Money & Values Archives

Almost half of all women fear becoming a bag lady according to a 2019 study by the life insurance company Allianz. HALF!! The term “bag lady” was coined in the 1970’s and quickly became a symbol of women’s concern of running out of money, regardless of how much they have. As a financial planner I heard this all the time. I never liked to rush an initial conversation so after a while, when we were speaking comfortably and candidly, the bag lady nightmare would bubble up. Whether the woman was solo or had a partner, children & a reasonable amount of money seemed to be irrelevant. Even the very rich and famous have confessed to sleepless nights! What counts is that the fears seem very real, and this scarcity mindset can affect important financial decisions in an adverse way.

Why is financial insecurity such a big deal to many women?
“Many women have been programmed that they won’t be good at this money stuff” says Olivia Mellon, a prominent Washington DC psychotherapist specializing in resolving money conflicts. As recently as 1974, a bank could insist women have a man cosign on a loan. Women barely have their feet under them so it is easy to see why even women think a man can do money and investing better. In reality this is fiction not fact! Current neuroscience is showing no gender difference in young children when it comes to math.

So, chalk it up to a socially learned lack of confidence and the resulting lack of preparation and a higher aversion to risk. The usual scenario with this script is a strong tendency for women to opt-out of the financial responsibility needed to create the financial security they crave.

What other factors prevent women from taking financial control?

There is an interesting book by financial educator, Ruth Hayden, called “For Richer, Not Poorer: The Money Book for Couples”. One idea she expresses particularly well is that because women are instinctively nurturers, they view spending and saving very differently than men. Women tend to relate to money for what it can do now. They are focused on using their energy and assets to create a good lifestyle for their families. This creates a problem. Retiring well requires long-term planning. If a woman hasn’t paid attention and saved for her own future, she could be left desperately wondering if that future was going to be still alive and penniless.

Is the bag lady fear just about money?

For women the fear of ending up broke might be magnified by the anxiety of being alone and unvalued late in life. One of the reasons some women neglect their financial situation is because they place more importance on family and community than on themselves. I think many of us also have concerns about being a burden in our elder years. Unfortunately, this compounds the problem because fear can erode a woman’s ability to take action now causing self-fulfilling realities in the future.

So, it is important to learn the basics about money and investing. You don’t need to reach a high level of proficiency, but you do at least need a general understanding of the key concepts so you can make good financial decisions throughout your life. “When women confront their money fears and do something about them, and they become knowledgeable and in control,” says therapist Olivia Mellan. “They experience the most profound sense of serenity, confidence, and security.”

Why are financial security and wellbeing so intertwined?

Money is the No. 1 stressor for Americans according to Northwestern Mutual’s 2018 study. But it wasn’t always that way. Thousands of years ago man, just like the animal world, lived in an immediate-return environment. Your actions delivered clear and immediate outcomes. Today modern society is forcing us to live in a delayed-return environment – meaning rewards don’t happen until some point in the future. Bottom line we have an old brain designed for quick solutions. The tiger didn’t eat me so I can relax. In today’s world the delay of a resolution creates a sense of constant uncertainty that leads to the chronic stress and anxiety we often feel about our future. One thing you can do to help is to focus on what you can control. You may not know exactly what you will need for retirement, but you can estimate and make sure you save enough each month to reach your target. And it works — 87 percent of the study participants who took control of their finances said “nothing made them happier” than knowing they were in a good place, money-wise.

Wrapping it up, confidence and control are the best defense if you are struggling with a bag lady mindset. Follow the money. Be clear on the difference in what you are earning versus spending. Make sure there is enough left over to save for short-term emergencies as well as your long-term future. Being on top of your financial situation leads to a sense of wellbeing. And wellbeing makes it possible to be happy in the present and confident you will have enough during your golden years.

On the surface, money and wellbeing don’t seem to have much in common, do they? But that hasn’t always been true. The word ‘wealth’ comes from the old English ‘weal’, which means ‘wealth, welfare, and wellbeing’. Weal is in turn related to an even older word ‘wel’, which meant ‘in a state of good fortune, welfare, or happiness’. At some point in our more recent history, we lost the more holistic perspective and money/wealth became detached — viewed more as cold, hard cash or at the least, with mildly negative connotations. The reason I bring this up is because many of us unconsciously view money as an end rather than a means. We all form most of our important beliefs as children including about money. But as adults we often lose touch with these emotional connections, leaving us prey to deep feelings we don’t understand. Fortunately, things have begun to change in recent years as the search for life balance and meaning has become mainstream. Learning what really brings us life satisfaction, and the true role of money in that endeavor, is an important step in achieving the holistic sense of wellbeing we all intrinsically desire. Let’s start by exploring wellbeing, especially financial wellbeing, and why it is so important.

What is wellbeing and is wellness the same thing?
First things first. The words wellness and wellbeing are often used interchangeably – but are they? While the concept of wellness, or the opposite of illness, traces back centuries, the movement really picked up steam in the 1950’s after the World Health Organization (WHO) used the term “wellbeing” in their constitution. There is no universal agreement, but wellness is often used to describe the health of the physical body. Wellbeing encompasses a broader perspective and constitutes the combined state of the body, mind and spirit. Not a totally new idea, as this trifecta was used to symbolize the YMCA as early as the late 1800’s.

What do we mean by “financial” wellbeing?
Wellbeing in an even broader sense, refers to what is intrinsically good for us. The word itself has Italian origins and from as early as the 1600’s it indicated an on-going positive state of health and welfare. Financial wellbeing defines “what is good for us” as how people feel about the control they have over their financial situation. Based on a research study of consumers around the country, the federal agency Consumer Financial Protection Bureau (CFPB) defines the term “financial wellbeing” as having an acceptable level of financial security and freedom of choice. They determined the factors that lead to a sense of financial wellbeing are one’s environment, personality and knowledge.

Is there a relationship between money and happiness?
Your next question might be, are happiness and wellbeing the same thing? Spoiler – the answer is kind of! A significant evidence-based study – The Australian Wellbeing Index – theorizes there are three key contributors to a strong sense of wellbeing: close personal relationships, financial control and a sense of purpose. They called this key to high life satisfaction “The Golden Triangle of Happiness”. Catchy title but even the study points out that while most of us also use these words interchangeably, happiness tends to come and go while wellbeing is a more stable state.

What is financial control and how does it relate to wellbeing?
So, what do they mean by “financial control” and why is it thought to be fundamental to happiness? The Australian Wellbeing Index showed that one’s sense of wellbeing rose with household income – to a point. After $100,000 money wasn’t much of a factor. Participants in the study indicated the power of money was mostly related to alleviating stress. That meant even people with lower levels of income could have a sense of happiness and wellbeing if they felt in control of how they spent their money. Key components are an awareness of month-to-month finances, maintaining an emergency fund, tracking long-term financial goals and having the freedom to make desirable choices in life.

Surprisingly while close relationships, financial control and a sense of purpose were the drivers of happiness and wellbeing, physical health was relatively unrelated. To put it another way, people are happiest when they are living a meaningful life. When you eliminate the worry of a lack of money, that life becomes golden!

Wrapping it up – to find your Golden Triangle of Happiness do some work on your own attitudes about money and make sure you are spending time on both your short-term and long-term financial future. Then money becomes the worthy means to an end it is meant to be!

Resources…

Rawson Gulick Interview
https://lady-money.simplecast.com/episodes/why-financial-wellbeing-matters-an-interview-with-advisor-rawson-gulick

HOW CAN YOU DEFEAT A BAG LADY MINDSET?

WHAT IS FINANCIAL WELLBEING?

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