HOW CAN YOU DEFEAT A BAG LADY MINDSET?

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.