The Mixed Messages That Prevent Women From Enjoying Financial Success
Lois P. Frankel, Ph.D., author of “Nice Girls Don’t Get Rich: 75 Avoidable Mistakes Women Make With Money” shares financial advice for all the stages of your life.
Commitment: Why did you title the book, Nice Girls Don't Get Rich. What does being nice have to do with making mistakes with money? Why don't nice girls get rich?
Lois P. Frankel, Ph.D.: First, it's important for readers to understand that when I refer to being a "nice girl" I really mean being the "nice little girl" many of us were taught to be in childhood. Women cannot act in ways that were appropriate in childhood and expect to achieve their adult goals. Women have a complex relationship with money and wealth because they've been given mixed messages about it.
On the one hand we've been taught to save but on the other hand we're steered toward lower paying jobs such as teaching, nursing, and administrative work.
We're also given messages such as "it's just as easy to marry a rich man as a poor man," implying we won't acquire wealth on our own. Similarly, even in this day and age, too many women believe that eventually they will marry, their husbands will handle the money, and they won't have to worry about portfolios, retirement accounts, etc. These are not equations for getting rich.
Commitment: What are the five most common mistakes most women make when it comes to money?
Dr. Frankel: The most common and critical mistake a woman makes is simply not embracing the idea that she will ever be rich. Most women tell me they just want to be "comfortable." I define rich as having all the money you need to live your life the way you want, free from concerns about money. That may include being comfortable but it also includes acquiring wealth to allow you the lifestyle you desire. Women need to develop a more comfortable relationship with money, investing, and wealth. Becoming rich is as much a state of mind as it is good financial planning.
The second most common mistake a woman makes is not having a financial goal. There isn't a woman reading this right now who doesn't know what she wants the scale to read when she steps on it. That's a number she knows! But the same woman doesn't know how much money she needs to save or invest each month so that she can reach her financial goals. Women need to have a financial target toward which they steadily work.
A huge mistake made by many women is turning over responsibility for their finances to someone else. That someone else could be a husband, partner, financial advisor or parent. Women must remain involved in how their money (or the family's money) is spent, invested, etc. Too many women have found themselves in desperate financial situations because they thought someone else would take better care of them than they would take care of themselves.
Saving, not investing, is common among women -- particularly younger ones. A young woman may be proud that she saves -- and she should be -- but she should also be looking for opportunities to invest wisely. That includes investing in the stock market, buying a home before you get married, and putting the maximum amount possible into your company's 401K plan.
Accumulating credit card debt is another big mistake made by women of all ages. This often happens because a woman doesn't want to tell her children that the family can't afford an expensive item that friends have or because she feels obligated to buy others gifts beyond her means. It may also be that she's in a low-paying job and uses her credit card to supplement her income. Women who carry credit card debt should contact a financial advisor who can help them to develop a plan for paying it off.
Commitment: Right now, many women are experiencing economic problems. What advice do you have for those having money problems during this economic downturn?
Dr. Frankel: There's no doubt that these are tough economic times -- certainly the toughest I've experienced in my lifetime. I advise women to do three things:
Keep saving and working toward your financial goal. It's discouraging to see your accounts dwindle but it's also an excellent time to add bargain stocks to your portfolio. The economy will turn around and you will be ahead of the game if you continue investing wisely.
Use only cash. This is the time to leave those credit cards at home or to use one and charge only an amount you know you can pay off at the end of the month. Paying cash is actually a better idea because it makes you acutely aware of how much you're spending and how much you have left until your next pay check.
Tighten your belt but leave room for a treat now and then. If you're going to continue working toward your financial goals you may have to cut back somewhere else. It won't be the worse thing in the world if you don't go on that dream trip you were planning for 2009. Instead, take a long week-end that's more affordable. Talk to friends about eliminating gift giving and extravagant celebrations. Instead, spend time together over a homecooked meal or taking a long hike.
Commitment: What advice do you have for women just out of college regarding their finances?
Dr. Frankel: Regardless of the state of the economy, now is the time to begin planning your financial future and to get into habits that will serve you well throughout your lifetime. It's just an easy excuse to say you can't save right now because the economy is bad. Be sure to negotiate well for your first salary. Women tend to negotiate for less money than men because they're afraid they'll damage a relationship or that others will see them as greedy.
Research the salary range for jobs in your field and geographic location (www.salary.com is a good place to start) then use it to make a business case for the best salary possible.
Commitment: What advice do you have for mothers who may be living paycheck to paycheck and overwhelmed with the cost of raising kids?
Dr. Frankel: First, if you're a single Mom, make sure you're getting everything you're due from the father of your children. If need be, take him to court (public assistance can help you with this) -- be a good advocate for yourself and your children.
Be honest with your children about what you can and cannot afford. Resist the temptation to charge things that your children beg for but that are outside of your budget.
Eliminate visits to fast food restaurants. After working a long day it's tempting to just stop and pick up some burgers or chicken, but it's expensive and nutritionally void. Plan your meals at the beginning of the week and shop for groceries using internet, circular, or newspaper coupons. If possible, go with friends to warehouse clubs where you can get even deeper discounts but must buy in bulk.
Search garage sales and thrift shops for kids clothing. Kids grow out of their clothing so quickly that buying brand new often doesn't make sense. If garage sales and thrift shops aren't for you talk to friends about clothing swaps as your kids reach various stages of development.
Get paid what you're worth. Right now is not the time to demand a raise if you haven't been given one in the past two years (at least if you want to keep your job), but you can always mention it to HR and determine if there's been an "oversight." Similarly, there's no harm in looking around for a higher paying job or getting the education or certification you need to earn more money in the future.
Commitment: What advice do you have for senior women or women who may be retired or about to retire?
Dr. Frankel: If you haven't retired yet and money is of concern to you, I'd say don't do it now. Just wait a few months to see what happens with the economy. Most retirement portfolios have lost a considerable amount of money and unless you had plenty to spare, you're going to have to replenish at least part of that loss before retiring.
Consider where you'll retire. Some places are more expensive than others. You might not be able to retire at the beach as planned, but another location might work better financially and allow you to retire sooner than later.
Stay the course. Continue investing and recalibrate what you'll have to put in to compensate for losses.
Don't loan money to children or friends. At this stage of your life and in this economy you can't afford to give away money that most likely won't be returned. Repeat after me, "The best gift I can give you is financial independence in my old age, so I can't loan you the money."
Seek part-time jobs geared toward seniors. Upscale senior communities have clubhouses with "concierges," Wal-Mart has greeters, and locations with seasonal activities (skiing, swimming, hiking, etc.) need part-time help for short periods of time.
Commitment: Why do you think so many women end up working too hard, earning too little, and never getting ahead financially? Explain the habits and differences between a woman who always seems to have the money she needs, and those who are always scrambling and having money problems?
Dr. Frankel: As mentioned in #1 above, wealth is as much a mindset as it is astute planning. If you believe you have to work like a dog for every penny you'll ever earn, you will wind up working hard and not getting as far as you might like.
Also, messages from family, peers, and co-workers can play into a woman's viewpoint about money. That's why it's so important to set financial goals, surround yourself with successful people from whom you can learn, and be unapologetic about your desire to live a rich life in all ways.
Commitment: How did you end up a financially secure women?
Dr. Frankel: I took calculated risks and invested in my future. It started when I went back to school to get my doctorate. I knew that working full time and going to school at night would be hard but that it would be an investment in my financial future.
Then when I was in my mid-thirties and had my doctorate, I quit a fairly high paying job to start my own consulting practice. After a few years of working pretty hard I realized I could never get rich by doing all the work myself and that I simply was not charging enough for my services because I was being a "girl." I was afraid if I raised my fees I'd lose business but that didn't prove to be the case.
Similarly, there are a limited number of billable hours in the day and I wanted more time for myself and my family. So I put together a company that consists of select subcontractors that I use for consulting engagements and hired other staff that I needed to grow my business.
I took risks along the way and although some didn't work out, more of them did. That gave me the confidence to continue taking calculated risks and devising ways to increase revenues.
I also chose to live below my means, opting instead to invest for the future. Like everyone else I'm concerned about the declining economy but my company continues to be profitable and I pick and choose the work I actually want to do because it's interesting to me -- not because I have to do it for financial reasons.
Commitment: What advice do you have for mothers who want to raise daughters who know how to get and keep themselves financially stable and thriving?
Dr. Frankel: Enroll them in all girls schools. Graduates of all girls schools have more confidence and are more likely to be successful than girls who attend co-ed schools.
Teach girls about money at a very young age. As soon as they can grasp the concept of money give them an allowance and show them how a portion is put into savings, a portion is given to those less fortunate, and a portion can be used for spending. Resist the inclination to give them more money when their allowance has been used up.
Enroll girls in self-defense classes. It's not only so that they can protect themselves physically, but because being physically capable translates into being self-confident.
Be a good role model. Your daughters will emulate your behavior. If you allow others to take advantage of you, spend more than you have, or in other ways act less than confident, then you daughters will think this is how adult women are supposed to behave.
Honor your daughters natural inclinations. Self-confidence stems from doing what we enjoy and have a propensity toward. A great book for learning about your child's preferences is Nurture by Nature by Tieger and Tieger.
Commitment: How can a women avoid a financial disaster during divorce?
Dr. Frankel: Being involved in the family finances BEFORE any sign of marital trouble helps to protect you in the event of divorce.
Get the best attorney you can afford -- don't try to work it out on your own particularly if you're not knowledgeable about the family finances.
Don't try to be a "nice girl." Be real. It's a divorce. It's bad karma to take someone to the cleaners just because you're getting a divorce but to not be an advocate for yourself or your children is just plain stupid. Now is the time to grow up and admit money does matter and your future depends on getting your fair share.
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Dr. Lois Frankel is the author of the New York Times bestsellers Nice Girls Don't Get Rich and Nice Girls Don't Get the Corner Office. For over twenty years she has headed the Pasadena, California consulting firm that she founded, Corporate Coaching International, and is a popular conference and keynote speaker. To learn more about her and to take advantage of the free resources she provides on-line visit her websites www.drloisfrankel.com and http://www.corporatecoachingintl.com
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