So it’s true, us Gen Y girls are more independent and in control of our futures than ever before. We’re taking the reins in so many areas that early generations of women could only dream of and prove that gender plays no role in the outcome of what defines success for each of us. Cue Beyonce’s Run the world.
But regardless of how much we’ve balanced the gender scales, research is still showing that when it comes to investing, understanding financial language and ensuring we have enough cash for retirement we are still generally less confident in these areas than our male counterparts.
Be it due to our overstretched schedules or our nurturing natures that tend to see us putting others needs before our own, when it comes to our money there are some common mistakes many of us still make. So in the essence of kicking butt in that area as well, here’s a list of these mistakes along with strategies to turn them around:
Not knowing your net worth
According to Lois Frankel, author of Nice Girls don’t get Rich, for most women the thought of finding out their net worth is as pleasurable as finding out their weight, they just don’t want to know. But determining our starting point is the first step in taking control and not only rectifying any problem areas but starting on a path to creating wealth.
Having a rough idea of the value of our home, the mortgage amount and income levels just won’t cut it. Whether we are in a relationship or not, being in the loop at every stage, knowing exactly where money is coming in and out is crucial. There are a tonne free financial calculators available online not only to help you work out your net worth but determine how much you’ll need for a comfortable retirement.
Better yet, book in a financial kickstart session with WE. A crucial part of their process is showing you the reality of your financial situation and uncovering your spending habits. Besides a one-on-one with Tony Robbins, most valuable and eye-opening session you will ever experience!
Falling to negotiate
Whether we’re in the market for a new car or working at a salary less than we deserve, “women are much less likely than men to ask for what they want and to use negotiation as a tool to promote their own ambitions or desires.”1 Which means we’re missing out on opportunities to both make and save money. As always, knowledge is power so the key is to do your homework and arm yourself with the relevant data to get the best deal. And it will take some practice, as effective negotiating is a learned skill but a very worthwhile one to master. Start by taking advantage of the free ‘how to negotiate effectively’ content online or delve into some weekend reading. Or better yet take a short course. This small investment will pay dividends.
According to a study conducted by Tahira Hira and Olive Megenda, women really do have fewer sales resistance than men when it comes to impulse purchases. And retailers work mighty hard to create tempting environments for us to want to spend. From setting up mannequins dressed in the full ensemble to strategically placing little ‘impulse buys’ at the front counter.
The best way to avoid impulse spending is to make a shopping list and stick to it. Period. If it’s not on your list you don’t need it. Frankel also suggests making a habit of sleeping on all purchases that exceed $250 before you buy.
Making emotionally driven purchases
The truth is everyone’s decision-making process when it comes to spending money is driven by emotions. Buying a knockout dress or some killer heels when we’re not feeling our most fabulous selves is a common story. As is the need to celebrate when we’ve smashed our goals with a 5-course dinner and a bottle of France’s finest. There’s nothing wrong with buying nice things as long as we can afford them. It’s how much we allow these emotions to take the wheel that becomes the issue. Making purchasing decisions based on our mood, or in hopes of lifting it, without research and logic usually leads to buyer’s remorse.
Getting in the practice of being aware of our emotional state as well as being accountable to our financial goals is a great way to put the brakes on this type of spending. Having a budget is the first line of defence against emotionally driven purchases. The second is including an ‘emergency’ fund in your budget for occasions where things pop up. That way it’s planned and limited to a certain amount. Need help with a budget? Start here: Why you won’t get Rich without a Budget
According to Frankel, despite the fact that we are becoming increasingly empowered financially, studies are showing that women are still more conservative and less likely to take calculated risks than men.
The fact is every investment involves some level of risk but playing it safe and staying out of the game entirely won’t get you anywhere. So whether it’s making the decision to start your own business or purchasing shares for the first time, start small and become educated in your area of interest. A great way to do that is to join an investment and financial planning group and learn from other experienced members. An excellent example of this is WE’s impressive and continuously growing line up of Tall Poppies. These individuals have experiences in a whole range of financial investments and inspiring wealth creation stories. What better way to learn, develop skills and gain confidence in the financial marketplace.
Not making your financial well-being a priority
Whether it’s putting a strategy in place to protect our futures, setting financial goals or just looking into refinancing to a lower home loan rate, our endless to-do lists seem to take priority. Until life throws us a curveball, such as a divorce, and we are then forced to react to these issues rather than proactively learning and putting strategies in place to protect ourselves.
Making time to create a solid financial future should be as important as making time to move and nourish our bodies. Frankel suggests scheduling in “get rich’ time as a recurring event to learn about finance and investing and track your spending. And most importantly, to put processes in place to protect against unforeseen events such as purchasing income replacement insurance and setting up a will.
Adhering to social pressure
Similar to impulse buying and making emotionally driven purchases, whether we like to admit it or not, social pressures also influence our spending. Ever paid a little more for a gift for a friend based on what she spent on you? How about the incredibly expensive round of drinks you bought because someone chooses the same on their shout?
Anytime you spend more money than you think is sensible you have succumbed to social pressure. And let’s face it, today the pressure to have it all seems to fall harder on the ladies than the gents.
Once again, this is where financial budgets and goals come into play. If it doesn’t fit with your wealth creation strategy and it has been allocated for, is it really a purchase you need to make? Factor in your priorities and be really honest with what you value. If building wealth is high up there then start getting creative with alternatives to this type of spending that align with not only your budget but who you are as an individual.
Not taking care of the most important asset: You
What does this one have to do with building wealth? Everything. Research conducted by the Centre for the Study of Aging found the state of an individual’s health played a great role in determining their ability to reach and secure an independent income in their retirement age. For women, especially those looking after the needs of a young family, their physical and emotional well-being can often fall to the bottom of the list. But it needs to be a priority in order to build wealth effectively and enjoy the rewards.
We all have different versions of what makes us our best selves, but as Lorna Jane’s active living philosophy goes, there are three main areas we need to focus on to live our best lives; moving our bodies, nourishing them and believe we have the power to achieve anything!
Whether you can relate to all of the above financial mistakes or you’ve got it all handled, real growth comes from continuous learning. And the key is to keep making improvements, even small ones. Every little change will get you closer to reaching your goals and taking control of your financial future. And everyone’s journey to creating wealth will be different but just as we’ve challenged what it means to be an empowered woman we need to be accountable for our own happiness, in all areas. In the words of our CEO, start now, start small and achieve real wealth!
1 Women Don’t Ask – Negotiation and the Gender Divide, Linda Babcock & Sara Laschever http://www.womendontask.com/questions.html
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Disclaimer: all information contained within this article is of a general nature and should not be relied upon when making financial decisions. Please consult a professional financial advisor or planner (like us!) before acting.