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Women and Money: Take Control Over Your Financial Life

Posted by August on Mar 17, 2022 3:39:31 PM
August

With March being women's month, it's the perfect time to talk about the importance of educating women about finances. Although our society has come a long way in achieving gender equality, the financial world still tends to be primarily a man's game, and it's time that changed!

Check out part one of the BALANCE blog series, Women and Money, for tips on taking control of your financial life.


Ladies, let’s talk about a financial topic that’s taboo for many of us to even think about discussing with another person… money. No, not how to spend money–that’s the easy part–how to save and invest it, like stocks, bonds, and other investments. What is it about the topic of investing and saving that makes us feel so much shame and fear around it? If you’ve made mistakes with money in the past and are ready to conquer your financial phobia, keep reading.

In thinking about your past financial decisions, how does it make you feel? Does the thought of it make you cringe? Delving into your past is a good way to deal with the present; just make sure you don’t get stuck there and don’t beat yourself up over past financial mistakes. Everything is a learning curve designed to teach us something. Acknowledge it and move on. We shouldn’t let these experiences stay with us and paralyze us with fear.

Through all of your triumphs and tribulations you’ve probably learned how to become empowered in many areas of your life. Maybe you’ve recognized behavior patterns in your romantic or family relationships that make you self-reflect on deep-rooted trauma and insecurities. But have you thought about your relationship with money–your patterns and fear around it? How have you examined this part of your life? Are you allowing your anxiety around money rule how you manage it, particularly when it comes to savings and investing? Are you at ease when you talk about financial topics with friends and family, which is a keyway women gather and process information?

Even in these turbulent times of #MeToo, gender equality, and women’s empowerment, when it comes to financial services, women think it’s a men’s world. And men think it’s a men’s world, which is reinforced by both society and the financial services industry as well. Consider these data points:

● Until a 2018 fix, Google’s Gmail software assumed an “investor” was a man. (Really???)

● When a woman walks into a financial services office, they’re immediately put off because “no one looks like me.” They’re also likely to feel patronized or talked over.

● In 2017, the financial services industry spent 13 times more money advertising in male-skewed magazines than in female magazines. The ads women did see featured older white men. (Again, really???) Source: (Winning Over Women, Kantar Consulting).

Data suggests that women lag behind men in our understanding across all areas of finance, with the most pronounced in the areas of saving and investing. We score very high when it comes to borrowing and consuming, which is no surprise given the household money decisions we make every day. However, in the areas of risk and risk management, we score low on our understanding, which equates to a lower likelihood of having an emergency savings fund or investment account.

It’s time to stop the madness and open ourselves up to explore new ways of approaching our money. One task that should become habit is to understand where your money is going, which means adding every single dollar you make and spend each month. DO IT. It’ll change your life. Women live longer lives than men and we have to be thoughtful about how we invest and save our money so it works for us later in life. Money is freedom. Let’s repeat that…MONEY IS FREEDOM.

Take Control Over Your Financial Life

1. Create a conversation money circle. 

Women need to help each other by openly communicating with their friends and family the topic of finance, especially if you were deprived of financial education early in life. When you lack confidence, you feel as though you have nowhere to turn. A collaborative effort is a great way to create the safe space women need to be able to just talk money stuff by asking crazy questions and things on their minds. The goal is to get comfortable talking about money. Without the conversation, confidence will continue to be low and feelings of embarrassment and shame high. Taking a “we’re all in this together” approach will get the conversation going.

2. Don’t let the language of finance scare you away. 

So much of the time financial jargon is confusing, overwhelming, and complicated to learn. FACT: Investing and building a diversified portfolio isn’t rocket science. Anyone can learn about adding a mix of stocks and bonds. Choosing an ideal asset allocation and sticking with it is an appropriate long-term strategy.

Data shows that women may be better at sticking with a long-term plan and not making changes when the market is way up or down, which is a beneficial behavior for long-term returns. It’s important that you understand you don’t have to know all the answers. It’s OK to not know everything about S&P 500 and the stock market. And it’s okay to ask questions until you do understand.

3. SAVE. Even if it’s a little at a time, SAVE.

Creating the habit of saving is more important than the total sum you’ve saved. Start saving just a little to create the habit. Even if it’s putting$5 at a time in a savings account, it’ll create a habit and build your confidence. It’s critical that you find a way to save in any situation, even if you’ve lost wages or work, or you’ve had to buy computers for your kids for remote learning and you have no emergency fund.

Changing your mindset is a key component to changing your behavior and when things change, when your income improves, you can bump up how much you’re contributing to your savings account. When you get to where things do turn around financially, you can then commit as many dollars as you can to build your emergency fund, which is ideally three to six months of expenses.

Anxiety over finances looks different for everyone as does addressing the anxiety. For some women, taking action is a good piece of advice to give someone who is more behavior oriented. But others may have to undo or untwist their negative thoughts that are based in fear. If you’re someone who thinks you’re terrible at math and therefore can’t do investing, you need to bridge that gap. Instead of jumping into thinking “I’m a powerful investor like Warren Buffett,” you need to start with “I’m better at math than I give myself credit for.”

There’s no prescription or fix that works for everyone. Maybe you need to start with tracking every dollar in your budget or setting up automatic savings deductions, forgetting about it, and moving on. We need to stop thinking we have to do finances the same way or we’re doing it wrong.

If you want to dip your toe in the world of stocks and bonds, you may already be participating to some degree through a 401(k), IRA, or another income-related savings plan. If you want to take Warren Buffet’s advice on a next step, consider reading “The Little Book of Common Sense Investing” by Jack Bogle, a mutual fund industry veteran and founder of the world’s first index mutual fund, Vanguard Group.

Topics: Personal Finance