Money is a dilemma, isn’t it?! We weren’t taught about it in school. It isn’t a polite discussion topic. And historically it is supposed to be firmly in the male domain. What’s a woman to do! Well – smart women break the “rules”. Self-preservation can come down to learning the basics as well as getting a firm handle on your own financial situation now rather than in the middle of a crisis. If this sounds daunting it doesn’t have to be.
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...
Reesa Manning Interview https://lady-money.simplecast.com/episodes/take-financial-control-an-interview-with-advisor-reesa-manning
Financial Literacy https://www.investopedia.com/terms/f/financial-literacy.asp
FINRA’S National Financial Capability Study https://www.investopedia.com/articles/investing/100615/why-financial-literacy-and-education-so-important.asp
Compounding https://www.investopedia.com/terms/c/compoundinterest.asp
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.
Money is a dilemma, isn’t it?! We weren’t taught about it in school. It isn’t a polite discussion topic. And historically it is supposed to be firmly in the male domain. What’s a woman to do! Well – smart women break the “rules”.
As advisor Reesa Manning points out in our recent podcast conversation, women need to know about their money. We are often the last ones standing and life is full of surprises. Self-preservation can come down to learning the basics as well as getting a firm handle on your own financial situation now rather than in the middle of a crisis. If this sounds daunting it doesn’t have to be.
So, what is Financial Literacy?
Think of financial literacy as the foundation of your relationship with money.It is the ability to understand and effectively use critical financial skills, including managing personal finances, budgeting and investing. Financial literacy supports important life goals, such as saving for retirement, using debt responsibly, and/or starting a business.
You would think we would be farther along considering that the concept of financial literacy has been around since the birth of our nation. Ben Franklin wrote a piece in his almanac titled “Hints for Those that Would Be Rich”. His closing comment was a version of the famous “A penny saved is a penny earned”. Informal instruction on money management is documented in the 1800’s. But “personal finance as a serious educational topic only started in the 20th century,” opined an early Chartered Financial Analyst. Unfortunately, we still have a long way to go considering a recent FINRA literacy study determined only 34% of the participants got 4 out of 5 basic financial questions right.
Several of the questions Americans failed to answer correctly had to do with compounding of interest, inflation and diversification. These are critically important concepts for women because they tend to live longer, earn less and are by nature more risk adverse.
Are you familiar with the magic of compounding of interest?
The concept probably originated in Italy in the 17th century. It meant “interest on interest”. And that’s actually the whole idea. Compounding interest is a miracle compared to simple interest on just the investment principle. An example may give you a clearer picture. Using the “Rule of 72” an investment earning a 6% annual rate of return will double in 12 years. Compounding is a powerful tool for building wealth, giving you the ability to maximize the growth of even modest savings. The earlier you start the more impressive the results.
Unfortunately, compounding of interest is a double-edged sword. It works both ways making consumer debt difficult to pay off. If you haven’t seen the math, it would take you over 10 years to pay off a $5,000 credit card debt with an average interest rate while simply making monthly minimum payments.
Why is inflation so dangerous?
Right after the fear of running out of money is the worry that you won’t be able to maintain your lifestyle. The villain is inflation. It is one of the main reasons you invest rather than keep your money in a low interest-paying savings account. Investing gives us the opportunity to earn more than inflation over the years so our purchasing power increases with the rise in the cost of goods. If you are having trouble embracing investing it may help to realize there are creditable risks other than the stock market.
Are you sure you really understand diversification?
We all know the saying – “Don’t put all your eggs in one basket!”. But there is a little more to diversification than that. If you have a well-diversified portfolio, you have spread your investment dollars across a wide range of different kinds of assets. This is an area where you might need a little help from a professional. Most people can see that they have a number of funds but may not know what kind of funds they are or what’s in them. The point is understanding that proper diversification is important because it reduces risk and makes the investing experience feel like a much smoother ride. Diversification keeps us in the game and the peace of mind is not overrated!
Is financial literacy a life skill?
Absolutely! Learning how to manage your money is critical to achieving financial security. And security makes it possible to live your life with a strong sense of wellbeing. The stakes are high for women. In addition to longer life longevity, women often earn less due to the gender pay gap and time off for caregiving duties. Mastering money gives you the best chance for a happy ending – with or without Prince Charming. And it is a confidence booster. Who doesn’t want to be in charge of their own destiny! When you feel in control of your financial situation it gives you options. And not just the freedom of choice. It opens up possibilities to do something incredible.
So, what is stopping you? It is not as hard as you might think. You really just need some basic knowledge about general financial concepts -- not a lot of complicated details. This is what Reesa meant by learning to tell time rather than trying to build the clock!
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.
Until next time, this has been Lady Money – where money and values do mix.