Category Archives: Think

Getting Finances in Order is Imperative for Women

Why Getting Your Financial House in Order is Even More Important for Women

“Women with money and women in power are two uncomfortable ideas in our society.”
–Candace Bushnell

As a financial planner, I was pretty adamant when I had couples as clients that they both participated in at least the initial kickoff session. After that, if one of the two said that they were fine with not being involved going forward, then that was acceptable to me, although I always gave the non-participating spouse a one-page “to do” list if the participating spouse ever got hit by the beer truck, and got a premature opportunity to find out what was on the other side. (Besides the stories that John Edward used to tell people about their loved ones talking to them through him.)

Maybe it was because I am a male or because there was a selection bias that occurred in the types of couples that I drew as clients, but there were certainly a few instances where the wife was the one who said that her husband made the financial decisions, and she was fine with it.

Note: I’m not including same sex couples in this analysis because if you’re a same sex couple, you both face the same gender-specific issues, whereas an opposite sex couple means that the female has different financial needs than the male.

Horses. Water. No drinking.

It was frustrating to me to see this situation because, like it or not, the women are much more likely to have to deal with and pick up the pieces when the husband passes away. I’ll explain more about this later.

The husband-as-lead scenario didn’t happen terribly often in my practice, maybe 20-25% of the time, but it certainly happened enough that I had a standard response to it.

The statistics about women participating in household financial decisions are mixed. A 2008 Pew Trust survey showed that families believe women make more decisions 43% of the time, whereas they divide decisions equally 31% of the time, and the man makes more 26% of the time.

But, in the same survey, the perceptions about who managed the money in the household differed between men and women. 45% of women said that they managed money in the household and 23% of women said that their spouse managed the money; however, 37% of men said that they managed the money and 30% of men said that their spouse managed the money.

On the flip side, a 2013 Fidelity survey reported that only 24% of women said that they took responsibility for day-to-day financial decisions.

Regardless of whose numbers you believe, there are a significant number of women who are punting the decisions on household finances to their spouses.

I’ll throw one more statistic to show some numerical and financial disparity.

In 2010, the RAND Corporation conducted a study relating the numeracy (math skills) of household members to overall household wealth.

The scores were scaled from 0 (the worst score) to 3 (the best score). When both spouses got a 0 on the test, the average household wealth was $200,000. When both spouses got the highest possible score, the average household wealth was $1,700,000 – 8.5 times higher than the 0/0 pairing.

According to the survey, men were more responsible for the finances than the women, with men in charge 62% of the time.

In cases where there was a 10 year or more age difference where the man was older, and the man was age 70 or older, the man made the decisions 82% of the time. This was the case, even though studies show that cognitive decline can start as early as age 60, and that math is the first skill to go.

What’s even worse, according to the RAND study, is that households where the man scored 0 on the test had him making the financial decisions 50% of the time!

How does this impact family wealth and financial well-being? Let’s look at couples who had one member score 0 and another member score 2. There were less than 20 0/3 couples out of 1,200, so there wasn’t enough data to draw conclusions.

In cases where the 0 scoring spouse led the family finances, the average wealth was $548,500. In the cases where the 2 scoring spouse led the family finances, the average wealth was $684,500, meaning that if the 2 scoring spouse took the reins, the average wealth was $136,000 higher.

More broadly speaking, when the less numerate spouse made decisions, the financial wealth of those couples was 14.7% less than households where the spouses were equally numerate.

But Wait! There’s More!

Adhering to traditionalist values, particularly when the financial decision-maker isn’t the mathlete (that’s a word…trust me!) is really harmful to your long-term nest egg’s health.

However, that’s not the only issue that causes women to come out on the short end of the stick when they don’t take part in the financial decisions.

On Average, Women Earn Less Than Men Over Their Careers

This quotation from Catalyst sums it up:

“No matter what their race/ethnicity, age, occupation, or education, all women are impacted by the gender wage gap.”

The Catalyst study finds that, on average, in 2013, women earned 78% of what men earned in income.

Let’s assume that you have a man and a woman starting out in their careers at age 25. The man earns $100,000, and the woman earns $78,000. Each saves 15% of their income, gets 7% return on their investments, and gets a 3% payraise every year.

How much will each have at the end of the year at age 60?

The man will have $3,154,916.

The woman will have $2,460,834.

Those differences add up over time. It’s a 28.2% difference over 30 years for the man.

Not only is this a problem when a woman is in her working career trying to save up, it’s a problem when she’s retired, too, because…

Women Live Longer Than Men

A woman who is 25 years old today can expect to live about 4.3 years more than a man who is 25 years old today.

So, just from a pure actuarial standpoint, women have a longer retirement to plan for. They can either work longer (which stinks if your husband is already retired) or plan so that they have enough assets to carry on when they, statistically speaking, outlive their spouse.

However, that would only be true if you married someone your age.

The average age difference for a heterosexual couple is 2.3 years, meaning that men are usually 2.3 years older than the women they marry.

So, women should plan on living between 6.5 and 7 years longer than their male spouses.

Most retirement projections from financial planners basically assume a 30 year joint retirement.

That’d be great if the female spouse was about 6.6 years older than her husband, but as we saw above, that rarely happens.

On average, a woman has to make the financial decisions for 6 ½ to 7 years without her spouse, whether she wants to participate or not. Plus, she has to make those decisions when she’s likely cognitively impaired and, therefore, susceptible to making the wrong moves.

Ladies, that’s not a position you want to be in, I can assure you! How many of you have heard the anecdotes of the widow who doesn’t even know how to balance the checkbook?

I’m sure you’re not in that position because you’re Frugal Femmes, but even then, you need to be actively participating in the financial decisions, from budgeting to investing to insurance to estate planning.

Budgeting

I’m not really going to go into the nuts and bolts of budgeting here; you can swing a dead cat at the Internet and find budgeting articles.

However, you do need to make sure that you’re setting aside enough money each month to save for your retirement.

We calculate the number such that the youngest spouse lives to be 100. There is a less than 1% chance that both spouses will be alive at that point, but you do not want to run out of money on your 99th birthday. That’s about the worst possible scenario you could face if you’re alive at that point.

I like the anti-budget. Figure out how much you need to save and then work backwards from there.

Investing

Again, I am not going to tell you what to invest in. In general, invest in low-cost indexed funds for most of your investments. Don’t try to swing for the fences lest you fall prey to the myriad behavioral biases that make the average investor a chump compared to market averages.

The rule of thumb that we use is for asset allocation – 100 – the age of the younger spouse for equities and the rest for fixed income. Easy peasy. Rebalance. Use proper asset allocation. Don’t follow the herd and try to figure out what the market is doing from what Jim Cramer prognosticates.

You do need to know what you’re invested in and why you’re invested in it so that if you have to be the one to start making the investment decisions, you’re fully aware of the game plan so that you can continue to execute it.

Insurance

The reason you buy insurance is to protect yourself against an unexpected event. You do it with your house in the hopes it doesn’t burn down. You do it with your car in the hopes that you’re never in an accident that is your fault. The same holds true for both life and disability insurance.

By the way, repeat after me (loudly, preferably if you’re reading this from a Starbucks):

INSURANCE IS NOT AN INVESTMENT. IT IS INSURANCE!

Yes, there are a few exceptions to this rule, but they are few and far between.

So, in this case, you want insurance in the event that you need to replace your spouse’s income, either from getting hit by the beer truck and finding out what’s on the other side (life insurance) or from getting hit by the beer truck and not being able to go back to work for long periods of time (which happens more often than you’d expect it to).

Estate Planning

This can be a touchy subject, particularly if you have a blended family. Remember, if your spouse passes away, you still have to look out for Number One (the person you see in the mirror).

You want to make sure that you have your documents together and affairs in order, to include not only a will, but other documents like advanced medical directives and do not resuscitate orders (if either of you doesn’t wish to be resuscitated in the event of an unlikely recovery).

It’s painful to go through. You’re forced to face your own and your spouse’s mortality in a way that no other event, aside from the death or disability of someone close to you forces you to do.

But do it anyway. You owe it to yourself and you owe it to your spouse to go through the planning process and make sure that you both understand each other’s wishes.

I’m Convinced! What Do I Do?

This list is not a comprehensive list, but a starting point for discussions with your spouse.

  • Know what the target number is for you to ensure you run out of heartbeats before you run out of money. That’s the amount that your nest egg has to be so that you can continue your desired standard of living in retirement without running out of money. Sure, the ideal is to spend your last cent (minus what you’d like to leave to kids/other benefactors, although I argue you should give that away while you’re alive so that you get to enjoy the act of giving) right as the old ticker gives way, but trying to achieve that, except through the use of low commission annuities, is impractical.
  • Know what you need to save each month/year in order to hit that target number. This is the starting point for your anti-budget. How you spend beyond that is a decision between you and your spouse.
  • Negotiate your salary. Only 16% of women negotiate their salaries, and only 15% believe that they are effective negotiators. What are most pay raises based on? Your current salary. That compounds over time. So, do everything you can to get your baseline as high as possible!
  • At least do a “fly-by” review of the monthly budget. You don’t have to get into the line item details, but you should have a general idea of where the money is going and how it’s being spent just in case you have to pick up the responsibility in the future.
  • Know where the accounts are. All you have to do is maintain a list of accounts by institution so if you need to access that list, it’s readily available.
  • Make sure that you’re both properly insured. Do a review. Find out your numbers of how much insurance you need. Get it. Don’t avoid the situation, put your head in the sand, or think “this could never happen to me.” Invariably, the unexpected happens more often to those who don’t expect the unexpected (though I have NO statistics to back that up!).
  • Update the beneficiaries for your insurance (you should be the first for your spouse’s insurance and vice versa) and the Payable On Death recipient on accounts. This will help you avoid a ton of inconvenience and wait if the worst case scenario hits.
  • Plan what you will do in the event your spouse can no longer manage the money, if you decide to delegate. It’s OK to not be a super active participant in the day-to-day finances (unless you’re the math smart one, in which case, you should manage), but you also need to have a contingency plan for the statistically inevitable.

Personal finance, in general, should not be a lot of work on a month-to-month or even a year-to-year basis. Set a plan and execute it.

Even if you don’t want to be involved in the nuts and bolts, if you’re a woman, you’re, in all probability, going to have to be the one to handle the day-to-day finances at some point. Make sure that you’re prepared for that day so that, if it comes, you know what to do and do not get taken advantage of.

Jason Hull, CFP®, is the CTO of the online, comprehensive financial planning service myFinancialAnswers. He is an Army veteran, earned a BS in Engineering from the United States Military Academy at West Point, and earned a MBA from the University of Virginia’s Darden Graduate School of Business.

This post is a part of Women’s Money Week. If you want to join us, you can do so here. Please tag this post with #WMWeek17 when sharing on social media.

Free Rides Home to Prevent Drunk Driving

Sending this to my friends---free rides to prevent drunk driving!

I had an interesting conversation with my Japanese friend while she was visiting. We were driving through an area laden with bars and night life.  Which can be a fun area if drinking is what you’re there for.

But that wasn’t what we were there for, and it got us talking about drunk driving. I related the lives I’ve known that have been lost to the horrible mistakes of both themselves and others while under the influence and behind the wheel. I lamented the lack of consequences for those who do drink and drive.

She looked shocked. “It is not like that in Japan. If I did that, my father would lose his job.”

Hell, yes, Japan.

Costs of Drunk Driving

Our system is way too lenient. But that doesn’t mean there are no consequences. Here’s some of what you face if you do drive drunk:

  • A night in jail.
  • Bail money.
  • A fine.  And a big one. They get bigger the more offenses you have, but the first one is nothing to laugh at.
  • Possibly extra time in jail. Upwards of six months.
  • A misdemeanor on your record.
  • Might have to attend AA.

Honestly, a DUI with its accompanying consequences would be good news. The fact that the cops caught you means that they got your drunk butt off the street, preventing you from killing someone else.  Or yourself.

Free Rides Home When You’re Drunk

Believe it or not, there are quite a few ways to get a free ride home when you’re drunk–especially on major holidays. Here are some of the best:

Cheap and Frugal Alternatives to Driving Drunk

Maybe you can’t get a free ride home, but you can use one of these options instead. Every single one of them is a heck of a lot cheaper than a DUI:

  • Public Tranport– This one is best if you plan to use it before you leave. On New Year’s and other holidays, cities usually leave their public transport open much later than usual so you won’t have to drive at all.
  • Sober Rides– AAA has created a compilation of programs across the country that offer DD services. They do charge a fee, but most of them not only drive you home, but also send a second driver out to get your car home, too. Check them out here.
  • Tell Siri you’re drunk. She’ll immediately offer to call a cab for you.

Cheaper Than a Funeral

Even if you pay for a super long, super overpriced taxi fare and get your car towed, the costs will still be less than that of the average funeral: $7,000. And that’s if only one person dies at your hands, not including additional damages awarded in the sure-to-happen law suit and the deep, painful remorse you’ll experience for the rest of your life.

It’s okay to have fun–as long as you’re responsible.

I hope everyone has fun tomorrow night–truly!

But I hope even more that you’ll do so responsibly. 2016 has sucked enough.

 

 

 

*This post does contain referral links. While they will provide me with credit, they’re the only way I known to get you a free ride—which is the entire point!*

Stranger in My Native Land: Asian American Money

Today, Revanche of A Gai Shan Life  joins us for our weekly Friday series on women’s money issues in honor of Women’s Money Week, which will take place January 1-7, 2017. Revanche covers the xenophobia and racism she has encountered in her lifetime as it pertains to her finances as an Asian-American woman.

Please use the hashtag #WMWeek17 when sharing this story.

I never would have thought of the ways that prejudice can make Asian-American women feel like strangers in their native country--especially financially.

Stranger in a Strange Land: My Native Country

As a first generation American, I see my home country through different eyes than most. Not because I don’t consider myself American. Of course I am, as much as anyone who isn’t a First Nation native can be – I was born here, a natural citizen.

But I have dark eyes, dark hair, dark skin and no nose bridge to speak of, so the correct answer to “where are you from?” can be Japan, The Philippines, China, Cambodia–anywhere but here. California, or Los Angeles, are unacceptable answers. I can’t be from here. I’m not white.

Why does this matter? In some cases, it makes no difference. What harm do I suffer if the cabbie wonders if I’m from that one country he visited, or the other country whose cuisine he likes?

None.

In most other cases, however, it matters a great deal, indeed.

The Financial Costs of Being a Target

It matters when you’re a target to profit from, based on your race. I saw this play out most immediately with Mom and had to get involved at a very early age. Her accent meant that vendors would dismiss her, disregard their own policies, overcharge, and fail to deliver. She had an accent and that made her stupid and unimportant, they decided.

Angry and frustrated sitting beside her listening in to one such conversation, I got on the phone, all of 9 years old but speaking in English unaccented, demanding that they honor the agreed-upon terms. Magically their inability to do so melted away. From then on, I made the phone calls, whether to renegotiate contracts, dispute billing errors or just to get simple information.

Being an Asian-American Woman in the Workplace

It matters when you hear and understand anti-immigrant rhetoric–when you realize that white or European immigrants are now acceptable, but the people who look like me or my friends are “immigrants taking the good jobs.” No matter that I’ve been a star in the workplace since I was 17; to those people, my race and my skin color define me, not my professionalism, work ethic or performance.

As Taylor pointed out, it’s tough enough to make it in the workplace as a woman with the wage gap. As a woman of color, racial stereotypes further impacts your ability to earn a living. So it matters a great deal when employers and colleagues consider you a “minority quota hire” on sight.

It matters when your first manager has a (well-known, internally) obsession with Asian women so his hires were dismissed as objects of his obsession. Work performance made no difference; they couldn’t earn raises or promotions because they were hired based on their appearance–nothing more–so far as the management was concerned.

A Long Way to Go to Eradicate Racism, Xenophobia and Prejudice

Twenty years later, the racism we face is still astonishing. Not more than a year ago, we were calling a mechanic’s shop regarding services and the shop owner declared he wouldn’t help people with accents. We don’t have accents, but he was suspicious and wanted to be sure, you see, that he wouldn’t have to deal with a lesser form of American. “Those people”, he calls them.

My white friends rallied to the cause, of course, offering to call him with their Canadian, British, Australian, and Scottish accents.

My perceived youth, completely normal for an Asian, still comes up when my performance is evaluated, more than my results. I still have to jump through more hoops than any other manager to ensure that I’m being taken seriously as a professional because my years aren’t worn on my face.

I am always mindful of the active racism that lingers in many fellow citizens when I look out for our money. I always get a second and third quote for services.

I’m not bitter about my particular journey, but I am frustrated that this is all old hat. I’m frustrated that my child will also be held up to a standard that takes into consideration zir racial appearance first, zir skills and results second–or last.

It’s not just Asian Americans

Despite all the barriers I’ve faced, the level of racism that I encounter on a daily basis is mild. Asians are the “model minority” so we don’t come in for the same degree of hate that other non-white minorities experience. We’re dismissed, demeaned, underestimated. But we’re considered harmless in the end. If you’re Hispanic or black, you always have to appear calm and collected, otherwise you’re a harridan or an angry Black woman.

I don’t have to imagine what it’s like to be them, I hear their stories and, to this day, I can only shake my head when people declare that we’re post-racism. The recent election, and the surge in hate for Jews and minorities since, clearly points up the fact that many Americans are in favor of racism.

Racism isn’t limited to the white residents of this country, of course, I’ve witnessed racism between non-white races, towards one another, and that also contributes to the wider harms done to our fellow citizens.

Xenophobia and racism are complex issues in this country and it’s critical to know that they are both present in the structure of this country.

It’s critical to know that people who object to hiring for diversity, stating they shouldn’t have to “lower standards,” are telling us what they believe: only a heterosexual white male can meet standards because that is the standard. Not skills, not experience, but race and sex. Anyone else, therefore, is naturally lowering the standard.

It’s critical to know that minority, women, disabled, LGBTQIA, any otherwise not standard issue white male candidates do indeed have the necessary talents and skills necessary to do the job. It’s our job to remove artificial barriers to finding them when you recruit new hires.

It’s critical to know that we have to actively dismantle our biases that point to hiring the people who look the same or fit the same “culture”, that manages to consistently avoid admitting minorities beyond the token woman, or token Asian, or token Black man, that consistently builds and maintains racist structures in which managers can refer to their colleagues as racial slurs.

These are complex issues. I can hardly do them justice here, but they’re worthwhile to tackle.

This country was built on the bones of Natives, with the blood of immigrants, and we must grow beyond what and where we are.

We have to start somewhere. We can’t avoid it simply because we aren’t able to solve it overnight.

Rockstar Community Fund Gives Diapers to New Moms

This is so cool! The Rockstar Community Fund gave diapers to new moms in Pittsburgh---want to join so I can bring this to my own community next month!

When I was a new mom, I was broker than broke. There was very little money coming into our household, and that makes it hard to get by, even if you’re managing the cash you do have real well.

After ushering that little human being out of my womb, I learned some humility and got on some assistance programs. One of those programs was WIC, and it literally allowed us to sustain our children during those first few years.

While I was breastfeeding, they provided me with the nutrition I needed to produce healthy milk.

When I found out I was expecting again, my milk dried up and they provided the formula needed to get my kiddo to the next step.

As my kids got a little older, we didn’t have to stress about affording healthy foods, baby or otherwise, because this program exists.

Our WIC Office and the FREE Table

The closest WIC office to us is about a neighborhood and a half over. It’s not a great area. At one point there was some type of violence that happened there–they were very hush hush about it, but they did install an intercom system so they could start buzzing people in and keep everyone safe.

Most of the people I knew in my neighborhood would drive far away to go to an office in a more desirable locale, but this place was close and convenient, so we stuck with it.

The waiting room was shared with an OBGYN’s practice. Pre-ACA, this was one of those places that the pregnancy version of Medicaid automatically assigned women to. I was assigned there, but I called and switched to my own doctor. Before the days of expanded Medicaid, a lot of these women didn’t have an opportunity to regularly see an OBGYN, so they might not have had their own doctors.

That meant that a lot of the pregnant ladies and mothers of young children that frequented the waiting room didn’t have a lot. As a result, a community “FREE” table was born. We’d all bring in clothes our little ones  had grown out of. Occasionally there would be books or toys thrown into the mix. Anyone could take anything that they wanted or needed.

Continued Donations and the Rockstar Community Fund

Since we’ve moved off of the program, I still take our “donations” there over Goodwill or something of the like. I might not get to write them off come tax time, but I know they’re going directly to people in my own community who really need them.

I was particularly proud of my kids this year. We always do an annual toy clear out before Christmas, but it’s usually after the children are in bed. Because melt-downs are no fun.

This year they were old enough to grasp the concept of charity and giving, and picked out some of their favorite toys to give to kids who might not have as much as they do.

As I was gathering up our latest haul to take over to the WIC office, J. Money let me know that the Rockstar Community Fund was kicking off. They were giving out fifty $20 VISA gift cards for people to do good in their local communities.

Rockstar Community Fund VISA Gift Card

The card–and the letter it wrote to me. 🙂

I immediately thought of what I needed back in the days when I visited the WIC office myself. Food was pretty much covered through assistance programs. Clothes and toys could be found at FREE tables.

But my biggest expense was always diapers. There was virtually no where to get help paying for them (as far as I am/was aware,) and they are freaking expensive.

When my card came in the mail, I looked for sales, picked up a box at the store and took it in with the most recent batch of toys and clothes. The office was virtually empty when I visited, but I know when some new mom realized that it was a box of diapers and not just a bunch of clothes in a diaper box, they were going to be as excited as all get out.

Diapers on their way to new moms from the Rockstar Community Fund

Getting Involved in the Rockstar Community

Giving diapers to new moms isn’t the only good the Rockstar Community Fund did this December. Mine was just one card out of fifty. Poke around the personal finance community to find more examples of positivity the project has perpetrated.

December isn’t the only month this will be happening, either. It will be happening again in the same format come January. If you’d like to get involved yourself, check out the Rockstar Community Fund page.

Lived Experience, Bravery and Fear

Today, Taylor of The Freedom from Money  joins us for our weekly Friday series on women’s money issues in honor of Women’s Money Week, which will take place January 1-7, 2017. Taylor’s story reminds us that financial decisions aren’t always about math—there’s a lot more to life than numeric calculations.

Please use the hashtag #WMWeek17 when sharing this story.

Wow, I love how she shares her experience as an LGBTQ+ woman through the lens of lived experience.

When I think about my relationship with money, there are a lot of things that come to mind—my relationship with my parents, feelings about myself and what I “deserve,” my career path and the people I love. What I don’t often think about, though, is the fact that I’m in a same-sex relationship.

But the truth is that it’s all connected. Who we are—our family, our history, our relationships and our health all interconnect with our money. In some ways, they are irrevocably combined. But despite the interconnectivity, there are some things that are impossible to quantify or explain with numbers.

Personal Finances as a Woman in a Same-Sex Relationship

According to the statistics I can tell you that my partner and I will each earn $1 million less than our male counterparts. I can also tell you that because we are in a relationship with each other (two women,) the gender wage gap will doubly affect us and we will not be able to “earn” back part of the difference in pay from a male partner.

I can also tell you that even though it’s cheaper, it often feels (and actually is) more difficult and unsafe to live in a small, rural town when you’re gay. My $1500 one-bedroom apartment in Southern California would cost me $470 in Wichita, Kansas and $750 in Louisville, Kentucky.

But what I can’t adequately tell you is what it’s like to be stared at and jeered at when you walk down the street with the person you love. I can’t explain what it’s like to be fearful that your relationship status could cost you your job. I can’t assign a value to those experiences and worries.

Making Choices Contextualized by Lived Experience

In many ways, it is impossible to quantify the experience of being gay.

It’s an experience that I’ve struggled to write about because I’m not sure what to say. It’s not an experience that I chose, but it’s one that I live. In the same way that I can’t control where I was born or how I look, I can’t control who I fall in love with, but it’s a part of my life nonetheless.

My relationship is a beautiful part of my life that brings me more joy than is possible to explain, but it comes with a financial price. It comes with strategic choices about what to mention to colleagues, which neighborhoods are accepting and what cities would be welcoming to our future children.

But these financial choices aren’t based in numbers or facts. They are based on lived experience, bravery and fears.

And sometimes, those are the most important financial concepts to talk about…even if you’re not exactly sure what to say.

 

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