will be a good offense. Knowing yourself, your money, and the law, and then devising a plan to protect yourself and all that you have, will help you trump what ifs before they trump you. Now is the time to stop taking so many chances with chance!

Answers:

1. c