I Know What To Do! So Why Don’t I??

Written by Barbara Huson

Could this be you? You’ve read volumes on investing, even attended some classes. You understand stocks, bonds, and the value of diversification. You own a few funds in your retirement account.

Still, you continue to ignore or neglect your money, even though you know better. Why?

Blame it on traditional financial education…where the emphasis is on filling your head with facts rather than fostering your courage to change.

Raise your hand if you’ve ever been given the tools to boost Self-Efficacy, the most powerful predictor of financial well-being. (I didn’t think so)

Self-Efficacy—a concept developed by the Stanford psychologist Albert Bandura—is a person’s belief in their ability to succeed in a given task or goal.

If you don’t believe you can invest wisely without screwing up irreparably, you likely won’t even try. Or you’ll stop at the first stumbling block. Or worse, unconsciously make bad choices that reaffirms your limiting belief.

Enhancing financial Self-Efficacy is the secret sauce for financial success. It’s the difference between knowing what to do and actually doing it, between being competent and feeling confident.

Yet, I doubt you’ll be shown how to shore up Self-Efficacy by most professional advisors. But thanks to Dr. Bandura’s research, here are 4 powerful techniques to do just that:

Experience Success—Select a task that’s sufficiently challenging but definitely doable. Have that money talk with your spouse. Organize your financial documents. Balance your checkbook. As the saying goes, “confidence is a memory of success.”
Find Role Models—Observe friends, family, even perfect strangers who are financially savvy. Watching others successfully complete financial tasks provides not only inspiration, but a template to follow.
Get Encouragement—Hang around with people who will cheer you on because they truly believe in you. Those who say, “I know you can do it!” Stay away from naysayers.
Manage Emotions—if you’re depressed, traumatized or anxious, the inner work is crucial. Read self-help books. Find a counselor. Join a support group. Talk to a friend. Whatever it takes to relieve your pain, stress, worry and fear.

What can you do today to increase your Financial Self-Efficacy?

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What’s $hame Got To Do With It?

Written by Barbara Huson

It was a conversation with a friend I’ll never forget. Her family was dirt poor. Mine was quite wealthy.

Our childhoods were starkly different, but we shared a startling similarity. Growing up, we both felt a lot of shame around our family’s finances.

I hated being different from my friends. She loathed feeling less than her peers. I never knew if people liked me for me or my rich parents. She always suspected others pitied or looked down on her.

That’s when I realized: Money Shame is ubiquitous regardless of one’s economic status.

Recently, I’ve also realized: Money (or lack of it) is not the source of our shame. Money simply magnifies the shame we’ve always carried.

Shame is the intense pain of feeling so awful, so flawed, so defective that I’m worthless and unlovable.

I’m convinced that unhealed shame is perhaps the major reason smart, capable women struggle financially.

Here’s why. When shame is triggered, the logical thinking part of our brain virtually shuts down.

“It’s like our IQ drops 30 points,” Bret Lyon, founder of the Center for Healing Shame, told me. “We can’t think. We freeze. We feel stupid. We’re at a loss for words.”

Bret noted, during a workshop I attended last week, that because shame is so unbearable, we’ll do anything to avoid feeling it. He described 4 common reactions:

Denial—numbing the pain, often through addictions (compulsive spending, chronic debting, and codependency).
Attacking others—lashing out or blaming another, taking the onus off ourselves
Attacking ourselves—slipping into brutal self-flagellation for being less than perfect.
Withdrawal—isolating from others, going within to lick our wounds,

Each reaction, if left unchecked, can radically erode one’s financial stability. Which confirms my suspicion: the secret to financial security, for many women, lies in transforming toxic shame (self-loathing) into healthy shame (self-compassion).

To demonstrate how to do this, Bret led us through a 2-part exercise.

First, we adopted a shame-based posture: head bent, eyes lowered, shoulders slumped, heart heavy. Honestly, I felt horrible!

Next, we paired up and shared something we were proud of. The difference was astounding!

Recalling a past success quickly shifted my feeling horrible to “Yeah, I’m a flawed human being like everyone else and I have strengths.” That, in a nutshell, is the definition of healthy shame.

Shame and money is a relatively new topic I’m exploring. I’d love to know if you can relate. Leave me a comment below.

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Figuring Out ‘Financialese’

Written by Barbara Huson

Have you ever met with a financial advisor and wished you had a translator? I know I did a few years ago when my sisters and I spent months interviewing various advisors for some family trusts.

Nice people, all of them. But once they got started, they were speaking in a foreign tongue.

I thought I knew this language. After all, I’ve written 6 books about money, including Finding a Financial Advisor You Can Trust.

But these folks, at various points in the discussion, had my head reeling. Then it hit me.

No wonder so many women aren’t getting the financial help they need. One conversation with an advisor and their heads are reeling too. And their first reaction is often to put their reeling heads right back in the sand.

Consider this blog, in part, a Plea to Professionals. C’mon, you people. Speak in plain English. And then check in with clients at frequent intervals to make sure they understand what you are telling them..

Even as I write that I know that the truth is, the onus is on us.

I am a Big Believer in working with professionals…be it for a root canal or retirement plan. And sometimes the latter can be as painful as the former! But it doesn’t need to be.

Not if we’re willing to speak up, ask for clarification, and keep asking until we understand. Which is exactly what I had to do in those meetings. And you know what? Every expert was happy to explain. And I actually learned a lot.

It all boils down to this. If we don’t understand ‘Financialese,’ it doesn’t mean we’re stupid. It’s simply a sign to ask more questions.

The payoff is clarity. But, I’m here to tell you, the real reward is how powerful you’ll feel for standing up for yourself.

Have you ever found your head reeling while talking to a financial professional ? Leave a comment below to tell me what you did.

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5 Terrific Tips for Investing Wisely

Written by Barbara Huson

I promise. You don’t need a boat load of money to build wealth. What you do need is to: Spend less; Save more; Invest wisely.

The first two are self-explanatory. Investing, however, is where most people trip up, which is not surprising, given that there’s an entire industry dedicated to making investing sound difficult and confusing.

Let me share with you 5 tips that really helped me finally understand investing (with links to learn more).

EDUCATE YOURSELF

There are only 5 places to invest (called asset classes)—stocks, bonds, real estate, cash and commodities. Your first task is to learn the difference between these assets classes. http://bit.ly/lucrepersonalfinance

DON’T KEEP EVERYTHING IN CASH

Cash in the bank, or under the mattress, may feel “safe.” But long term, you’re putting yourself at great risk. To ensure you don’t outlive your money, at least a portion needs to be in assets that grow faster than inflation and taxes take it away. If inflation averages 3% and your money is sitting in an account paying 1%, your buying power will significantly shrink over time. (Why Cash May Not Be as Safe as You Think)

UNDERSTAND THE RULE OF 72

This rule explains how long it will take to double your money—by dividing the interest rate or compound return into 72. Let’s say you own a fund that returns 8% annually. 72 divided by 8 equals 9…so it’ll take 9 years to double your money. Put that same amount in the bank, paying 1% interest, it’ll take 72 years to double. (Rule of 72 Definition & Example | InvestingAnswers)

MINIMIZE MARKET RISK

It’s true, the market, like a roller coaster, feels really risky. But price swings only matter when you sell. To significantly diminish the risk of loss and increase the potential for gain:

Have a longer time frame. Money you need is less than 3 years should be in cash. Everything else should be invested. The Importance Of Time Horizons For Investing (And Beyond)

Be well diversified, spreading your money among different asset classes. https://www.nerdwallet.com/blog/investing/diversification

SEEK SUPPORT

The whole point of investing is to make sure your money is adequately allocated to meet your short and long term goals. To figure out the best diversification for you, consult a Fee Only Certified Financial Planner. Start with: www.garrettplanningnetwork.com

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Joint vs Separate Accounts

Written by Barbara Huson

If you’re married, or about to be, I have a question for you. Do you have money in your own name?

Even if you’re blissfully in love with each other, even if (s)he’s filthy rich or a financial genius, it’s critical to have your own economic identity a bank account and credit card in your own name.

In part, it’s a matter of self-protection. If anything happens to your Prince(ss) Charming, you could be in big trouble. Oh, the horror stories I’ve heard from women who couldn’t get credit or had all kinds of legal problems after losing a spouse through death or divorce because everything was listed under their spouse’s name.

Also, since money is the #1 source of marital spats, having separate accounts could minimize arguments. As Stephanie Sarkis pointed out in Psychology Today, “the less you argue about money, the closer you will feel to your partner.”

But there’s also a psychological component. A separate financial identity, even while maintaining shared accounts, makes a major personal statement. It has nothing to do with the relationship. It has everything to do with your self-concept and sense of autonomy.

Putting money in your name is about growing up, becoming an adult, claiming your sovereignty over your own life.

I’d love to hear if money is a source of strife or harmony in your relationship? Leave a comment below.

Are you in search of a safe place to talk money with other women? My brand new virtual community, The Wealth Connection, is that safe place. Click here for more info.

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A Reason to Worry….Or A Call to Action?

Written by Barbara Huson

Even the wealthiest among us—those with earnings over $200,000 or a net worth over $3 million—still worry about money.

Their biggest fear: Inflation.

Inflation is, indeed, a ravenous creature that eats into our cash like a caterpillar on a leaf…slowly, methodically, little bits at a time.

For years, however, inflation has stayed quite low. But that’s rapidly changing. The Wall Street Journal just announced, “US inflation hit its highest rate in more than six years.” And inflation is expected to keep escalating.

Is it time to start worrying? Heavens NO! The worst response to climbing costs (or most anything else for that matter) is to go into fear, which tends to have a paralyzing effect.

Instead, look at rising inflation as a resounding call to action…no matter how much or how little money you have.

The only way to counter the ravages of rising prices is to make sure at least some of your savings is working harder than it would in a bank. How? By investing in assets that grow faster than what inflation takes away.

Now is the time to make sure your money is well diversified. Here’s the standard rule of thumb for investing wisely:

Money you need in the next three to five years–for emergencies, unexpected expenses, or short-term goals–should be in cash or cash equivalents like money market funds, CD’s, or short-term treasuries.
Money you’ll need in the next five to ten years should be in a mix of stocks and bonds.
Money you won’t need for ten or more years should be mostly in stocks and perhaps commodities and real estate.

You can’t eliminate inflation. But you can do a lot to protect yourself from it.

Tell me about your biggest money fear. Leave a comment below.

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Brilliant Idea for Raising $avvy Kid$

Written by Barbara Huson

Pati Wolfgang sent me this story. It’s so good, I had to share. If you have kids, you’ve got to read this!

When my boys were tiny and we went in the store, I’d bring pencil and paper.

I’d also count the money in my wallet before going in to see how much treat money we had.

Later, I had them help count.

Then, when they saw things, they could see if that fit in their treat allowance. What was sweet, too, is plenty of times, one would give their funds to their brother. Or they’d pool together.

If it was more than the daily funds allowed, I would write down, with their help, what it was and what store it was in. That left them feeling heard. They knew what they wanted mattered, even if it couldn’t be bought that day.

They’d focus on reading the label to me, figuring out which store. It was cute.

Then, once a week or so, we’d have a fun fund meeting and go over the list. We’d talk about the extra “fun fund” we had that week. I’d talk about how this week was more than last because…. etc. That helped them see, sometimes if the plumber came, we could still do something fun, but we toned it back a little.

They’d constantly say how it helped them to see how they could want something so much, then just a day or two later not want it any more.

They’re adults now. They love to save just as much as they love to treat themselves. They still share and pool funds.

Share below how you teach your kids about money.

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How the Wealthy Think…and You Can Too!

Written by Barbara Huson

Q. How can I SAVE money to create wealth (which means cutting back spending) and still have a feeling of ABUNDANCE, not a mentality of LACK (which means the desire to SPEND).

A. Oh the devious ways we fool ourselves by how we choose to think.

If you think like a Consumer, then cutting back spending to sock away savings will absolutely feel like scarcity or deprivation, while spending offers the pleasurable (but deceptive) pretense of abundance.

When you think like a Wealth Builder, you understand that every cent you put in savings is money you’re giving to YOU (not Starbucks or MasterCard), so that ultimately you can purchase what you please without pressure or worry.

To paraphrase the old saw, a Wealth Builder tells her money where to go. A Consumer wonders where it went.

The difference between the two mindsets is not deprivation but delayed gratification. And it’s easy if you think small and automate. Every month have some money, no matter how small, automatically transferred from your checking to your savings account. You don’t miss what you don’t see.

What if there’s nothing to spare at month’s end? Try giving up something small, like a daily latte, and bank the savings. One woman funded her IRA with lose change from her purse, coins she found in pockets doing laundry, and cash from the coupons she redeemed at the market.

I recommend two types of savings accounts. An Untouchable for emergencies and unexpected expenses. And a Touchable for fun stuff, like a vacation or shoe sale—which keeps you from dipping into your emergency savings, yet not feeling deprived.

Bottom line: Instant gratification is such a cruel illusion. I’ll never forget meeting an elderly woman who lamented: “I always got such joy from shopping. But now that I’m old and I look back on all the money I wasted, I wish to God I had saved more.”

How do you balance feeling abundant with the discipline of spending less and saving more? Leave me a comment below.

Thank you, Tracy Beth & Maria Aum, for the Q.

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Talking to My Man About Money—Oy Vey!

Written by Barbara Huson

I remember when my now-husband & I were about to move in together. We’d been dating for 2 years. And I was struggling. At what point do we have THE TALK about money?

We each knew the other had no credit card debt. Beyond that, we kept tip-toeing around the topic.

It reminded me of a letter to Ann Landers from a woman who wanted to ask her boyfriend to help pay for her birth control, but didn’t feel she knew him well enough to ask!

I laughed when I read that. But here I was—a financial coach—doing the same!!! I just couldn’t bring myself to, as my friend Manisha Thakor titled her terrific book, Get Financially Naked with the man I loved. One day, I happened on an old journal from high school. I’d forgotten how I always wondered if people liked me for me or because my family was rich…how hard I tried to be like everyone else.

No wonder I was scared to expose myself financially. I was sure he’d reject or judge me harshly. With that realization, my resistance subsided.

Later that week, as we were finishing breakfast, without even thinking, I got up, retrieved my latest financial statements, pushed aside the dishes, spread out the papers, and said, “This is what I have.”

He listened, asked a few questions, then explained what was in his accounts. That was it…a non-event. But at the same time, it was clearly a turning point for us. I learned 3 important lessons that day:

The fear of doing is far worse than the actual doing! Afterwards, I wondered, “what was the big deal?”
Resistance dissolves when its root is revealed. The moment I realized my childhood fears were the culprit, those old demons didn’t seem so threatening.
Financial transparency is vital to intimacy and trust. “Otherwise,” as Manisha writes, “like termites eating away at the foundation of your relationship, little nagging doubts or questions about each other’s finances could end up destroying what is currently a beautiful life.”

I’d love to hear your experience talking finances with your partner. Leave me a comment below.

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“Impossible” Simply Means “It’s Not a Priority”

Written by Barbara Huson

She, like so many others, made a decent salary, but could never get ahead.

“I cash my paycheck and before I know it, it’s gone,” she told me, hoping for advice.

“Why don’t you try paying yourself first?” I suggested. “Every time you get paid, right off the bat, put a portion in a savings account. Even a small amount is better than nothing.”

“That’s impossible,“ she said with a sigh of resignation. “I don’t make enough. There’s nothing left to save.”

That conversation occurred years ago. Imagine my surprise when she recently contacted me to let me know she followed my suggestion, never thinking it would actually work.

“I didn’t even wait until the end of the month to see how much was left after paying bills,” she said. “I paid me, then my bills, and anything left, was mine to spend.”

To her amazement, she never missed what she set aside. “Eventually,” she said, “I began putting some of what I would ordinarily spend into the savings account too.”

The act of savings had become a habit…a habit that changed the course of her life.

“Had I not had that kitty when I got divorced, I couldn’t have made it,” she told me. “I would have been in the poorhouse without it.”

Today, she told me proudly, she is quite well off… even though her paycheck still isn’t very big.

“I can’t believe how my savings has grown,” she said in amazement. “I can’t believe how much I have. And how much more in control I feel.”

She’d discovered the most powerful principle of wealth building: You don’t need a lot of money to create wealth. And the time to start saving is before you wish you had…when it feels impossible. The truth is: everything is possible once you make it a priority.

When it comes to money, what is your priority? Be brutally honest…I’d love to hear your answer. Leave me a comment below.

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Financial Wellness

I Know What To Do! So Why Don’t I??

What’s $hame Got To Do With It?

Figuring Out ‘Financialese’

5 Terrific Tips for Investing Wisely

Joint vs Separate Accounts

A Reason to Worry….Or A Call to Action?

Brilliant Idea for Raising $avvy Kid$

How the Wealthy Think…and You Can Too!

Talking to My Man About Money—Oy Vey!

“Impossible” Simply Means “It’s Not a Priority”

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