Gender, stress, and money – just one of these topics is enough to start an interesting conversation, but have you ever thought about how they’re all related? It may surprise you to hear that various studies show that, on average, women are better investors than men. Women tend to make fewer trades, they invest with funds rather than individual stocks, and they take a “slow and steady wins the race” attitude. Despite this, women are often fearful about investing, and talking about money and financial matters causes stress for many women at a level that men do not seem to experience.
In this article, we shed some light on the strained relationship many women have with money and offer our 6 Tips to Help Women Conquer Money Stress. We want to acknowledge upfront that tackling this topic might sound like we’re stereotyping – we’re not. These observations are based on many years of working with clients, both male and female, and noting patterns and differences that persist too often to be a coincidence.
The Impact of Societal Norms
First, we note that women seem to intuitively understand that achieving long-term financial stability is a matter of how much you save and invest over the long run – that’s the “slow and steady wins the race” thing. As the saying goes, it’s time in the market that matters, not timing the market. Market timing is trying to buy and sell at just the right time – which no one can do consistently, not even pros. However, many women are intimidated by investing, often because they lack investment “training” and think they need to know how to pick a good stock – Not True. This lack of training, often called the financial literacy gap, is closely related to women experiencing stress about money. Women, please trust us – you do not need to pick stocks to invest wisely.
The financial literacy gap is related to the fact that, historically, women were not the major breadwinners in the family. They were dependent on their husbands financially, and traditional roles usually put men in charge of money matters. While roles are shifting – many wives earn higher salaries than their husbands – traditions change slowly. We still see a tremendous amount of stress, bordering on financial paralysis, when women divorce or are widowed and have no idea how to manage their finances. A woman in this situation who has limited means is often afraid of becoming a “bag lady” and may cut out everything she used to enjoy, even small things like going to the movies or lunch with friends. Knowing how much money is coming in and where it goes each month empowers women – it is a loving act for a husband to make sure his wife understands this.
Is It Vulgar to Talk About Money?
Many women were taught, “polite people don’t talk about money” – either explicitly, or by observing their parents’ silence on the topic. This reinforced the lack of knowledge and discomfort about the subject. This creates real problems. For example, women are often willing to throw themselves into a caregiving role, but don’t talk about where the money needed to deliver the care might come from. Information can be helpful in overcoming this reluctance to talk about money, but not information overload – we recommend seeking thoughtful, experienced guidance, not the list of 209 million Google hits you’ll get from searching on “understanding financial matters”.
Women also often (consciously/subconsciously) believe they should have a higher purpose than pursuing or thinking about money. We find it useful to consider this in terms of a “hierarchy of needs”, a concept first introduced by psychologist Abraham Maslow in 1943 to understand what motivates human behavior. Maslow states that we must first satisfy our most basic needs (food and shelter, followed by safety and security – including financial security) before we are capable of achieving personal growth and realizing our full potential. In a very real sense, actively engaging in financial planning is liberating to women (and men, too) as it frees them to pursue their higher purpose.
Reducing Money Stress – Our 6 Tips
Note that we’ve been focused on “financial planning” rather than just “investing” – that’s no accident. Money stress, particularly for women, is only partly about investing and worries about whether they are handling that well. It’s more about the Big Picture. A key part of relieving the stress about money is viewing your financial life holistically. That takes us to our 6 Tips to Help Women Conquer Money Stress:
1) Find a trusted advisor. The primary benefit of working with a financial advisor is having someone knowledgeable, experienced and impartial to guide you in managing all of the details that affect your financial life. That, in turn, helps you to enjoy other things more, by removing the worry that you’re overlooking or neglecting something important. That might involve buying your first house or refinancing a mortgage, making sure your insurance coverage is adequate, getting your estate plan and living wills together, dealing with the financial aspects of a catastrophic medical issue, and many other things. A financial advisor coordinates your financial life, and just knowing that things actually are being coordinated de-stresses.
2) Put your saving and investing on autopilot. Don’t rely on your memory, or an alert from a mobile app, to get you to save and invest regularly – remember, steady, regular investing “wins the race”, and automating your savings takes that pressure off, reducing stress. If your employer offers a 401(k) Plan, make sure you enroll so you get company matching funds to maximize your savings potential. If you don’t know what funds to choose in the 401(k) and you don’t yet have a financial advisor (see #1), a diversified “Total U.S. Stock Market” fund keeps things simple. Know that there will be ups and downs in the market, and don’t look at your statements more than quarterly (if that). You are not going to lose everything in the market as long as you don’t sell when the market drops and you have proper diversification. You will have less stress if you don’t look at the gyrations – it’s the long-run that matters.
3) Have a comprehensive, goals-based financial plan. Could you list the big goals you have for your life? You wouldn’t even try to host a Thanksgiving dinner without making a list and a plan – why handle your life’s goals that way? Perhaps the most important part of a financial advisor’s job is helping you to identify your goals and making a plan to help you achieve them. That could include getting your kids through college debt-free, writing a novel, taking a year off to volunteer, going on a safari, starting a business – the list may be long, and it will likely change over time. Your life will be de-stressed if you have a thorough financial plan.
4) Acknowledge the fear of the unknown. Financial matters involve many unknowns, and that contributes to stress. Simply acknowledging this can reduce stress (it goes along with a mindfulness practice, if that’s something helpful and familiar to you). But “unknown” or “unfamiliar” doesn’t have to be a permanent state of being. Seek help to shed light into financial matters that intimidate you. For example, if you are newly widowed, work with your financial advisor and attorney to take care of the things that need immediate attention, but avoid major financial decisions (such as selling a house) for a year. A trusted advisor can show you what you need to know and what you don’t need to know (remember, you don’t need to know about stock-picking).
5) Break a big task into smaller pieces. When you’re faced with a daunting task, it can cause paralyzing stress. The solution is often to break it down into smaller steps. As a wise person once said, “You can only take one bite of the whale at a time.” If you’ve raised a child, you probably remember that giving the sweeping command to “clean up this mess” doesn’t work well, but “put the Lego pieces into this box” is doable. A good financial advisor breaks the big, daunting task of planning your financial life into digestible pieces.
6) Know that it’s okay to say no. You don’t need to solve everyone else’s financial problems – that means working with your advisor to figure out how much you can contribute to your child’s college education while you save for your retirement and using that knowledge to say “no” to schools that are outside of your range (your kids will still find a great school); it means deciding how much to give to charity and sticking to that, no matter how many worthy causes are asking for more, and saying “I’m sorry, but no” when asked to loan money to family members or otherwise bail them out of their
financial difficulties. Being okay with saying “no” can eliminate a lot of self-inflicted stress.
Knowledge and understanding are at the heart of feeling confident, and confidence conquers stress. As financial advisors, our personal mission is to help our clients to become active participants in their financial lives. We are inspired by Louisa May Alcott, the author of Little Women, who said, “I am not afraid of storms for I am learning how to sail my ship.” At Gold Medal Waters, we’re here to help you sail. Reach out to us with any questions.