A few months ago, a friend sent me a link to a most interesting article on the extremes to which some Albanian women went to gain power in a male-dominated society. I found it fascinating, and, not surprisingly, I found some investing lessons in it. (If you ever run across an offbeat article that you think I might have thoughts on, feel free to send it to me.)
Here's the deal: Long ago, when the country had been savaged by war, many women chose to take an oath of celibacy. By doing so, these women could live as men -- dressing like them, talking like them, and working like them. These women actually became patriarchs in their families.
The tradition is dying out today, but it persisted for some 500 years. Why? Because these women did the math and made a rational decision.
When weird things make sense
Why did these women decide to live as men? In many cases, it was for self-empowerment. Traditionally, most women were worth half as much as a man. As an International Herald Tribune article about the practice explained, "Under the Kanun [code of conduct], the role of women is severely circumscribed: Take care of children and maintain the home. While a woman's life is worth half that of a man, a virgin's value is the same -- 12 oxen."
See? If you had a chance to double your net worth, wouldn't you strongly consider it? When you consider how these women gained power and freedom that otherwise would have been denied them, it's easy to understand how they came to such an important decision.
So what does all this have to do with you? Well, all of us have some numbers we should crunch -- numbers that can have an enormous effect on our lives. There are decisions we should make to ensure our own financial survival and give us more power and freedom.
This is true for all of us, but especially women. Typically, women have worked fewer years, due to time off for child-rearing or parent-aiding. They've generally been paid less than men, too. And to top it all off, they live longer than men, needing to make their fewer dollars last longer.
Do your own math on your retirement savings
Do the math to calculate how effectively you're saving for retirement. You might think you're fine saving $300 per month. But that's just $3,600 per year, not even enough to accumulate $400,000 in 25 years at 10%. Sock away $5,000 per year for 25 years, earning 10% annually, on average, and you'll end up with more than $500,000.
Do the math regarding how much you'll need in retirement. Do you plan to travel a lot? Garden a lot? Ski a lot? How much will that cost you? What do you expect to be paying for health insurance and health care in retirement? According to Fidelity Investments, a couple, both age 65, without health-care coverage from a previous employer will need $225,000 to cover health-care costs in retirement. That's 4.7% more than the previous year's estimate. If that's not depressing enough, consider this: A 65-year-old worker who earns $60,000 annually and who plans to retire within the next year is expected to spend about 50% of his Social Security benefits on health-care expenses over the next 17 to 20 years. (Yikes!)
Will your investments grow fast enough?
Do the math regarding the expected growth rates for your investments, too. Don't just assume or hope that you'll earn 25% per year, on average, because that's very unlikely. The stock market has averaged 10% over long periods, not 25%. If a mutual fund you're invested in sports a 14% annual average gain, you might conservatively tell yourself to expect 12% annually. (Remember that averages can vary widely, especially over shorter time frames.) Over 25 years, money growing at 12% will increase in value 17-fold, turning $50,000 into $850,000.
Strong funds do exist. The T. Rowe Price Media & Telecom (PRMTX) fund, for example, sports a market-stomping 12.4% annual return over the past decade. Its top holdings recently included Electronic Arts
Remember that individual stocks can also lead you to wealth. Over the past 20 years, not-so-unknown companies such as Kimberly-Clark
What to do
So get thee to a calculator, and run some numbers. Do the math for your financial situation and see what changes, big or small, you need to make in your life. Put it all off until another day, and you may end up being worth just six oxen, instead of 12.
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. Kimberly-Clark is a Motley Fool Income Investor selection. Sprint Nextel is a Motley Fool Inside Value recommendation. Electronic Arts is a Motley Fool Stock Advisor pick. Try any of the Fool's investing newsletters free for 30 days; we'll help you pad your retirement fund. The Motley Fool is Fools writing for Fools.