I’ve shared many of my quirks and idiosyncrasies with you over the past few years; here’s yet another one: I am passionate about personal finance.
That’s right: this lady who loves words and stories often enjoys nothing more than reconciling her end-of-the-month budget and making big picture financial plans. And, apparently, this fact isn’t just odd for an English-history gal like me, it’s odd for a woman in general.
In this month’s issue of Real Simple, Geraldine Sealey writes about a phenomenon called “the female financial paradox,” in which women tend to focus on micro financial choices like pinching pennies, clipping coupons, and paying bills, but ignore the macro ones, lagging behind men “in actions crucial to building wealth and security, such as investing and having a long-term money plan.” According to two different surveys, 90% of women are their family’s primary bill-payer and shopper, but 60% of us rate our investing and financial planning skills as below average.
What gives?
According to the experts Sealey interviewed, the female financial paradox rests on four main elements:
- “Women tend to be insecure about the subject of money,” and our insecurity, compounded (see what I did there?) by bad experiences with financial professionals, leads us to remain less informed than we need to be;
- Following in the footsteps of generations of American women, “we focus on scrimping instead of investing,” ignoring the fact that a good investment is worth far money in the long run than a good deal on Pampers or a 2-for-1 coupon on ketchup;
- “[W]e rely too heavily on others for financial know-how” – often our husbands or partners, which is especially problematic when a marriage or partnership ends; and
- “[W]e’re not always adept at translating abstract figures into concrete goals,” focusing too much on big picture aspirations rather than the specifics of how to get there.
In our household, I am the coupon-clipper and the one who chooses the funds for our 401(k)s and Roth IRAs. I love a good bargain at Kroger, but I also like to understand how much of our income we should be setting aside for retirement investing and when it makes sense to rent vs. buy. And I think both sides of my financial personality have to do with my compulsion to control the world around me. Especially in these years with little kids and constant colds and unpredictable sleep, I like knowing how much money we have in the bank, how much we spend each month, how much we’ll need to pay for college, and how much we’ll want to have when we retire – you know, control the controllables.
But Sealey’s article reminded me that my passion for personal finance isn’t one that’s shared by a lot of people – at least, it seems, not by a lot of women. But, especially since financial literacy is not part of the curriculum in many schools, understanding not just how to save our pennies, but also how to manage our pounds is an essential skill that we all need to have.
Sealey closes with four simple strategies we can all take to help shore up our financial knowledge: work with a financial planner (I’ve done this and found it helpful); read a helpful book (I first got hooked on personal finance through David Bach’s Smart Women Finish Rich; it’s now over ten years old, but the message hasn’t changed); go online (Dave Ramsey has some great, simple materials; I also like The Simple Dollar and Get Rich Slowly); and take a class.
Especially in this volatile economic climate, don’t we all owe it to ourselves to understand where our money comes from, where it goes, and how we can use it to reach our dreams?
Who is the “money person” in your household? What gives you comfort when life feels unpredictable?
{ 25 comments… read them below or add one }
I find this fascinating. I’m in charge of all the small money matters in our house, paying bills, making decisions about the little things etc. I’m also about a 40-50% contributor to our overall income. Yet he makes every choice about investing, where that money is, etc – and I don’t even hesitate or ask questions about that. I feel relieved it’s off my plate. But this makes me wonder if that’s a foolish stance. Must rethink! xox
Lindsey, our setup is so much like yours. I pay the small bills – mostly medical invoices because the kids’ accounts bill to my name – and I do most of the shopping. But nearly everything else falls to my husband. Mortgage, monthly credit card bills, investments, and so on. And, much like you, I’m happy to be relieved of that responsibility. I am glad, though, that everything is transparent to me through our bookeeping sofware, so I can see exactly what is where whenever I want.
I take heart in the fact that I did manage all these things for myself before I was married, and, if I had to could certainly do it again. That said, I truly do not enjoy it and GAP does. So I leave it to him, tell him how thankful I am that he does such a terrific job of managing everything, and try to make myself take stock of it all every other month or so.
I think the fact that you understand what and where your investments are and that the information is transparent in your house takes you way out of “paradox” category. To me it sounds more like a sensible division of labor: he enjoys it, you don’t, but you could do it if you needed to. (Kind of like the way others divide cooking and doing dishes or housework and yard work.)
In fact, your balance sounds healthier than the one in my house where I do everything. We do talk about it from time to time, but it’s more like me presenting my ideas to him and him nodding and going along. Kind of like the stereotypical 1950s couple, but in reverse.
Oh, my goodness, you would be horrified. There is no money person in our house (over the age of eight). My husband and I each have separate accounts–his pays the bills, mine the childcare and groceries (and healthcare comes out of my paycheck). Neither of us has balanced a checkbook in the last 15 years. I have a tiny deferred comp account (opened due to peer pressure by older colleagues) and once in a while my husband and I say something to each other like, “we should think about an IRA” or “maybe we should talk to a financial planner,” or “do you think we need life insurance” and call it good, move on and forget about it for a long time.
If we lived closer, I’d be at your door tonight with my notebook and some sharpened #2 pencils and we’d get to work! :)
I’m with you. Maybe it’s because I am married to an artist, but I was the one who pushed for us to see a financial advisor, who set up our life insurance policies, retirement accounts, long-term disability for Z who works free-lance, 529 accounts for the girls…. I also pay the bills and deal with the insurance company. We’ve been married for 8 years and we still keep separate checking accounts and credit cards, though. Sometimes I wonder if it would make more sense to have joint accounts, but I would freak out at not having full control over my stuff.
Ahh, the joint account vs. separate account issue. Another one that’s very ripe for discussion. Perhaps another post a-brewing…
I give a shameful amount of control to my husband in financial matters.
Like you, I manage financial matters large and small for our household. But I’m woefully lax about putting plans into action. I choose the funds, calculate how much to save and where to put it…but I’ve been meaning to switch Coverdells to 529s for two years. And just can’t seem to find the motivation.
Thanks for the links and the kick in the pants. I’m off to fill out transfer forms.
A colleague once told me there are three types of people: spenders, savers, and counters. I get great solace from counting what comes in, what comes out, what the going rates, prices, and returns are.
*raises hand* Counter.
Ooh, love that. I’d definitely heard of the spender vs. saver dichotomy, but I am so totally a counter. No wonder my husband sometimes (lovingly) refers to me as Scrooge McDuck.
Im like you, Kristen–I do everything. We took a Dave Ramsey class thru our church a few years ago, which felt wonderful and helped us get more on the same page. Having that time to be honest and proactive together helped us limit arguments and get our money habits more healthy.
I am a saver. But I like counting too. :)
I am a spender. I take solace in spending. I feel shame about it. My husband is a saver/counter. I am grateful for that. Thank for showing me where to start. It’s very helpful.
I have never understood why more people don’t take a more serious role in learning about their finances, especially women.
A lot of the guys have told me that they made or make all of the major financial decisions for investments and retirement but very few of my female friends have expressed interest or desire.
That is not clear across the board, but it has always bothered me. Relationships end or change for a variety for reasons and it is important for that reason alone to understand what is going on with your money.
Unfortunately most of us aren’t independently wealthy so if we ever want to retire we have to pay attention to where our money goes and what happens with it.
Counter here! As in, I am one as well. I control all the money flow in our house. My husband simply isn’t interested. To keep us on the same page (to let him know what I’m doing), we try to talk about it at least monthly with big discussions a couple times a year to make sure we agree on priorities. He always knows when I’m stressed about something because I start reviewing the budget and accounts nightly. Then it’s time for a massage and a nice glass of wine. :)
On the flip side, I never feel I know enough and am generally unsure about the moves I make when it comes to investing. If asked if I knew what I was doing, I would hesitate. I suspect a man in the same position would feel more sure of himself.
That’s such a good point, Margot. Like you, I never feel 100% sure about my investment choices and probably never will even though I know more than most. You’ve really made me think about how much of that is a personality thing and how much of it connects to larger gender expectations. Thanks for the food for thought!
I love this comment. You’ve just described me.
For nearly a quarter of a century I did control – both coupons and budgets, but also IRA’s. Now, for a variety of reasons, he is much more involved. He is quickly gaining in confidence, and, while I love the participation, the confidence stunned me. Reading this comment helped give me some insight.
Oh what a delightful conversation you started. Let’s see. There is transparency here as well. We have software that is updated daily/weekly. We’ve done the financial planning and have a game plan for the future. My husband is in charge of the bills. I’m in charge of the spending. As in I have a budget to adhere to, but he doesn’t have to do the mundane dinner/activity planning. Which is a chore within itself. I have the power to do these things myself, but I am relieved that he has taken it on. Maybe I should give him a heart attack and ask him if he wants to trade family duties. Ha! Thanks for writing this enlightening piece.
Alita
This post is so timely and thank you very much. I am 100% on my own now but used to fall into the “leave it to my husband for the investing decisions” type of peson. I have been thinking about how I need to get more educated and over-whelmed with how and where to begin. You’ve pointed me to something to start with at least! Good deal!
Terrific post. As one who suffered the consequences of insufficient knowledge of what the spouse was doing (financially) during marriage, may I add that when a woman finds herself post marriage and on her with kids, financial literacy is essential – and even then – some things are not within her control.
All the more reason for as much education and practical knowledge as possible!
I love personal finance and my husband hates it. The only problem is that now there are so many expenses that don’t reconcile right away – all medical bills, my husband’s business expenses … it’s impossible to have a satisfying month-end. So ever since I’ve come to France I’ve given up a little. (Plus it’s so expensive here I feel like we barely make ends meet).
It’s the same with investing. When people (especially the guys) finally start to focus on creating a nest egg, most spend 90% of their effort deciding which particular stock or fund to put their money into, or (God forbid) trying to time markets. But that matters very little. 90% of the return comes from allocating properly.
I am the saver. He is the spender. Awaiting your blog post on that please.
I am playing catch-up with your wonderful words Kristen and I felt compelled to chime in. In college, I was a bank teller and learned important lessons (unfortunately through other people’s financial management) that it is important for both people to know the in’s and out’s of their money. I love (homage to control) balancing our checkbook, managing credit card statements, and investing in the IRA and 529 plans. Every month my husband and I discuss our financial budget for the month – how much we want to put into savings, what we would like to set aside for vacations/fun money, and any “unanticipated” expenses that may arise. As for this household, I am definitely the CEO/CFO. :)
Enjoyed your post as well as the discussion.
We are financial soul mates, Rudri!
When I was in college, I applied for a summer job as a bank teller, but they weren’t hiring. I know I would have loved it!