Women have been programmed to think they aren’t good with money. So, we end up in a – I have to, but I can’t – destructive mental loop. Here are some common financial mistakes women make: • Lack of long-term planning • Focusing on the numbers rather than goals • Underestimating other kinds of risk • Not recognizing the power of a budget • Investing too conservatively Setting goals, creating a plan, and allowing for inevitable contingencies is a better recipe for success.
Host – Teresa Mitchell, CFP
ladymoneyllc@gmail.com
In my 20 years in the industry, I have had over a thousand conversations with women who have not felt they have reached their financial potential – usually in the areas of investing and subsequent financial security. I have found the key to moving forward from the image of bag lady to empowered lady is having a different kind of conversation with women than they usually experience with a financial advisor. It is about focusing more deeply on what matters in terms of family, community and life purpose. Approaching the conversation with compassion and a goal of honest, authentic connection creates a sense of trust that makes financial education and taking investment action not only possible but desirable.
To that end I left my longtime wealth management firm and am launching a personal financial coaching platform -- LADY MONEY, LLC. It is intended to help women achieve a sense of financial wellbeing around investing for retirement that imparts peace of mind and ultimately leads to financial security.
Resources:
The Golden Triangle of Happiness --
https://www.huffingtonpost.com.au/2015/10/18/happiness-wellbeing_n_8323916.html
Poverty -- https://www.ssa.gov/policy/docs/population-profiles/marital-status-poverty.html
Teresa Mitchell, CFP: Values and money don't mix, or do they? Join me, financial coach, Teresa Mitchell to find out. Let's explore how women can make money while making a difference. This is Lady Money!
Welcome! Please join me for Lady Money Tips in Ten.
Our topic today is -- Common Money Mistakes. Mistakes that women make that cause them to feel financial insecurity.
Ever notice it’s hard to have a good day when you have a bad attitude? That’s one of the problems with women and money. I think we women have been programmed to think we aren’t good with money. But unfortunately, financial security is a top concern for a lot of us. So, we end up approaching money with a – I have to, but I can’t – destructive mental loop.
In my view mistakes women make are about not having a strong relationship with money. I’ve mentioned several times this season an Australian study on wellbeing. They came up with a formula called the Golden Triangle of Happiness -- relationships, purpose, and financial control. Unfortunately, people, and women in particular, often don’t a strong sense of financial control. One way I’ve found through women’s circles is –is to align your values with your money. This creates a new perspective and can improve your relationship with money. After all, when you can dump the emotional baggage, money becomes a very useful means to a purposeful end.
What are some common money mistakes?
Women tend to focus on the short-term for a variety of reasons. I think the time constraints of child rearing and/or caregiving are partly responsible. And a tendency to be risk adverse is harmful too. That’s because financial planning is really about the future. It takes a long-time horizon to prepare for retirement. Because without a plan how can you know what adequate savings targets are? How will you know how much your nest egg needs to be?
When people do plan, I have found there is confusion, and they tend to focus on the numbers. Numbers matter but so do important life goals and sense of purpose. It’s like dieting. Unless your plan is motivating and you can maintain it, it will sit in a desk drawer somewhere rather than becoming a new way of life. On the flip side, over planning is just as unfortunate. As a planner I had clients that were afraid to spend anything. They had to be encouraged to live their lives. Reassured that their financial plan was strong enough to take special trips, renovate the house or help with their grandkid’s college. This comes down to the art of financial planning. You need to consider what could go wrong but also feel like you can spend when things go right. Setting this expectation of spending flexibility helps us feel more in control of our financial situation. Which in turn leads us to a higher level of satisfaction with our life.
The truth is, if you don’t know what you are spending, it is difficult to be in financial control. Even if you aren’t going into debt it can lead to indiscriminate rather than thoughtful spending. And it is difficult to make good decisions on big ticket items. You may have the cash flow at the time but aren’t considering sporadic expenses or the monies you planned on contributing to a retirement plan. Another issue is that spending often meets underlying psychological needs. Sometimes it is a necessary expense but other times it is an unconscious way of dealing with feelings you aren’t totally aware of. Like purchasing things online, you don’t really need because it makes you feel better. It’s fine if it fits into your budget but not if it prevents you from doing things that are more important to you. The key is to spend thoughtfully as part of a plan.
But that isn’t true. Fear of a volatile stock market is just one risk you should consider. Because if you don’t invest or have other substantial income – your assets don’t grow. Then inflation can lead to significant loss of purchasing power by the time you reach retirement. And women typically live longer than men. So, if your nest egg isn’t growing over the years, you run the risk of being unable to maintain your lifestyle and even worse, you risk running out of money. The bag lady nightmare!
Even if you do invest, our portfolios need to take reasonable risk to meet our goals. You put money in a bank account for safety. But you invest in the stock market for long-term growth. Both have their place. When you have a short-term purpose for your money safety matters. But when you have a long-term goal, such as saving for retirement, it is absolutely essential that you get a reasonable return on your investments. Basically, when you invest you are taking on more risk for higher expected returns – portfolio growth.
Unfortunately, many women are reluctant to invest because they are fearful, they lack knowledge and between family, career and other obligations -- are short on time. I do think fear is the main deterrent because the stock market must seem like a house of cards if you don’t know how it works. But that isn’t true. While not every stock or mutual fund will be successful many will. And it helps to realize that a stock is based on tangible company assets such as real estate, equipment, employees and product. Having a well-diversified portfolio, making sure you pay only reasonable fees, and staying in the market for the long-term has historically led to a successful investing experience.
The harsh reality is that once a woman reaches the point where she has to pay attention to her financial situation it can be too late. Sure – maybe you will be lucky and inherit something or have a partner that plans adequately for both of you. But do you want to bet on that? According to Social Security “the overall elderly poverty rate is almost two-thirds higher among women than men”. And sadly, even if you do have a robust retirement nest egg there are plenty of people out there that are willing to commit fraud or simply give you bad financial advice. You need to know enough to make, or at least partner in, making good decisions. And it’s not that hard! That’s why the goal of the Lady Money program is education and empowerment. Anyone can learn to take the kind of financial control that leads to security and wellbeing.
TIPS OUTRO:
Thanks so much for listening! I hope you found Lady Money – Tips in Ten, helpful. If you have any questions, you would like me to address,or if you want more information on the Lady Money financial coaching program or blog, check out the show notes. Or you can reach me, your host Teresa Mitchell, at ladymoneyllc@gmail.com.
Until next time, this has been Lady Money – where money and values do mix.