November 29, 2013

A Woman Looks At a Woman's Relationship With Her Money

The following is a guest post from financial advisor, Luna Jaffe. Her insight on the particular concerns women have in relationship with money is worth your consideration


If you’re a woman, chances are good that in the years ahead, it will be you and you alone who’s responsible for managing your money. 

That could be a problem: Even among the very affluent, many women admit they know little to nothing about bigger-picture money concerns such as financial planning and investment management, according to a recent survey. “A lot of women cede those responsibilities to their husbands or partners because they say they don’t have the time, interest or opportunity to learn,” says Luna Jaffe. “Things are changing- more women are choosing not to marry or have been devastated by divorce or death of a loved one.  They recognize they can’t ignore money any more, but don’t know where to turn or who to trust.”

But even women with a net worth of at least $1 million concede they aren’t especially knowledgeable about money management. In the Women & Wealth Study sponsored by GenSpring Family Offices, only a third said they know a lot about financial planning, and 30 percent said the same for investment management. Part of the problem is that financial education is male-oriented, catering to how men’s brains are wired and what appeals to them, Jaffe says, “When we approach it creatively and from a more emotion-based perspective, women are not only drawn to learning about it, they have no trouble getting it,” Jaffe says.

She offers these three things every woman should know about their relationship to money:
• Your investment decisions are influenced by your emotional baggage. We all bring baggage into our relationships, and it’s no different with money, Jaffe says. When you’re not aware of the baggage operating quietly in the background, you may think you’re making smart decisions when you’re actually simply reacting to past experiences. And those might not have been even your own experiences! “Whether you or a loved one suffered the consequences of a bad financial investment, it can color your thinking in many ways, from destroying your confidence in your judgment to writing off all similar investments as ‘bad.’ ’’ Take time to reflect on the experiences you’ve had with investing, the decisions you made, and the conclusions you made as a result. What stories do you tell yourself because of these experiences?

•  Understand the emotional response with which you receive money, whether a paycheck, a gift or an inheritance. It’s important to receive money with grace – to savor it, to be grateful for it, to be at peace with it. But depending on the circumstances by which it arrives, and lingering emotions from past experiences, we sometimes receive money with anger, guilt, resentment, greed, entitlement or any of a host of other negative emotions. This can lead to self-destructive actions. Jaffe shares a story about receiving a small inheritance from her father at a time when she had no money. She loaned the whole sum to a friend, who promptly vanished. “I was still grieving his death, and I received money that represented his legacy, yet it was only a tiny fraction of his estate – his second wife got everything else. Deep inside, I felt ripped off. Perhaps I thought by loaning my inheritance, I could wash the confusion and grief out of the money making it clean and safe to use. ”

• Know your Comfort Zone for risk and stay within it. Investment comes with risks; you can assume a lot for potentially greater returns, or less for lower returns. Understanding your Comfort Zone and staying within it will help you stay committed to your financial plan. Would your best friend describe you as a risk taker? If you got $100,000 with instructions to invest it all in just ONE of these options – stocks, a savings account, a mutual fund portfolio of stocks and bonds, or your best friend’s start-up – which would you choose? Knowing whether you’re very conservative; happy with a little growth; comfortable with some ups and downs; or in for adventure will help you avoid taking financial advice that makes you uncomfortable.


About Luna Jaffe
Luna Jaffe is a Certified Financial Planner™ and Accredited Asset Management Specialist with more than 10 years of financial advising experience. She is the author of  “Wild Money: A Creative Journey to Financial Wisdom” and its companion workbook, “Wild Money: A Financial Field Guide and Journal,” (www.lunajaffe.com)


I received no compensation for this post.

18 comments:

  1. I can't imagine not being knowledgeable about money and investment related issues! Unfortunately this is not just women, but there are men as well, who do not understand the fundamentals. We've got a great (fee-based) investment advisor that we see yearly. We follow his recommended model for our investments (right now 50% bonds, 50% equities) and we have been happy with our portfolio growth.

    I wish that this was required education for kids in high school. Can you imagine the difference it would make? Just covering the basics of compound interest, financial future stability, benefits of savings etc could change the financial future for upcoming generations.

    With regard to women and their relationship with money, I think this can be true for men too! I believe it reflects a lack of a good knowledge base. When you don't have a basic knowledge on which to base your financial decisions, you are ruled by your emotions. Risk tolerance, emotional response to money and investment decisions are issues that have a profound impact on the bottom line financially when a couple makes decisions about their money. It makes sense to educate yourselves and to work together sorting out these issues as you plan for your financial future. Once you have a good understanding of the issues, decisions can be less of an emotional one, and one based on facts.

    Many years ago, when we first went to a financial advisor it was apparent to me that I was sorely lacking in understanding the basics of financial planning. I started reading whatever I could to broaden my perspective and educate myself. I'm so glad I did! I regretted not having done it sooner, but was determined to make up for lost time.

    They say that money is often a source of conflict for married couples. Imagine if engaged couples put even a tenth of their effort and resources for wedding planning, instead into financial planning. It might help pave the way to a sound financial future.


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    1. Financial "smarts" are lacking in both sexes. But, the way society operates it is more often than not the woman who has a steeper learning curve when she is thrust into a position of making all the decisions. That is dangerous and unnecessary.

      You are absolutely right about the failure of our education system to teach the basics to kids in school. But, since that is the reality then the responsibility falls to the parents....who may or may not be any better off than the children in their grasp of the subject.

      I don't have any proof, but I would be willing to bet that a strong majority of high schoolers don't understand the bare minimum about credit cards, savings, compounding interest, and how stocks and bonds work.

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    2. I can't think why you feel women have a "steeper learning curve" concerning their finances. This may have been true half a century ago, but I'm pretty sure that view of life died off with the hula hoop. I have managed our family finances for 30 years and have parlayed very average earnings into a nice retirement for us. And we married late with a blended family.

      "Steeper learning curve" my foot. (Said with a smile, Bob.)

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    3. In your case, that doesn't apply. But every national study I have seen shows that older women are more likely to be not as financially savvy as they could be for their own well-being. Because of the typical (albeit sexist) marriage setup where the man more often than not handles the finances, there is a real risk that when he dies (usually first), his wife will face the couples financial situation from a difficult position.

      Man or woman, if financial management isn't equally shared one spouse will face a steeper learning curve than is necessary.

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  2. Thanks for sharing this, Bob. I'll be linking to it so my friends can see it.

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    1. It is an important subject. Thanks, Ed.

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  3. Bob, my BFF and I are retired and great savers and realized we needed to figure out now how to spend and live off of our investments. We started a monthly meeting to discuss our finances and hold each other accountable for completing financial tasks. I blog about it at http://retiringwomen.com/.

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    1. A good, proactive step, Bonnie. I will check out the link.

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  4. Thanks Bob!
    I would love to hear Luna's thoughts of investment for women who have less then a million in the bank. Where do women place their assets these days? Are they more likely to put in for annuities? What are her thoughts on those? (I know Suze hates them.) What about investing for a green future? Do women tend to invest differently then men? Since women tend to be a bit more conservative then men with their money---how does that seem to be working out? Are there more and more middle class women who are sustaining their futures with stocks and bonds. What are some of the other asset classes that I haven't heard about. Who is she reading? How is she becoming educated.

    This is a topic that is important to me. It is difficult to become educated in them, I feel. I sure would love to hear more from Luna.

    It was interesting to read about 115 women who have a net worth between 1 and 250 million dollars- which is what the Wealth study is based on. Personally, I don't, at this point, know any women who are not involved in their family finances. I do know a few women who weren't even five years ago….but the recession took care of that. Yet, I don't have a lot of contact with people in this money class anymore :)

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    1. All excellent questions, Janette. I will attempt to get in contact with Luna and ask her to respond to your queries.

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    2. Hi Janette-- great questions!!! The majority of my clients have less than a million dollars, so I understand this population. While I can't talk about specific investments I can say that the women I work with care deeply about investing in a green, sustainable future. My focus is on helping women clarify what matters most to them, such as security, family, happiness-- then to dig in to what that would feel like and look like. Women are more willing to do this work, yet I always have a few brave men that find my creative, emotional approach to money intriguing.

      In my experience the differences between the ways men and women invest are far greater when they do their investing without a financial professional's guidance. When we have a trusted adviser at our side there is less gripping on to fear of losing money or making a bad decision, and there tends to be more commitment to the investment decisions that were made because they were based on understanding risk tolerance, long term goals and cash flow.

      What I've discovered is that when I engage clients and students in an exploration of their relationship with money through creative process their capacity to learn new skills and change neural pathways increases dramatically. When paired with solid tools that help them to navigate month to month spending/saving, as well as ongoing learning and reflection, these clients emerge feeling empowered, clear, organized and prepared. Life is full of unpredictable events. Our investment strategy and planning should help us to be as flexible and resilient as possible.

      In answer to your question about where women are investing, or if there are other asset classes you haven't heard of, I would say that your success at building wealth has more to do with having great habits than in finding the perfect asset class. I've learned the hard way to avoid unusual investments and instead, following Warren Buffet's advice, I stick with what I know -- stocks, bonds, mutual funds and annuities.

      I hope this was helpful!

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    3. Thank you so much Luna! You answered my questions and gave me some things to think about.
      I was especially glad to see your last answer- since I have been feeling like I am "missing something", which I don't seem to be.
      Bob, I hope you invite Luna back. I think many of us are interested and willing to be more educated on this subject.

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  5. This is a good reminder that I need to get more involved than I am currently in this area. I know where all of our funds are parked, and why, but I don't share my husbands passion for analyzing the news each day to identify factors that might impact the performance of the financial market going forward.

    The information is there for the taking, and I'm risk tolerant enough to dislike the rigidity of annuities, however, so it's probably time I pulled up a chair alongside him the next time he rebalances, to see what he likes and why. (I did get an A in both of my Financial classes in college - I know this stuff, I just don't love it to the degree my husband does.)

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    1. I feel a quick clarification is in order here - I oversee most of the maintenance issues in and around the house, including making repairs as I'm able, and I also negotiate for all of our large ticket purchases, including autos, so please don't think we subscribe to strict gender roles in our marriage. We tend to go with the 'he/she who loves it more philsophy,' but clearly cross training is very important, regardless.

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  6. Luna Jaffee says only a third of women claimed they know a lot about financial planning. But as Carol and others point out, the same is probably true of men as well. Now that so many of us are left out in the cold without pensions or other support, we all need to educate ourselves ... we all need to know readin', writin' and 'rithmetic -- and these days 'rithmetic is financial planning!

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    1. So correct, Tom. Financial well-being is sex-blind. All of us have the responsibility to understand what keeps our financial boat afloat.

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  7. I have always handled our financial affairs (I was an accountant). Recently, now age 60 and retired, I realize that I need to teach this stuff to my husband! He is a little younger than me (59) and given our families history and our own health, he will most likely outlive me. We have split things, not based on gender, but on talents and interest. He was landscaper, and we have beautiful yards (although I have learned and manage the front yard myself - I had a teacher and a desire to learn). One of my goals in the next year, is to teach my husband what he needs to know if I go before him.

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    1. That is the responsible and loving thing to do. There is enough stress and grief after a loved one's death without adding on a total lack of financial preparation.

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