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Chapter One
You Can Do It!
You Have What It Takes to Achieve Financial
Freedom!
If you are like me, you have many roles. You may be wife, mother, career person, and any number of other roles, in each of these roles, women are consistently proving themselves to be equal to or better than their male counterparts.
With so much to their credit, why do women so often rely on men to take care of their finances? Why are men more likely to have the responsibility for the household budget, retirement planning, and insurance purchases? In previous generations, we could point to our husbands' or brothers' greater experience and education, but that is no longer a sufficient explanation.
The answer lies in our confidence rather than our ability . Although men generally do not have any more knowledge of financial planning, women have less confidence in their ability to make correct decisions when they are not completely versed in the subject. Studies of male-female differences in decision-making styles have shown that this gender difference holds true in other areas as well. Female students are less likely to ask questions in class for fear of saying something wrong. In business meetings, men will express strong opinions on topics they know very little about, whereas women will reserve judgment until they have had time to read supporting materials.
So why do I say that you have what it takes to achieve financial freedom--and to be financially successful? Because taking charge of your finances is not rocket science. Your success in your prior endeavors, whether those endeavors are managing your children, running a household, or running an office, proves that you have the basic intelligence to succeed at finance as well.
However, it is likely that you lack two components that are necessary to your financial success. You probably don't have the fundamental knowledge about financial planning and, being a busy woman, you probably don't have very much time in which to learn it.
Financial Knowledge: You Probably Don't Have Enough of It--Yet
Women commonly express concern that they don't know enough about their finances. The fact that you are reading this book indicates that you probably have similar feelings. This is nothing to be embarrassed about. Unfortunately, our educational system has never placed a high priority on teaching personal financial planning. Some high schools are now including a few of the basics in their curricula; I applaud this, but high school may be too early for most students to see the relevance of this material. In college curricula, financial planning is often an elective course, and, even for finance majors, some subjects such as insurance and retirement planning may not be covered at all. At Colorado State University, where I am a member of the finance faculty, I teach a survey course in risk management and insurance, but it is one of several electives that finance majors can opt for.
So where did all those people out there who are successfully handling their own finances get this knowledge? Most of them figured it out for themselves or turned to professionals for advice. In this book, I give you the tools to figure it out yourself, but I also recommend that you consult with professionals for specific tasks that require specialized expertise. Using professionals for certain tasks is an important, although not always a necessary, component of financial planning. The problem with hiring experts is that you need to know enough to tell them what you want and to judge whether they are doing a good job. And, too often, those who are holding themselves out as experts are also trying to sell you something at the same time, whether it be financial advice or a particular financial product. Turning over your financial problems to others costs you money and results in some loss of control, so having a little knowledge up front is essential.
Time: You Probably Don't Have Enough of It
A second problem you may be familiar with is lack of time. Whether you are a single career woman, a homemaker, or a working mother, it is an established fact that women have fewer "leftover" hours (or minutes) in the day than men have. In fact, studies have shown that, on average, working women spend twice as much time doing child-related and household chores as their husbands, even when they work equivalent hours outside the home.
Here's what my typical weekday is like (which should sound familiar to other working mothers): Up at 5:30 A.M. to feed the pets, wake up my two high-school-aged sons, and make sure they have their homework and any essentials they need for after-school activities. By 6:00 A.M., I'm in the shower; I have a precious half-hour to shower, dress, and apply a little makeup (sometimes I don't make it to the last step). Out the door at 6:35. Drop the kids at school and arrive at work around 7:20. My work schedule sometimes involves evenings, but typically I am home by 6 P.M., unless I have to stop for groceries on the way. Then it's time to make dinner, except on the rare days when I can enlist more than just "help" from my husband and sons. Of course, I also need to police the clarinet and saxophone practice, check math problems, read rough drafts of language assignments, etc. The boys are usually in bed by 9:30, so that's when I can finally put my feet up.
Does this sound familiar? Does the illustration below remind you of yourself? Women who don't have children usually aren't much better off because they typically put more effort into their jobs. Many women are choosing to put off motherhood in order to establish their careers first. Their work may extend into the evening hours or involve extensive travel. Or they may have additional obligations at church or volunteer work that takes up their time. Single women are also likely to have time commitments to relationships or dating.
Are you thinking that maybe it's a fair trade to allow the men to take care of the finances? The problem with this philosophy is that it makes women dependent when they should be independent. Most married women will someday be widows, given women's longer life expectancy. And it is still an unfortunate truth that many marriages end in divorce. You can't afford not to understand your finances. You can't afford not to allocate the time to this important task. So where's the time for dealing with your finances going to come from? Frankly, it doesn't take much. You will need to efficiently allocate a few extra hours to work through this book. Happily, the end result will be worth it. Once your financial plan is in place, it won't require a lot of upkeep and you will be able to sleep better knowing that you have taken care of your financial needs.
It's Not Because You Can't Do It
Some women say that the reason they don't have control of their finances is that they just aren't that interested. I've even seen studies that suggest that women are somehow less capable in finance. I don't buy this. I have been teaching finance for many years and, although I will agree that women make up a smaller percentage of our majors, they tend to do just as well as the men in our courses. Women are just as capable of doing a good job of handling their finances as men are. If anything, women tend to be more organized and detail-oriented than men, which aids in the process of decision making.
It is well established that people tend to like things that they feel more knowledgeable about. No one likes to feel stupid. There's nothing more frustrating to me than being at a social function and having the conversation turn to football. Everything I know (or want to know) about the game could be summarized in a paragraph. For some people, the same thing happens when the conversation turns to financial issues. And people who are successfully managing their investments love to talk about them! (You should always keep in mind that they never tell you about all the mistakes they have made along the way.)
My reason for writing this book is that I think there are a lot of women with similar problems. First, women don't have sufficient understanding of finance to feel confident in making decisions in this area. Second, women don't have very much time to devote to learning about or managing their finances. I think that most of you will agree with me when I say that men do not face the same constraints that women face in these areas. For whatever reason, men tend to have greater knowledge of their finances and more leftover time to deal with them.
So How Can You Do It All?
As a busy woman, I have never had the luxury of wasting time. At work, at home, and in school, I always look for the most efficient method of doing whatever task is set before me. There's nothing that bugs me more than to have someone else waste my time.
With this in mind, I have designed this book to be an efficient resource for you. I know that you don't have the time to read books on every financial planning subject (and if you've browsed the shelves at Barnes & Noble or Borders lately, you know that there are literally hundreds of such books to choose from). I have attempted to condense a wealth of information (no pun intended) into a small space so that you can get the most out of your valuable reading time. Of course, this means that you are getting only the basics--a "primer," so to speak. It should be enough to get you on the road to financial success, independence, and self-confidence. For some topics, I have provided citations to other useful resources in the appendix. For those of you who are Internet savvy, I have listed web sites that can provide useful calculators and supplemental information.
The Structure of This Book
Each chapter of this book covers a different aspect of your finances. Although you do not need to read them in order, I recommend that you do the organization and self-evaluation exercises in Chapter 2 before you go on to the later chapters, since many of the other chapters will require that you have an understanding of your net worth and cash flow. Once you have completed that part, you can use the book as a reference and look up the specific topics you need help with.
Each chapter other than this one begins with a checklist to help you identify your needs and to indicate the basic chapter coverage. Whenever I thought it would be helpful, I have created easy-to-follow worksheets that help you to work out some of the math. The only tool you will need to do any of the calculations in this book is a simple calculator that can add, subtract, multiply, and divide. I have provided shortcut tables for any more complex calculations (like compound interest and mortgage amortization). For those of you who want more, most of the topic areas include references to informational Web sites and Web site calculators for more in-depth coverage. Throughout the book, I also provide illustrative examples of women in circumstances that may be similar to your own. Although these examples are fictionalized, they are drawn from the life experiences of the many women I have known in the course of my professional career.
Do You Really Need to Read This Book?
If you are browsing through this book and think that perhaps you don't need to read it because your finances are in pretty good shape, ask yourself the following questions:
1. Do you know what your net worth and annual cash flow are?
2. Do you have and follow a monthly budget?
3. Do you have specific short-term and long-term financial goals, and are you taking steps to meet those goals?
4. Are all of your personal and family financial documents organized and easily accessible?
5. Do you have credit cards in your own name and, if you do,
do you pay your balance in full every month?
6. Have you forecast your retirement income needs and established a savings program to meet those needs?
7. If you have children, have you established a savings program to meet the costs of their college education?
8. Do you understand the process of buying a car and financing the purchase?
9. Do you have a valid will that is up-to-date?
10. Do you understand the process of buying a home and financing it?
11. Have you considered the impact of estate taxes on your heirs and taken steps to minimize this tax burden?
12. Do you understand your investment options?
If you answered no to any of these questions, then this book will be worth its purchase price many times over.
Congratulations!
Before you go any further, let me congratulate you on your decision to begin the process of taking charge of your financial future. With a little help, you can do it! The evidence is clear that the financial condition of the nation's women is improving. In a recent academic study that I did for the Employee Benefits Research Institute with Nancy Jianakoplos, a professor of economics at Colorado State University, we found that even though there has been little improvement in the wage gap over the last decade (women on average still make significantly less than men), the difference between men's and women's retirement account accumulations (the pension gap) is improving at a much faster rate. Women are taking the hand they have been dealt and making the most of it. And the more knowledge you have, the better off you will be.
Excerpted from The Busy Woman's Guide to Financial Freedom by Vickie L. Bajtelsmit, J.D., Ph.D.. Copyright © 2002 by Vickie L. Bajtelsmit, J.D., Ph.D.. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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