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“I Don’t Know Where to Begin”

Don’t Bitch

Getting Over the Unknown

I am one of the fortunate people who really like what they do for a living. One of the main reasons I enjoy my work is that it takes me out into the world. About once a month I travel to far-flung places such as Phoenix (Arizona), Pasadena (California), Fort Worth (Texas), or Fort Wayne (Indiana) to talk to groups of people—often groups of women—about money. My favorite part of these journeys isn’t the half-hour or so prepared speech I get to give. It’s the question-and-answer session that comes after. Some of the questions are always regional (“Is now a good time to buy a house in this market?” or “What do you think of the future of the big national corporate conglomerate that just happens to be based three miles down the road?”). But others are so wide-ranging I can count on them being raised whether I’m holding court in Detroit, Duluth, or Des Moines. Someone generally wants to know: “What’s the best way to choose a financial adviser?” Someone else typically asks: “Should I be buying long-term-care insurance for me or my parents?”

But the question I get asked more than any other—the one I get asked every single time—is the following. It’s never first. In fact, it’s often last . . . as if the person speaking waited until the moderator said, “We have time for only three more.” It usually comes out of the mouth of someone who feels a little silly asking it—who prefaces her question with an apology to me and the rest of the audience for being “so basic.” And it goes like this:

I don’t even know where to start. I mean, really. I feel like I know so little about my money that I don’t even know where to begin. Can you point me to a book or a magazine or a website or something that can get me going?

Sometimes, the floodgates really open, and the questioner ends with the complete truth, confession-style: “I’m tired of feeling like a total idiot about my money.”

I have to admit, the person who asks this question immediately becomes my favorite person in any crowd. Not just because she dug deep and was honest about wanting help. But because now that she’s revealed that she’s looking for help, I can do something for her.

As I collected—via e-mail—letters and excuses from women around the country about why they don’t take a more active role managing their money, this feeling of total inadequacy popped up again and again. From young women, older women, women with college and graduate degrees, women in the workforce, stay-at-home moms . . . in other words, from all types of women, in all parts of the country.

This one, from Rebecca, a stay-at-home mom, is typical:

For anything else in my life, I would get on the Internet, read some articles, talk to some people I know, and make a decision. But I’m paralyzed when it comes to money. I don’t even know where to start.

Jennifer, a publicist, put it even more succinctly:

I don’t know where to begin.

This Is Where You Begin

You’re in the right place: This is where you start. In this chapter, I’m going to give you a set of tools you can rely on to make any financial decision, to sound brilliant defending why you’re making it, and to quickly get on the road to a richer life.

But first, let’s explore why you can’t get started with your money.

Rebecca put it really well when she said: “For anything else in my life, I would get on the Internet, read some articles, talk to some people I know, and make a decision.” That, in a nutshell, is how women make nearly every large, important decision. We do our homework using the resources at our fingertips—the Internet, newspapers, and magazines. We tend to be consensus builders so we gather the opinions of the people we trust most: our mothers, sisters, and girlfriends. We take our time readying a case we could defend in the toughest of courts, and then (only then) do we pull the trigger.

Most of the time, as we’ve learned through experience, that sort of decision making works fine. Say you’re an East Coaster trying to plan a vacation for your family of five. You know you want to go to the beach in December. So you hop on the Internet and go to a site like weather.com. You learn that at that time of year Florida’s weather is inconsistent but the Caribbean can be counted on for sun. Your spouse wants a direct flight, so that eliminates a few of the smaller islands. You both want a short flight, so you focus in on Puerto Rico. Next you surf to tripadvisor.com to see what people are recommending as kid-friendly places to stay. You narrow your search to a Westin and a Hyatt. Finally, you talk to your friends who have been to Puerto Rico, settle on a hotel, book flights, and emerge confident you’ll have a great vacation.

And that’s, as I said, a fairly large, important, expensive decision. You make smaller decisions with confidence every single day. Paper or plastic? Grey’s Anatomy or Law and Order? Coke, Pepsi, or—what the heck—Fresca? You blow through them as though they’re absolutely nothing. If, occasionally, you hit a stumbling block—heels or flats? pants or a skirt?—a little trial and error (or a call to a close friend) does the trick.

Why are you able to make these decisions—large and small—with such aplomb? Because you’ve learned, over the course of your life, that for you there are right and wrong answers. Fresca gets drunk in your house; Pepsi sits in the pantry. Grey’s Dr. McDreamy does more for you then Law’s not-so-dreamy detectives. Unless you’re fighting a spouse over the remote, there’s no argument. One is better. One is right.

Yet in the world of money—particularly in the world of investing—there are few right answers. Which stock is the best one to buy? Which mutual fund will rise the fastest? People may claim to know (just turn on CNBC and you’ll see a dozen of them within an hour), but no one really does. That makes it tough to get to the starting line, particularly for women.

We like to know the outcome before we make any decision. That’s why we not only cook from recipes but prefer that those recipes come from Julia or Martha or Rachael because we’ve learned that we can trust them. We may loooove Tom Hanks as much as we love our spouses, but we’re willing to spend $10.50 for a ticket to his latest picture only after we’ve read a handful of uncontested reviews. Everything from the books we select for our book clubs to the doctors we see for our children gets sliced and diced and picked apart and commented on before we step up to the plate.

And women not only need more information but need it to be broken down into small, digestible pieces. Along the way, if we’re not convinced of a particular piece, we stop and ask for help—we’d prefer it from trusted sources. (Figuring out how to get good help is such a conundrum for women that I deal with that matter specifically in Chapter 9.) Not surprisingly, it takes women longer than men to make most decisions. Not just about money, about everything. Men don’t need to know the answer before they tackle the question. They tend to say, “Gimme the facts, gimme the figures, gimme the logic and the rationale, and let me build a machine.” It’s very much a left-brain approach. They work from start to finish, from left to right, from point A to point B. If they like Denzel Washington, knowing that Denzel Washington is in a new movie is enough to make them buy a ticket. If the end result isn’t totally to their liking, they either fiddle with the decision to make it more acceptable or—more likely—figure out a way to defend it, convincing everyone around them (and themselves in the process) that the outcome was precisely the result they had in mind all along.

And there are other complicating factors:

•The world of money has its own vocabulary. Don’t worry, I define terms—in English—beginning on page 251.)

•The world of money is shrouded in secrecy. Some progress has been made, but talking about financial things—how much credit card debt you’re carrying, the size of your student loans—just isn’t polite. If the number is too high, friends will think you’re bragging. If it’s too low, they’ll think you’re asking for a handout. Nobody wins.

•The world of money involves higher stakes than picking a movie to see on date night. When you’re deciding whether to contribute to a 401(k) and how to invest the money you’re contributing, whether to refinance the mortgage, whether to accept a new job, whether to buy life insurance, or whom to name as guardian for your kids in your will, money decisions tend to be important, potentially life-changing decisions.

And there are no right answers. Of course you’re stuck.

The Power of “Good Enough”

The logical next question is: How do you get unstuck? Step one is getting yourself to acknowledge—no, more than that—to really believe, that in this particular area of your life, you do not have to be right. Yes, you heard me correctly. You don’t have to be right. Not only that:

You don’t have to be perfect.

You don’t have to be the best.

You don’t have to be at the top of some class.

You don’t have to be the smartest.

You don’t have to be the winner.

You don’t have to prove yourself.

You don’t have to do better than your neighbors or your parents or your siblings or your friends.

Instead:

You have to be good enough.

And you have to believe that good enough is just fine.

What does that mean in real terms? It means your investments don’t have to do better than the market as a whole or better than other people’s investments. They simply have to do well enough to meet your goals. It means you don’t have to save more or spend more or make more than anyone else. It means you have to negotiate these areas of your life well enough to secure your happiness and make yourself comfortable.

You do not have to justify your financial life. Not to the markets. Not to your friends. Not to your relatives. And, most certainly, not to the men in your life who may not understand how you can sit there, perfectly satisfied with your “good enough” portfolio, without reaching for the stars. (Try not to blame them. It’s in their DNA, just as not taking so many risks that you can’t sleep at night is in yours.)

I know this sounds foreign. We live in a world where relativity is key to our sense of inner peace. It’s not enough to be thin or smart or funny. You have to be thinner or smarter or funnier than someone else. The problem is, in the world of money this kind of measuring up won’t make you rich. It will make you poor. Why? Because it will entice you to behave in one of two ways, neither of them any good for your wallet. Either you will go overboard in your quest for wealth, taking risks that are both unnecessary and unwise (Amazon at $400, anyone?). Or you will become so convinced of your inability to be richer than the next guy or gal that, once again, you will become stuck.

The truly great thing about “good enough”—and the reason it is so powerful—is that it allows you to get to the starting line in a way that waiting for the ultimate, best possible result does not. Take an example that you may have faced dozens of times in the past couple of years: refinancing your mortgage. Say you’re sitting with a $200,000 30-year fixed-rate home loan at 63/4 percent. Rates have fallen to 6 percent. Refinancing now would save you $98 a month—the difference in your $1,297 monthly payment and the $1,199 new one. But some “experts” have been quoted in the paper saying they see rates falling to 5 percent, maybe even lower. Do you refinance now? Or do you wait?

If you’re expecting the best possible ultimate result, you are stuck. What if tomorrow rates fall farther? Then you’ll be kicking yourself, won’t you?

But if you’re a believer in the power of “good enough,” you forge ahead. And then—guess what? Starting tomorrow, you pay nearly $100 less a month. Over the life of your loan, that means you’ll save $35,314 in interest alone. If you put the money you’re saving into an IRA or other account where it can grow tax-free, at the end of those thirty years you’ll have a fat $147,126 in addition to your paid-off house.

Map to a Million

How much more money could you save if you made the little changes I’m going to suggest to you throughout this book? How much richer could you be? I want you to see the answers in straightforward numerical terms. I want you to see the actual dollars—and in some cases cents. So throughout the chapter I’ve sprinkled lots of little Maps to a Million. Unless otherwise noted, I’ve calculated returns at 8 percent and assumed that the savings invested were tax-deferred. Follow the actual steps and you’ll see the wealth start to add up. Then, starting on page 241, you can see exactly how fast incorporating a few of these steps into your life really does add up to a million—or more!

Refinance a $275,000 mortgage

Prior rate:63/4 percent

Monthly payment:$1,783

New rate: 6 percent

Monthly payment: $1,648

Annual savings: $1,620

10-year savings: $24,997

20-year savings: $80,182

30-year savings: $202,674

If the rates fall to 5 percent—or lower—as the “expert” predicted, you can always refinance again. But what if rates don’t fall that far? What if the “expert”—because in this world of no right answers even “experts” can be off-base—got it wrong? In the world of ultimate perfection, you would lose. But in the world of “good enough,” you still would come out a winner.

Who Are You Doing This For? You!

My aim is to make you feel like a winner. I want to make you feel better about yourself and your life. But in order to do that, I need your help. The unfortunate truth is that taking control of your financial life won’t work until, like a good diet, you are doing it for yourself. You may be able to lose five pounds for your husband or your doctor. But you’ll keep them off only if you’re doing it for yourself. You can buy a book on money management because it makes your partner happy to see you walking into the business section of your local bookstore. But you’ll read it and follow its advice only if you’re doing it for yourself.

Sound selfish? It’s the furthest thing from selfish. Becoming financially self-sufficient is like giving a huge gift to the people you love. It means you will not be a burden to your parents or your children. If you are in a committed relationship, having a handle on your own money makes you a full partner rather than an associate. (And no, having more than enough money to live on doesn’t mean you don’t have to take the reins. Do you think your grown children relish the thought of taking over your checkbook because you never learned how to pay bills during your long marriage? Think again.)

You are taking control of your money because doing so will make you feel happier and smarter, more confident, more content, and more useful. Having a little extra money in your wallet will not make you feel more satisfied with your life. What you do with the extra money will do that. Having better control of that money, however, will make a huge difference in how you view yourself and your place in the world.

The folks at Real Simple magazine did a study in which they asked women to describe in a word or two what they’d need to feel successful. Here is what the respondents said:

Happiness80%

Peace of mind75%

Fulfillment71%

Self-confidence71%

Freedom70%

Balance70%

Learning to manage your own money can help you achieve about every one of those line items. For JoAnn, who is 68 and retired, it did precisely that. Here is her story:

During my growing-up years, there was very little money to manage. At the age of 10, I asked my parents to give me the money that they would have spent on my clothes and allow me to do my own purchasing. I was unhappy with the things my mother bought for me in a very low-end department store in Detroit. I felt that I could do a better job. I found I could buy three semi-attractive outfits instead of the six cheaper ones that my mother purchased. Each year, I added a few better things and even managed to snag a much-lusted-after cashmere sweater on sale. I was very proud.

Lack of money continued into my married years, this time accompanied by bill collectors. It was a time of minimum payments on credit cards and trying to meet the needs of the children. And it was very depressing and stressful for the whole family.

I took a minimum-wage job when the youngest child went to kindergarten. The job had health benefits and a pension to make up for the low salary. My husband felt that every cent I earned was needed to reduce our debt and run our family. I made a decision on my own, however, and signed up at work to purchase a $25.00 U.S. Savings Bond every two weeks.

Each time I was promoted or received a raise, I invested most of that money in more and higher-denomination bonds. Over the years, I quietly accumulated the unimaginable (to me) sum of $100,000. My husband and I managed, through both of our jobs, to resolve our money problems and shortages. Today, the bonds are untouched in a safety deposit box for use in case of an unexpected major expense or a future big surprise for the kids! It was a difficult time for me, and I never want to be poor again.

In recent years, I have left most of the money management to my husband. I am knowledgeable about my life-time pension, I know when the Social Security checks are direct-deposited, and I know where our money is invested. And I also know I could carry on financially in the future if I had to.

Can you imagine: $100,000-plus on $25 twice a month. Yet JoAnn did it. How? By taking control of her life. By taking control and starting to save even when her husband thought the money would be better spent in other ways. By doing what she knew was the right thing for herself, her future, and her kids. And how did managing her own money make JoAnn feel? “Very proud,” she said.

JoAnn had every right to feel proud. And you can feel that way, too.