- that you will be taken care of by some third party or someone else,
- you will be largely responsible for taking care of yourself, or
- some combination of these two alternatives will emerge.
Prior to the pandemic, our society appeared to be moving toward more individual responsibility and less government and employer responsibility. In our posts of January 31, 2020 and September 25, 2019, we encouraged you to assume more responsibility in your own personal planning. And while we believe it is possible that your government and/or your employer may step up in response to the pandemic, we still believe, in the long run, you will still be largely responsible for managing a significant portion of your finances, including your retirement.
We know that there are a lot of people out there who are not focused on their retirement at this time. We understand. According to, 27 Shows to Watch While Self Isolating, “Nielsen predicts that Americans will spend up to 60% more time with streaming services over the next few weeks of self-isolation.” All we are asking is that, instead of watching all those “Golden Girl” reruns, you consider spending one or two hours digging into something a little more educational—your personal finances and planning for your retirement.
Focus on Women
At this point in our post, we are going to do something we have never done before. We are going to address just one of the two genders: Women. And while our Actuarial Budget Calculator (ABC) workbooks recognize that the different genders have different expected remaining lifetimes, we have historically shied away from treating women differently from men in our guidance.
We recently came across an excellent guide from the Women’s Institute for a Secure Retirement (WISER) entitled, Going It Alone – A Guide for Widows: 5 Steps for Navigating the Financial Challenges. If you need a financial education break from binge-watching in the next couple of weeks, we recommend that you start your financial education with this guide. One of the passages that struck us was:
“Women are three times more likely to experience the death of a spouse than men. For many women, widowhood means taking on and making important decisions about current and future financial, legal, and personal matters at a particularly difficult time. Unfortunately, many women have not been interested in these decisions and are not prepared to take on these important tasks. A recent study found that only 14% of the widows surveyed were making financial decisions before their spouse died and 53% said they did not have a plan for what would happen if one of them died.”Our point in highlighting this passage is that even though you may currently rely on someone else to make financial decisions for you, there is a good chance that you will have to make these decisions down the road (i.e., you will become largely responsible for taking care of yourself) and now (rather than later) may be a good time to bone up on your basic financial knowledge. And, Men, it is even ok if you read this guide too.
Budgeting and Present Values.
One of the key principles of personal finance is developing a spending budget. The importance of this process is discussed in Step 2 of the WISER guide. And of course, budgeting is a huge part of what we talk about at How Much Can I Afford to Spend. A key building block of the spending budget process for us (and most actuaries) is also the “Present Value” (PV). It is such a key building block that we include it in almost every one of our posts (or it just seems that way to our readers) in the form of the Basic Actuarial Equation for personal finances.
If you want to better understand how our workbooks work (and check the formulas in the PV Calcs tab), we suggest that you look up the definition of “Present Value” in Wikipedia and Investopedia. We suggest that you read these definitions for the concepts, not necessarily the formulas. It won’t take you very long and the subject of the time value of money is not that complicated.
Summary
Stay healthy and stay away from others in the next few weeks. But, instead of sitting on the couch and watching all those “Cheers” episodes, we encourage you to spend just a little bit of time in the next few weeks improving your financial knowledge, especially as it applies to your personal finances. And, we have workbooks that can help you test out your newly acquired knowledge.
