My parents had a running joke that 'women made the little decisions'—like how much to spend on groceries, how to raise the kids, and how to spend the family paycheck—and 'men made the big decisions'—like who would be president, whether to stay on the gold standard, and what stocks to buy. But it wasn't a joke, was it? In the post-World War II era, the financial roles of men and women were clearly defined, and women were substantially dependent on the men in their lives—husbands, fathers, and even younger brothers. 'Being a lady' meant that challenging a man about his financial expertise was improper and emasculating. The power imbalance was not just a matter of custom: it was the law in most states.
The repercussions of that culture still haunt many of us today. I can think of two Greatest Generation men who are unwelcome reminders of this old way of thinking:
- Marcella's husband had inherited a large position in a bank stock. With no other investments, the couple had been living off the dividends for years. Her husband wouldn't consider diversifying the holdings because his "Dad believed in the stock, so I do too." He was not a man to be questioned. When he died in 2007, Marcella was finally free to ask for my guidance with what was now her money. We diversified the stock holdings as quickly as we could, but she still lost more than she should have when the financial crisis hit in 2008. If we hadn't taken action when we did, her future would have been particularly grim. Her husband meant well, and he certainly intended to provide for Marcella and their family. He didn't know what he didn't know.
- Jody's husband had invested all of the family's assets in a large brokerage account with Merrill Lynch. The problem: the account was attached to an easy-to-use credit card that required no monthly payments. Charges to the card were added to the margin balance. By the time Jody and her husband met with me, they had built up a margin balance of over $2M—almost half the value of the account. When I showed them a strategy to restructure their investments and spend realistically, Jody’s husband wouldn't hear of it. Seeing that $4M number made him feel rich, even though the real value of the investments was half that, and dwindling fast. He had to do it his way. Last I heard, they had sold their Orange County home and downsized their lifestyle. For Jody's sake, I wish her husband had been willing to get off his high horse before he was knocked off of it.
Luckily, fewer women today are willing to tolerate such one-sided money roles in their relationships. The women I work with now are more educated about their financial challenges, and many are financially independent and confident. More and more, women welcome financial guidance and perspective early on, and they are adept at tying their money decisions to their values. The younger couples I work with have much better financial partnerships. They discuss their goals as equals, work together to paint a picture of what they want their future to look like, and make joint decisions to fulfill that vision. It's a whole new world.
Whether you are an independent woman planning to make it on your own, or you are part of a couple working together toward your financial goals, now is the time to take control of your finances. Here are some steps to get you started:
- Name your values and goals.
The best financial plans are built around real, tangible goals—not just numbers. What is important about money… to you? What does retirement look like… to you? What people or causes matter most… to you? What makes you happy? Your answers are the foundation for your financial life. Not sure of your answers? See Money really can buy happiness!
- Create a budget.
It's the word everyone loves to hate, but budgeting is vital to achieving your goals. A budget helps you understand what you're spending, what you're saving, and if your actions are aligned with your goals. Is your emergency fund funded? Is your retirement fund growing? Are you saving toward goals like education, homeownership, and dream vacations? Are you keeping debt to a minimum? Cash planning is empowering. For more on budgeting, read There's no such thing as an unexpected expense.
- Build your financial freedom.
Financial freedom means being free from worrying about money. The essential step to getting there is to 'pay yourself first' by taking your fixed expenses, taxes, and retirement contributions off the top of every dollar you earn, and then spending the rest. Saving is what you pay yourself—spending is what you pay everyone else. Tilt that equation in your favor, and you'll be on your way toward true financial freedom. Ready to get started? Read Declare your (financial) freedom!
- Track your progress.
One of my favorite exercises with clients is to compare their balance sheet year to year to see how their net worth has changed. Like getting on the scale in the morning, your net worth is the bottom line. In absolute terms, that number is interesting; in comparative terms, it is what really matters. Comparing your net worth today to what it was last year—or ten years ago—reveals the cumulative effect of every little financial decision you made along the way. And it gives you the insights you need to adjust your approach and reach your goals.
- Ask for directions.
Men are famous for avoiding asking for directions, but women are often just as guilty. Your financial success is your responsibility, so take action now to take control of your future—and don't wait for a divorce, the death of your spouse, or some other major transition to force your hand. Recognize what you don't know, and get the guidance you need today. Your future self will thank you!
Most importantly, be willing to learn—and to change. When my first marriage ended (eons ago!), I had no money skills at all. I was suddenly raising two kids on my own, and I had to step up and learn the 'uncommon sense' of money, and fast! Sylvia Porter's Money Book: How to Earn It, Spend It, Save It, Invest It, Borrow It - And Use It to Better Your Life changed my life. It taught me how to begin to build a lifetime of financial security and perhaps even started me on the road to my career as a financial advisor. When it was published in 1975, it was groundbreaking as the first personal finance book for women. It became my bible. Today it is a little dated (it was written before computers!), but it remains a classic that launched a generation of personal finance guides. Wherever you are in life, make a commitment to yourself to continue learning about money. Find your own ‘bible.’ Have the courage to make big changes. And when you're ready to throw on that cape and take your financial life to a whole new level, I'm here to help!