|
INTRODUCTION
When I set out to write this book, one of my objectives was to help
women put money in perspective. It seems money has become far more important
than it should be. Our drive to amass wealth, the fear we feel when
we think or are forced to face the horror that we may not have enough,
and the sleepless nights we endure as we wonder if the cheque will clear
or bounce to the stratosphere are all unhealthy.
On September 3, 1997, USA Today published a bar graph based on the research done by Dryfus and the National Center for Women and Retirement Research that described what people worry about in terms of their money. They divided the results by gender and those results were very telling. Seventy percent of women feared not having enough money when they were old. When Statistics Canada released its report, Growing Old in Canada, an alarming 40 percent of women over the age of 75 who were living on their own, had incomes below the poverty line. And since a woman 75 or older has a greater chance of being disabled than her male counterpart, this can paint a gray picture for our futures. But we can paint this dismal picture with fresher, more vibrant colours. We have the ability to do what we must to take charge of our present and our future. But we have to understand how money works to do it. The most obvious indication of the irrationality surrounding money is the fear and despair many people feel when it comes to managing this very basic economic tool. If we can, just for a moment, forget the more complex issues - investing, retirement planning, writing a business plan - and look to the simple tasks, we can see the extremes to which people will go to not deal with this basic tool. We would rather buy overdraft protection, one of the most expensive forms of credit, than reconcile our chequebooks. We don't save. Using credit cards, we spend our yet-to-be earned income without much thought where the money will come from to pay it back. We don't have enough or the right kind of insurance. We don't have wills. We just don't want to think about it. Despite the best efforts of a variety of personal financial experts to put money in perspective, the language of money remains extreme. We talk about "worshipping money" and about being "money crazy." We consider money to be dirty: "filthy" rich, "stinking" rich, "money laundering", "dirt cheap". We worry about being "ripped-off" or "taken to the cleaners". We loathe the idea of talking to our children about money, fearing we will imbue them with an immoral love (or is it lust) for money. We still have a long way to go in coming to terms with money and the role it plays in our lives. Money issues seem to pull us to the two extremes: from complete denial to obsessive concern. Somewhere there is a middle road - one that will be infinitely easier to walk - where we can put money into its correct context and deal with it in a logical, rational and decent manner. Most financial discussions fail to help people understand how they feel about money. While they may demonstrate how to budget, stress the importance of saving, and describe the various investments available, they seem incapable of motivating people to put into practice what many already know. What little that has been written on psychology of money often doesn't integrate the practical information. And despite the proliferation of books on all aspects of personal finance, the ability to convert that knowledge into practical day-to-day good money management is elusive. This book has been designed to deal with both the psychological and the practical. It will not solve your financial problems. I know that is the implicit promise of most books on money, but that promise is unrealistic. Just as money - or more money - is not the solution to most people's needs for love, security, power, freedom, status or comfort, so too this book cannot miraculously take you from where you are now to where you want to be. Only you can do that. What this book will do, if you are a willing participant in the process, is help you to uncover your personal feelings and attitudes toward money. It will provide you with information and proven techniques for positive money management. It will be a guide to what you must think about in order to stay on an even keel and keep money in its right place in your life. It will ask you many questions that you must answer for yourself, if you want to discover how to achieve financial health. By answering these questions, you will make some discoveries. You will find that money management is easy. You will learn new ways of dealing with money. You will achieve the results you want.
LIFE CYCLE FINANCIAL PLANNING We live in the post-modern world, where anything is possible and almost nothing is certain. Václav Havel
Life cycle issues have been used for years to help manufacturers and
retailers decide how to target their customers. If you're a single woman
without children, you likely read a different magazine, eat different
food, and wear different clothes than the woman who is mired in rug rats.
When I was single, I ate out more often, I wore high-heeled shoes and
I hardly ever thought about spot removers for my carpet, my couch or my
clothes.
Just as where we are in our life cycle influences the commodities we buy, so too must it be considered when we're thinking about the financial products we should own. As I've moved through my life cycle, I've gone from shopping for guaranteed investment certificates to shopping for mutual funds. I've had to think about divorce, stepchildren and satisfying financial commitments to ex-spouses. And I've been forced to face my own mortality and make a will. Perhaps the single change in my life that has most affected me is the birth of my children. I had no idea that it would be this all-consuming, over-the-top, fantabulous experience. I've found in talking with women that I'm not the only one completely blown away by the experience. In fact, one of the questions I'm most often asked is, "How can I stay home with my baby and still help make ends meet?" This is just one example of how a change in life cycle can throw a spanner in the works of the best laid plans. This is one of those issues so new for women that we haven't had any long-term practice dealing with it. Our liberation has given us many new opportunities, and with those opportunities has come the need to make choices. I often suggest to new preggies, for example, that they trying living on one income while they are pregnant to see how the family copes, should the sweet smell of baby addle their brain and leave them longing to remain a prisoner of love. It would be a dry run at living on one income just in case one income is all there would be in the future. And it's a great way to actively pay down debt and build up reserves for emergencies, even if Mommy Newest does decide to return to work after the baby is born. So, the life cycle issue has become increasingly more complicated as our norms have changed. In Gail Sheehy's New Passages, she says that until recently, "Chronological age has served as a uniform criterion for normalizing the roles and responsibilities that individuals assume over a lifetime... age norms have shifted and are no longer normative." In today's fast-moving, ever-changing, nothing's-the-same-as-it-was world, age has little to do with stage, and we are facing a new paradigm in terms of dealing with where we should be when. For most of human history, only one in ten people lived to age 65. In North America today, eight in ten people will see their sixty-fifth birthday. No longer are forty-somethings delivering their sixty-something parents into the care of old age homes, now it is the seventy-something delivering her ninety-something mother. And the old demarcations we've growth used to - adulthood at 21, retirement at 65 - have no place in our current reality. The traditional life sequence - school, job, marriage, child rearing, empty nesting, widowhood - has become jumbled. Many women complete their degrees well after the traditional school age. Many delay having children until their careers are well established. And divorce has changed the family structure so that many women now must raise children on their own, or help to raise stepchildren, without ever having considered what parenthood would hold for them. Just thinking about the various forms a family can take is enough to boggle the mind. And just as there are new structures within which we must live, so too are there new financial issues with which we must come to terms. Since there is no such thing as a normal life cycle anymore, does that mean we have to throw out the concept of life cycle planning? I don't believe it does. After all, whether you are 20 or 40 and having your first child, the issue of educational savings becomes important. And whether you are widowed at 55 or divorced at 30, you better have your own credit history established if you want to be able to function within the financial world. Think about financial planning as a trip through the supermarket. First there are the essentials you must have to keep body and soul together. What you put in your basket will be a direct reflection of your needs and the needs of those around you. If you are single, your essentials may be few and your fridge quite empty. If you're married with children, you'll need a larger larder. Once you've done the core stuff, then you have to look at changes in the normal weekly routine that will affect what you're buying. If you're planning to have the folks over for turkey dinner, you'll be adding cranberry jelly and stuffing to your basket. If you're throwing a birthday party, oooh, now we're getting to the good stuff: ice cream and cake. Then there's the shopping you do, just in case ... just in case friends drop in and you need pate and crackers for a light nosh or just in case you get a cold and need a steaming bowl of chicken soup. The financial life cycle is very similar. First there's the core stuff, the basics of your financial larder. Just about everyone needs a chequing account and a banking card. Everyone needs to establish a credit history. And everyone should begin investing as soon as they have an extra $25. (Yes, that's all it takes to get started, and the longer you wait the harder it is to convince yourself you can live without spending that 25 bucks.)
As you move through your life cycle - as your life changes - you'll
need to add or subtract from your financial basket. Early on, you'll be
adding. As soon as you have some assets, you'll need a will. As soon as
you have dependents, you'll need insurance. And as you increase your income,
you'll need to buy more and different types of investments to meet your
long-term goals. Once you've established a good asset base and most of
your dependents have gone their own ways, you can get rid of most, if
not all, of your life insurance. As you move closer to retirement, you
will consolidate your retirement savings for convenience and ease of conversion.
You may even shift some of your assets to your children's hands, or to
a trust, to reduce your estate and the taxes payable on death. WHY A BOOK ABOUT WOMEN AND MONEY?
This book isn't just about money. If it were, then the advice would be gender neutral. This book is about women taking control of a part of their lives that, until now, they may have wished away or ignored. This book is about women having the power to make their life whatever they want it to be. Most financial planning books assume a person will continue to earn an income, without snags, for the majority of her life. They seem to abandon women who must deal with significant changes like motherhood, divorce, widowhood, disability and the like. Yet, it is at these very moments that we need guidance, support and information. It is at these very moments, when our life plan changes that we must make adjustments to our financial plan so we remain proactive in managing this thing called money. That's why we need a book for women specifically. And that's why I wrote this book. I hope that you will be able to take from it the information you need as you move through your life, adjusting your plan for significant changes, tweaking it for small ones. The other reason I wrote this book is that I sometimes despair at women's unwillingness to be masters of their own fate. More often than not, the reason given for not taking control of the money is, "I just can't." Yes, you can. You are the author of your own life. If you choose not to take control, that's your choice. If you choose to write your own script and direct your own future, read on. SOME DEFINITIONS |