It's Your Money: Becoming a Woman of Independent Means

INTRODUCTION

When I set out to write this book, one of my objectives was to help women put money in perspective. It seems money has become far more important than it should be. Our drive to amass wealth, the fear we feel when we think that we may not have enough, and the sleepless nights we endure as we wonder if the cheque will clear or bounce to the stratosphere are all unhealthy.

In 1997, USA Today published a graph that showed what people worry about when it comes to their money. Seventy percent of women feared not having enough money when they were old. According to the Statistics Canada publication Growing Old in Canada, an alarming 40% of women over the age of 75 who were living on their own had incomes below the poverty line. And since a woman 75 or older has a greater chance of being disabled than her male counterpart, this can paint a grey picture for our futures. But we can paint this picture with fresher, more vibrant colours. We have the ability to do what we must to take charge of our present and our future. But to do it, we have to understand how money works. And we have to be willing to take charge of our own financial lives.

Many women still believe that dealing with finances is a man’s job. Time and again I speak with women who have given financial control completely to their husbands, fathers, or sons. I continue to be astounded. You might think that this is a characteristic of older women—women who haven’t been educated in the finer points of feminism. You’d be dead wrong. Who’s in a better position to have a handle on personal finances than an accountant or a financial planner? How about an accountant who is a financial planner? I have a story that clearly demonstrates how knowing and doing are two distinctly different things.

Marla had been married for several years when she and her husband separated. At that point, Marla was forced to take a long, hard look at her money situation. She was surprised to discover that despite the fact that both she and her husband had been saving and investing aggressively, their investment portfolio had not done much in the past few years. Marla had left all the investing up to her husband. He chose investments that performed badly and, in the end, Marla paid for it. After putting away a significant portion of her income each year, she had far less to show for it than she should have had.

What would motivate a well-educated, professional money manager to leave the decision-making to someone else? If money is so important in terms of keeping a roof over our heads and food in our children’s tummies, then why are so many of us still willing to let our partners do the dirty work? The answer may be the same thing that motivated you to take this track. First, if money creates a conflict, and you want to avoid conflict, you choose the route of least resistance and let him do it all. If you have different investment strategies—and you’ve been convinced that doing it your way will take too long—you let him have his way. If you trust him implicitly, you let him make the decisions and live with the consequences, good or bad. No one is always right, after all. If you don’t have the time, don’t have the energy, or don’t have the desire to do it for yourself, it’s easy to give the responsibility to someone else.

We still have a long way to go in coming to terms with money and the role it plays in our lives. Money issues seem to pull us from one extreme to another: from complete denial to obsessive concern. Somewhere there is a middle ground—one that will be infinitely easier to walk—where we can put money into its correct context and deal with it in a logical, rational, and decent manner.

Most financial discussions fail to help people understand how they feel about money. While they may demonstrate how to budget, stress the importance of saving, and describe the various investments available, they seem incapable of motivating people to put into practice what many already know. What little has been written on the psychology of money often doesn’t integrate the practical information. And despite the proliferation of books on all aspects of personal finance, the ability to convert that knowledge into practical, day-to-day good money management is elusive.

LIFE CYCLE FINANCIAL PLANNING

Part of how I want you to look at money differently is by thinking about your money in terms of where you are in your life. Different stages mean different needs. As your needs change, you must change what you’re doing with your money.

Life cycle issues have been used for years to help manufacturers and retailers decide how to target their customers. If you’re a single woman without children, you likely read different magazines, eat different foods, and wear different clothes than the woman who is mired in rug rats. When I was single, I ate out more often, I wore high-heeled shoes, and I hardly ever thought about spot removers for my carpet, my couch, or my clothes.

Just as where we are in our life cycle influences the goods we buy, so too must it be considered when we’re thinking about which financial products we should use. As I’ve moved through my life cycle, I’ve gone from shopping for guaranteed investment certificates to shopping for mutual funds to buying the index. I’ve had to think about divorce, stepchildren, and satisfying financial commitments to ex-spouses. And I’ve been forced to face my own mortality and make a will.

Perhaps the one change in my life that most affected me was the birth of my children. I had no idea that having children would be this all-consuming, over-the-top, fantabulous experience. I’ve found in talking with women that I’m not the only one completely blown away by the experience. In fact, one of the questions I’m most often asked is, How can I stay home with my baby and still help make ends meet? This is just one example of how a change in life cycle can throw a spanner in the works of the best-laid plans.

Life cycle issues have become increasingly more complicated as our norms have changed. The traditional life sequence—school, job, marriage, child rearing, empty nesting, widowhood—has become jumbled. Many women complete their degrees well after the traditional school age. Many delay having children until their careers are well-established. And divorce has changed the family structure so that many women now must raise children on their own, or help raise stepchildren, without ever having considered what parenthood would hold for them. Just thinking about the various forms a family can take is enough to boggle the mind. And just as there are new structures within which we must live, so too are there new financial issues with which we must come to terms.

Since there is no such thing as a normal life cycle anymore, does that mean we have to throw out the concept of life cycle financial planning? I don’t believe it does. After all, whether you are having your first child at 20 or 40, the issue of educational savings becomes important. And whether you are widowed at 55 or divorced at 30, you better have your own credit history established if you want to be able to function within the financial world.

Think about financial planning as a trip through the supermarket. First, there are the essentials you must have to keep body and soul together. What you put in your basket will be a direct reflection of your needs and the needs of those around you. If you are single, your essentials may be few and your fridge quite empty. If you’re married with children, you’ll need a larger larder.

Once you’ve done the core stuff, then you have to look at changes in the normal weekly routine that will affect what you’re buying. If you’re planning to have the folks over for a turkey dinner, you’ll be adding cranberry jelly and stuffing to your basket. If you’re throwing a birthday party, ooh, now we’re getting to the good stuff: ice cream and cake.

Then there’s the shopping you do, just in case … just in case friends drop in and you need pâté and crackers for a light nosh, or just in case you get a cold and need a steaming bowl of chicken soup.

The financial life cycle is very similar. First, there’s the core stuff—the basics of your financial larder. Just about everyone needs a chequing account and a banking card. Everyone needs to establish a credit history. And everyone should begin investing as soon as they have an extra $25. (Yes, that’s all it takes to get started, and the longer you wait the harder it is to convince yourself you can live without spending that 25 bucks.)

As you move through your life cycle—as your life changes—you’ll need to add or subtract from your financial basket. Early on, you’ll be adding. As soon as you have some assets, you’ll need a will. When you have a partner, you might choose a joint account. And as you increase your income, you’ll need to buy more and different types of investments to meet your long-term goals. Once you’ve established a good asset base and most of your dependants have gone their own ways, you may want to get rid of some of your life insurance. As you move closer to retirement, you will consolidate your retirement savings for convenience and ease of conversion. You may even shift some of your assets into your children’s hands, or into a trust, to reduce your estate and the taxes payable on death.

Finally, there are the financial precautions you take, just in case … just in case you lose your job, just in case you become disabled, or just in case you suddenly find yourself the primary breadwinner in your family.

In this book, I’m going to tell you what you need to think about. And I’ll provide you with some tools, so that you can use your money to your advantage now and as you change throughout your life.

WHY A BOOK ABOUT WOMEN AND MONEY?

So you get the life cycle thing, but you’re saying to yourself, Gail, why a finance book specifically for women? Money doesn’t know x from y chromosomes. That’s true, but apparently society, our work environment, our legal system—just about every social construct you can imagine—has yet to catch up. If you don’t believe me, ask yourself:

• Why do women still make less than men for work of equal value? Yes, the gap is closing, but why are we still not equal?

• Why are elderly women and women with children the poorest members of our society?

• Why is it that when a couple divorces, a woman’s income goes down and a man’s goes up?

• Why did a vice-president at a mutual fund company with perfect vision once tell me that women are not our market?

This book isn’t just about money. If it were, then the advice would be gender-neutral. This book is about women taking control of a part of their lives that, until now, they may have wished away or ignored. This book is about every woman having the power to make her life whatever she wants it to be.

Most financial planning books assume a person will continue to earn an income without snags for the majority of her life. They seem to abandon women who must deal with significant changes like motherhood, divorce, widowhood, disability, and caring for the elderly. Yet it is at these very moments that we need guidance, support, and information. When our life plans change, we must make adjustments to our financial plans, so we remain proactive in managing our money.

That’s why we need a book for women specifically. And that’s why I wrote this book. I hope that you will be able to take from it the information you need as you move through your life, adjusting your plan for significant changes and tweaking it for small ones.

The other reason I wrote this book is that I sometimes despair at women’s unwillingness to be masters of their own fate. More often than not, the reason given for not taking control of the money is, I just can’t. Yes, you can. You are the author of your own life. If you choose not to take control, that’s your choice. If you choose to write your own script and direct your own future, read on.

By the way, when I use the term marriage, I mean it in the broadest sense: I mean your desire to have a continuing relationship with another person, regardless of your specific family structure. When I use the terms spouse and partner, again, it’s in the broadest sense. This is the person with whom you have, and want to continue to have, a relationship. Recognizing that families have changed—having lived in just about all kinds, I’m a first-hand witness—my definition of a family is EVERYONE you love, who loves you back (even if they also hate you periodically), and with whom you have to relate for the common good.

This book has been designed to deal with both the psychological and the practical. It will not solve your financial problems. I know that is the implicit promise of most books on money, but that promise is unrealistic. Just as money—or more money—is not the solution to most people’s need for love, security, power, freedom, status, or comfort, this book cannot miraculously take you from where you are now to where you want to be. Only you can do that.

What this book will do, if you are a willing participant in the process, is help you uncover your personal feelings and attitudes towards money. It will provide you with information and proven techniques for positive money management. It will be a guide to what you must think about to stay on an even keel and keep money in its proper place in your life. It will ask you many questions that you must answer for yourself if you want to discover how to achieve financial health. By answering these questions, you will make some discoveries. You will find that money management is easy. You will learn new ways of dealing with money. You will achieve the results you want.

Sound good? Let’s go!

PART ONE

UNDERSTAND

HOW YOU FEEL

ABOUT YOUR

MONEY

Everyone’s seeking financial freedom. But ask 50 people what constitutes financial freedom, and you’ll likely get 50 different answers. Often it’s associated with having enough money to never worry again. But that raises the question, How much is enough? The fact is, financial freedom has absolutely nothing to do with how much money you have. Read that last sentence again. Financial freedom comes when you have control—when money anxieties and fears no longer creep into your thoughts as you lie in bed at night. We can all have financial freedom, regardless of how much we make, if we put money in perspective.

Money is a tool. That’s all. It’s a way of getting the things we need and the things we want. So why do some of us place such significance on its acquisition? Why do we compare ourselves with others and feel better or worse about ourselves based on how our family, friends, and acquaintances are doing? Why do some of us always seem to be running to catch up?

When I set out to write this book, someone asked me a question that significantly changed my approach: Why do some women do absolutely nothing to take care of their futures despite the fact that they know better? It’s a good question, and I was stymied for several weeks as I rolled the idea around in my head. Why do some people save while others spend every cent they make—and then some? Why is it easier for some people to defer gratification, while others must immediately have it … whatever it is?

It isn’t education or upbringing that makes the difference. Many people who know how to take control of their money, or know that they should, still don’t. It is our values, intentions, and circumstances that together contrive to help or hinder us from achieving the outcomes we want.

Part of the problem is that what we think and say are often different from what we do. We think we’d like to own a home of our own, but we never save a cent for the down payment. We say we want to be secure, but we do little to take care of the what-ifs. We know it’s silly to pay loads of interest on a credit card balance, but we continue to carry that balance.

It also has to do with image. Some people seem to think that their worth is tied to the car they drive, the home they live in, or the clothes they wear. They use money to create the image they want others to see, and then they spend all their energy maintaining the image. Perhaps they want to be seen as generous, so they spend lavishly on children, lovers, family, and friends. Maybe it’s the desire to be seen as successful that drives them to spend more than they make to keep up appearances. Even those with a negative image expend heaps of energy to maintain that image, sometimes without even realizing it. Rather than accepting control of their lives and their money, they continue to play the role of victim, battered by their circumstances. And some people feel guilty or ashamed about money. While they desperately wish they had more, they are resentful of their inability to get it and keep it.

Financial freedom doesn’t begin with making more money. It doesn’t start in a financial planner’s office. And it doesn’t have anything to do with investing to earn a return of 32%. Financial freedom begins in your head. It starts with how you think about yourself and your money. And it starts with understanding how you developed the feelings you have about money. That’s what we’ll talk about next.

1

IDENTIFY YOUR MONEY PERSONALITY

Your attitudes about money play a big part in how you deal with it. For all the savers I have met, there have been as many spenders. For each person who has worried about money, there is someone who avoids dealing with it completely. There are as many risk-takers as there are those who are terrified of losing money. For all the people who believe that money is the key to happiness, there are an equal number who think it leads to misery and corruption.

When I speak to people around the country, the morality of money inevitably comes up. People get all up in arms about what’s right and wrong, about taking the moral high road, and about all sorts of perceptions and misconceptions.

When I tell parents they should be charging adult working children rent, they practically hiss and spit at me. They can’t do that. It’s wrong. Really? More wrong than teaching your child to live on a disposable income she will never again have? More wrong than setting her up to fail when she finally sets out on her own?

When I tell parents to give an allowance tied to nothing, I can see the distrust on their faces as they reply, I don’t want my kids to learn that you can get money for doing nothing. No, it would be far better for them to learn that you have the money so you have the power—and if they don’t do what you tell ‘em, they won’t get any, right? Sure, that’s a much better lesson to teach than simply how to manage money.

When I tell parents to start talking about how much they make, how much they spend, and how they handle their money, they look at me as if I’m insane. They can’t do that. Their kids will blab that stuff and other people will know their business. So the secrets of money management (or the lack thereof) persist, and we pass on to our children absolutely none of our experience, be it positive or negative.

Why are we convinced that any of these issues are moral issues or that money has morality? Does a car have morality, or is it the person behind the wheel who decides not to drive drunk? Can any inanimate object have morality, or is it the onus we put on that object that gives it such human characteristics?

Regardless of the impressions you grew up with, money does not have morality. Money is simply a tool. It is paper and coin, nothing more. To give it human characteristics is to place far more importance on this tool than it deserves.

It bears repeating: money is a tool we use to pay for things we need and want.

HOW DO YOU FEEL ABOUT MONEY?

The key to developing a healthy attitude towards money is to understand why you have the attitudes you do, and then find ways to build on your strengths and minimize your weaknesses. This usually involves taking an inventory and thinking some deep thoughts.

Ready to get started? Let’s go …

Identify the following statements as true or false based on your first reaction to them:

Done? Good. Now consider those statements again and then answer the questions in italics:

Taking control of how you feel about money means asking yourself lots of questions. You need to work through where your attitudes about money came from and what influence your history has on your present. You have to look at your attitudes from all sides to make sure that you have a balanced and healthy perspective on your money. And you need to get real about it. It doesn’t matter how much of it you have or don’t have—if you don’t get a grip on money’s place in your life, you’ll always feel like you’re dangling from the end of a frayed string.

YOUR MONEY PERSONALITY IS WHAT INFLUENCES YOU

The next step in coming to terms with the role money plays in your life is to find out why you feel as you do about it. Some of what we have learned we absorbed by osmosis from those who influenced us as children. Some of our money personality is embedded in our genes. If we remain ignorant of our money styles, if we allow money to be a carrier for our emotions, we remain incapable of seeing it for what it is: a tool.

Read through the following categories and see how many you believe are true. Remember, styles may not be exclusive. And you may have shifted styles as you have moved through different stages in your life. What’s your predominant style now? If you answer True to more than half of the questions in a category, then that money style is part of your personality.

Are You a Miser?

What drives the Miser? It’s not really meanness, although it may appear that way to others. It’s fear: fear of not having enough, fear of being poor, fear of catastrophe. To protect herself, a Miser makes sure she never runs out of money. The best way to have money is to not spend any. She has no confidence in her ability to make more money. She thinks the gravy train is about to end and she’ll be left destitute.

If you’re a Miser, money is a symbol of security. Stop playing out all those worst-case scenarios in your head that make you afraid. If you fear poverty so much that you create it in your daily life, you are living your worst nightmare. Instead of focusing so much on the future, live each day as if you have enough money. Remember, it’s not money that makes you rich. Money is just coin and paper. It is what you choose to do with that money that will determine the richness of your life.

Help Yourself

Make a list of five things you would like to buy for yourself: flowers, books, music, a new blouse, candles. Ask a friend or family member to look at your list and add two things she or he has heard you say you want. For each of the next seven weeks, buy one item on your list.

Make a list of the people closest to you. Beside each name, write one item you know that person wants to buy, or that she or he would enjoy receiving. If you can’t think of anything, write a card and some flowers. Over the next few weeks, buy one of the items on the list each week and present it to your loved one.

Each time a catastrophic image comes into your mind, write it down on a piece of paper. Put it in a box created specifically for this purpose. At the end of each week, take those bits of paper and tear them up, burn them, or bury them in the garden. Destroy one piece of paper at a time, reminding yourself with each one that you will not give up control of your happiness to the Worry Demon.

Are You a Spender?

Some Spenders are trying to create an image. For example, a spender may have an enormous desire to be noticed. She buys designer clothes, jewellery, expensive cars, and luxury items in her desperate attempt to impress and be validated. She may crave approval and preferential treatment, which leaves her vulnerable to any pitch that treats her as special. Or she may enjoy shocking people by being outrageous with her purchases.

Success is important to the image Spender, and she is easily impressed by power and fame. She wants to be a part of the in group, and she is prepared to spend her way in. She may want to be perceived as generous, so she competitively races for the bill and buys the most expensive presents. She’ll go deeply into debt to maintain the façade.

Other Spenders are bargain seekers. They’re in it for the hunt. When this type of spender finds a bargain, she feels victorious. While she can often afford to pay full price, the satisfaction comes from adding up how much she has saved. Paradoxically, she often buys things she doesn’t need simply because the deal was too good to pass up.

Some Spenders are compulsive shoppers. Whether they have $5 or $500 in their wallet, they have to spend it as quickly as possible. After doing so, the bargain-seeking Spender may feel guilty or ashamed that she didn’t handle her money better. She hits the shopper’s low and feels anxious. Despite experiencing buyer’s remorse, she shops again just as wildly. She shops to hide from her misery. She shops for the excitement. She shops to escape loneliness. She shops to enrich her life. She absolutely itches to shop. And because the buying is more important than the having, if you open up her closets, you’ll find clothes with the tags still on them or household items still in their original boxes. She buys not because she needs the item, but to satisfy her urge to shop.

If you’re a Spender, what you have to figure out is what’s pushing your shopping buttons. You are more than the labels you’re wearing, but if that’s all you can think about, you’ve got a bad case of imposter syndrome and need to focus on your insides as much as you do on your outsides. If you’re bargain hunting, then you should be saving your savings to make that bargain really count. And if you’re shopping compulsively, you may need to