By: Lindsay Tigar, Her Money featuring Julia K. Pham, CFP®, AIF®, CDFA®, Wealth Advisor at Halbert Hargrove
When it comes to overcoming your financial weakness, first you must find the problem, then work to fix it. You got this and we got you.
Financial weaknesses can often feel like our kryptonite, and they vary greatly from person to person… In other words, what may seem easy for your best friend or sister can be stressful or confusing for you. But as with any other part of our lives that needs improvement, the only way to turn these downfalls into strengths is to tackle them head-on. Whether you’re struggling with overspending, a fear of investing, or simply just taking control of your day-to-day finances, here’s a look at how to overcome your money-related fears and get to a better place.
SOCIAL MEDIA AND THE COMPARISON TRAP
Social media can be one of our most meaningful sources of community connection — especially over the last 12 months. But in other ways, it’s created an unreasonable expectation for our homes, relationships and travel plans. When we pay attention to what everyone is doing — from celebrities to our wealthy friend from high school — we may be tempted to buy more than we can afford, which can turn into a major financial weakness. It’s natural to want to engage online and seek inspiration, but we have to reign ourselves in if it’s sending us into debt, says Cally Bruce, the vice president of sales for Carver Edison, a New York-based financial technology company.
“If you find yourself in this position, you can start by removing your payment information from your social media accounts. Doing so will give you at least a moment of pause to consider whether checking out is the right decision,” she says. “All of this should help to make you more mindful, and by the time you’ve had space to think critically about the purchase, the whole luster of that bright, shiny object may just wear off.”
PUTTING YOURSELF LAST
Particularly if you’re a business owner, a partner or a parent, you may feel stretched in so many directions that you’ve lost count. Busy schedules and demands can leave us feeling exhausted — and at times, broke. As Bruce explains, in addition to practicing self-care emotionally, paying ourselves first is a way to protect ourselves from giving too much to others, a financial weakness many people in these categories may face. “Before paying any bills, buying a new item, or doing anything else, it’s important to put a little money away for ourselves,” she says. “This can be putting $5 each month in a micro-investing platform. It can be putting a few dollars in a savings account or putting extra money toward a credit card’s principle, which is paying it down rather than increasing the balance. Whatever it is, do one thing each month for your future self.”
SUFFERING FROM LOSS AVERSION
As defined by Lauren Anastasio, a certified financial planner at SoFi, loss aversion is a cognitive bias that explains why the pain of losing is psychologically more powerful than the joy of an equally-sized gain. This is why you might feel incredibly stressed if you lost $15 on a $100 investment, but not over-the-top jazzed if you gained $15 on that investment instead.
“Loss aversion is considered to be one of a few culprits contributing to the gender investing gap. Women tend to be more risk-averse, which is another way of saying we have a more inherent aversion to loss,” she explains. While this may not seem like a big problem, the fear of loss can prevent you from taking well-calculated risks that have the potential for worthwhile, or even necessary, returns. It is something many women actively need to work to overcome, she adds.
To move past this financial weakness, Anastasio suggests testing out an exercise called ‘framing,’ where you shift the wording of a question to impact your answer. Anastasio poses this question: “If you invested $1,000 today, it could grow, but you might lose it all and end up with nothing. Would you do it?”
Seems scary, right? But what about saying it this way: “There’s a 90% likelihood that your money will double, and if you don’t invest, you’ll need to save five times as much to reach your goals. Now would you do it?” By reframing our financial decisions to focus on the potential gain, it can be easier to see value rather than anxiety.
PUTTING OFF SAVING FOR RETIREMENT
In case you need a reminder: Retirement savings are super important. Like, so important that it might be one of the best financial weaknesses to overcome right now. Women live longer than men, and the gender wage gap means we’re working at a disadvantage, often from the very beginning of our careers, explains Julia Pham, a wealth advisor at Halbert Hargrove. So if you haven’t gotten started, it’s time to dig in your heels and make saving for your future a priority. Even if the task seems daunting now, there’s no time like the present to get started.
“Build your retirement savings into your budget and automate your savings so that it’s taken out every paycheck before the other monthly expenses start to erode your bank account,” Pham says. “If your employer offers a 401(k) plan, then take advantage of the easy enrollment and pre-tax savings. If they offer a company match, then try to save at least that percentage.” Ideally, you’ll work your way up to putting aside 15% to 20% of your income for retirement.
NOT GETTING AHEAD OF CREDIT CARD OR STUDENT LOAN DEBT
If you have any sort of debt, but particularly high-interest debt from credit cards or student loan debts, you may feel paralyzed to make strides in your financial future. This can leave you continually paying a monthly bill but never making a dent in the lump sum.
“These issues don’t just go away — they compound over time, so the sooner you address them, the better off you’re going to be,” says Zuzana Brochu, CFP, CBEC, vice president of financial planning at People’s United Advisors. “You need to budget for them before budgeting for more discretionary items. Depending on how severe your issues are, it may take some courage to face your situation, and it may also take a period of time of tightening your belt to get it under control. But once you conquer these issues, you will feel so much more empowered.”
GIVING UP ON A SUCCESSFUL FINANCIAL FUTURE AFTER A DIVORCE
Going through a divorce is emotionally, physically and financially draining — and it can be terrifying. “Starting over” has a whole new meaning when you’re doing it after twenty years of sharing your life with another person. Even if you’re only making end’s meet at first, it’s critical to stand tall and not be intimated, says Brochu. “Start to shift your perspective to think of your new financial situation as an opportunity to shape it in the way that is best for you. Knowledge is power, so learn as much as you can and try to find a trusted advisor who will look out for your best interest.”
BEING NERVOUS TO TALK ABOUT FINANCES
Since you already found HerMoney, (welcome!) we know you’re curious about your finances. And you probably want to talk about them with your friends. So why aren’t you having those conversations more often? One of the most significant weaknesses women have is feeling like financial matters are taboo. This isn’t true — and it blocks our wealth, says Shannon Foreman, the CEO and founder of Forethought Planning. “Traditionally, most adults raising girls didn’t talk to us about money. We were encouraged to be polite and not ask about something as personal as finances.”
On the other end of the spectrum, Foreman says men often talk about their favorite financial strategies, their compensation, and they aren’t shy about reaching out to investors to start companies, or asking their boss for raises. Because they’ve long communicated about their wealth and finances, they feel less in fear, because it’s not ‘unknown’ territory to them.
“Get a small group or even one other female together and start the conversation,” she recommends. For example, start a book club where you choose a read about money, and spend time talking about your personal experiences.
How do you balance having the life you want to enjoy today with what you’re going to need in the future? Are you doing what it takes to enter your dream retirement? TAKE OUR QUIZ to find out.
