Mind Over Money: 5 Steps to Build Your Financial Confidence
STEP 3: Get educated.
"A lot of times women think they are supposed to know through some kind of osmosis what they should do with their money," says Gail MarksJarvis, financial columnist for the Chicago Tribune and author of Saving for Retirement Without Living Like a Pauper or Winning the Lottery. "I find that really laughable. The reason we know how to cross the street without getting hit by a car is because at some point when we were young, someone told us that a green light means go and a red light means stop."
Most of us never got that kind of financial coaching. As my friend Emily puts it, "I realized at a certain point that I had never learned a lot of fundamentals: what a money market account is, when it makes sense to have savings bonds, those kinds of things." Indeed, they teach geometry in high school (for all those occasions when you need to figure out the area under a bridge) but not basic financial management. So you have to study it on your own.
Whatever information you're seeking (financial terminology, getting out of debt, retirement accounts), go slowly and set reasonable goals. Translation: It's boring, so take it one step at a time. Mellan recommends spending an hour a week improving your financial IQ: Read a simple book, ask questions of a trusted friend, find a financial adviser (a recommendation of almost every money expert I talked to), or research a topic online. "Do something to make yourself feel more empowered," she says. And ditch the perfectionism. "Women don't think they're good at something unless they know everything," says Mellan. "They're afraid to make mistakes." That attitude can be crippling. "Rather than being afraid of making a mistake with, say, a 401(k), realize that avoidance is a mistake in itself," says MarksJarvis.
Dychtwald recommends signing up for a money-management class with your mother, daughter, sister, or friend. Chances are she could use the financial education, too, and it makes for a terrific bonding opportunity. Or seek advice from coworkers, since they're likely to be in the same financial boat. Remember, talking about money is not crass, and believing that your finances will sort themselves out while you're sleeping is magical thinking: It makes for great novels but poor financial planning. Information is your friend. You know the stereotype -- that men will drive in circles while women will actually stop and ask directions? Exactly.
STEP 4: Take charge.
Even if you're lucky enough to have a Prince Charming at home who figures out everything and gallops up on his stallion to hand you wads of cash, you should cultivate and use your financial knowledge. For one thing, sharing fiscal responsibility is part of being a healthy couple. "When two partners are equally invested in family and career, it really changes the game," says Dychtwald. Besides, the hard truth is that we will probably need to do this stuff on our own at some point. At the risk of pointing out the obvious, nearly half of first marriages end in divorce, and women have longer life expectancies than men do. "When we asked women over the age of 50 if they had one piece of advice to give to younger women," Dychtwald reports, "it was to learn to be financially independent."
STEP 5: Recognize what you're doing right. Just because a financial adviser wouldn't recommend your methods doesn't mean they're wrong. Does your system actually work for you? Then stick with it. For me, that means organizing my giant shopping bag of freelance receipts only at tax time because I can't bear for it to be a part of my daily life. For my friend Emily it means consciously donating a bit more than she can afford to charitable organizations because that investment in the world makes her feel rich with hope. For you it might mean enjoying a daily latte, even though experts are fond of saying that if you invested that money you could become a millionaire. Maybe you could, but you'd be a cranky caffeine-deprived millionaire with a wicked decades-long craving. Smart financial decisions may appear quirky to others, but you don't have to change who you are in order to be more financially adept.
Your current skills and perspective may actually enhance your money-management abilities. So hunker down, study up, and move forward. Financial confidence doesn't mean you'll be scouting stock tips, investing billions, and debating Roth IRAs at dinner parties. It just means you'll be you -- getting information you need to have the relationship with money you want.
In attempting to reach that goal I've consulted friends about their financial advisers, asked coworkers about saving for college and returned to my Dummies book to read one chapter a week. To my surprise, it's not as complicated as I thought. In fact, now I can explain to Ben that, yes indeed, he'd need a 10 percent interest rate to have $110 at the end of a year. I don't show off by explaining that, at the end of two years, compound interest would mean that he'd have $121. But I could.