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BossWoman ENews
Combining prosperous work lives and balanced personal lives
April 2006

My goal is to bring you news, insights, and information about leading a balanced and prosperous life.

In this issue, you'll find:

  1. Smart About Money
  2. BossWoman coaching
  3. Up and coming workshops


1. Smart About Money

With the annual income tax filing deadline behind us, it seems like a great time of the year to do an annual "financial checkup."

Here are three questions that I ask my coaching clients when we review their choices about their financial life:

  1. Do you know your personal worth?
  2. Do you live *under* your means?
  3. Do you ask for what you are worth?

Do you know your personal worth?
I asked Linda Tice a Certified Financial Planner® at the PSA Financial Center in Lutherville, Maryland why a woman should care about this figure. She suggested that a personal net worth statement is a snapshot of an individual’s financial health, a measure of financial well being. She said that the key question for women to ask themselves is: “Am I worth more now than I was a year ago?”

If you don’t have a clue how to answer this question, you are not alone. According to a recent study done for the Financial Planning Association and the Consumer Federation of America, less than half (49%) of Americans polled know how to define their net personal wealth. Even after being told how to calculate net worth, more than half the respondents (54%) had no idea as to their own number.

Calculating net worth is as simple as adding up all the things we OWN (assets) and deducting everything we OWE (liabilities). We shouldn’t count depreciable items, such as automobiles, unless we feel there is a ready market for them.

Here is Linda’s check list for calculating your net worth:

  • The fair market value of your home;
  • Retirement savings;
  • Checking accounts;
  • Savings accounts;
  • Investment accounts;
  • Life insurance cash value;
  • Collectibles;
  • Business interests;
  • Any other items that have a real value.

The subtractions include any debt you carry including:

  • Mortgages;
  • Home equity loans;
  • Car loans;
  • Debt deferments such as those where “Start using your furniture now. You don’t start paying until January 2007.”
  • Debt consolidation loans;
  • Other loans such as student loans;
  • Credit card debt.

One responsibility of adulthood is managing your wealth. If you want to know if you had a good year financially, calculate your net worth from December 31, 2005 to December 31, 2006 and you will then be able to answer these questions about your net worth:

  • Have I moved closer to my goals?
  • Is my net worth more or less than last year?

Do you live under your means?
One way to be smart about money is to live under your means, in other words to spend less than you make and save an amount regularly. According to the survey done for the Financial Planning Association and the Consumer Federation of America, there is a sense that among the general public that acquiring any substantial wealth is largely impossible. Recently I heard a quote from a family friend (a couple in their mid 30’s) who said, “We’ve resigned ourselves to the fact that we will never be wealthy.” While they might never rival Bill Gates for his personal net worth, they are already accumulating wealth if they have savings, retirement plans, and some equity in their townhouse.

However, only one quarter of those polled believed they could save $200,000 or more in their lifetime. One fifth (21%) of Americans now believe that winning the lottery is the best way to accumulate several hundred thousand dollars. In other words, twenty-one percent of those polled are pinning their hopes for a good financial future on a chance event in spite of the fact that the most predictable way to build personal wealth is to eliminate debt and accumulate savings, retirement, and home equity.

Linda Tice says building wealth is a doable goal for the dual career couples. If you deposit $250 at the beginning of each month for twenty years in an account earning 8% per year, compounded monthly, your account will grow to $148,247. Save just $50 more ($300 a month) for thirty years, and you will have $450,089! Financial expert and author, David Bach, calls this the “latte factor” because if you bring your coffee to work instead of ordering two gourmet coffees every a day you can save $10 a day. There is your monthly $300 savings. Yes, this discipline does mean a sacrifice of your gourmet coffee or maybe your multiple cable options but you can’t have it all ­ an early, comfortable retirement and the short term luxuries. Only you can decide how to balance your long and short term luxuries.

However, it is difficult to save anything if you are living beyond your means, spending more than you earn. According to the Federal Reserve, over 40% of US families spend more than they earn. The average American household has 13 payment cards, including credit cards, debt cards and store cards. There are 1.3 billion payment cards in circulation in the US. The average credit card debt in the US is close to $10,000 per household.

Thirty-five million people in the US are currently making only minimum payments towards their credit card balances. If you are a mom, grandmom, or aunt, educate younger family members about the difficulties of ever having a positive net worth with the realtities of living beyond one’s means in early adulthood. Show them this example. If they accrue no more than $1,000 debt and make just the minimum payments, it will take 22 years to pay off the debt. With the average debt most households carry, they will never get out of debt!

Do you ask for what you are worth?
The average woman is seriously underpaid for her work. According to the U.S. Department of Labor, women make 76 cents for every dollar paid to men with the same qualification for the same job. While sexism in the workplace accounts for some of this differential, part of the problem is that women are afraid to ask for what their work is worth. When I coach women business owners, they often fail to price their services competitively in the market. Women who are employees are often shocked to find out when they leave a job that a male who replaces them gets a higher salary because he asks for it.

Financial guru and author, Ric Edelman says that the implications of not earning what your work is worth has implications beyond not making enough to live comfortably now:

  • You may not be able to save as you work because of low earnings. Ric says that by the time women are ready to retire, they only have half the amount of personal savings as men their age. He says, "Women are often stay-at-home mothers for a portion of their career, and they still tend to earn less than men in our society. They end up retiring with less money in their accounts." Non-employed spouses at home with children can still build personal wealth by contributing to an IRA.

  • You may live on the edge and not choose to take advantage of your company’s 401K plans where your savings are matched by a company contribution. These plans are among the most painless ways of saving because they are subtracted before you receive your paycheck. Therefore, a maximum contribution can build tax-free and faster than the same savings after you have paid taxes on it.

  • You may not build up enough pension and social security to secure a future with options for early and/or comfortable retirement. Although women live longer than men, the majority of women receive higher social security benefits as spouses of workers than as workers themselves.

  • You are only half as likely to qualify for a pension as your male counterparts who tend to commit to one place of employment for a long tenure.

  • While many women hope that a man will come along to take care of them financially, the life expectancy statistics show that 85% of women die alone. Ric says many women who are widowed, divorced or have never married defer financial matters to the men in their lives and have little experience managing their personal finances. “Women can not afford to be passive about their finances.”

A Special Note
Sometimes women tell me they hesitate to imagine building wealth because they feel guilty about all the poor people in the country and world. I have an answer that I learned from my Auntie May who married a successful Chicago business man and managed his business after his death. She was generous to a number of worthwhile causes including Marshall Fields. She said, “The best way to help the poor is to not be among them. Make money and then help others.” Managing your own wealth will allow you the opportunity to contribute to the causes you care about.

Steps Towards Being Smart About Money

  1. Know where you spend it. Linda says that when she works with clients on their financial planning, understanding where they spend money is of primary interest. “I have never met anyone who had all the time or all the money they need. Making conscious spending decisions is important because it helps identify ways to reduce spending and pay off debt.”

  2. Live under your means. Slow down your spending so that you are spending less than your make. Put the money you aren’t spending into debt reductions and savings.

  3. Invest your savings. Ric Edelman says, “When you're just beginning to build your financial portfolio, invest in mutual funds. This is the quickest, cheapest and most convenient choice of investments.” Later on you can diversify your investments. Make sure you have money in a lot of places—loading-up in one or two sectors is too risky and will not promise financial security.

  4. Continue to review your financial worth preferably with a trusted financial professional. Make it an annual ritual ­ maybe around tax time or the first of the year or your birthday. Watch your success and your wealth build! Pass the message to other women (and men): With awareness and a bit of discipline you can be smart about money.

  5. Use your wealth to help out those less fortunate than yourself.

Conclusion
You are already building wealth. Now get smart about how you manage it!

Susan Robison

Resources:
To subscribe to Linda Tice’s newsletter, "Money Matters for Women," contact her at
Linda@psafinancial.com To contact her:
410-821-7766, ext 419; fax 410-828-0242

Books:
Ric Edelman. “The Truth about Money.”
“Ordinary People, Extraordinary Wealth.”
“Financial Security in Troubled Times.”

Jean Chatzky. "Pay It Down: From Debt to Wealth on $10 a Day."

David Bach. “The Automatic Millionaire Homeowner.”
“Smart Women Finish Rich.”
“Smart Couples Finish Rich.”


2. BossWoman coaching

About the publisher: Susan Robison, Ph.D. is a professional coach, speaker, author and seminar leader. She loves to coach women who want improvement in:
  • work-life balance,
  • career transitions,
  • building your business or practice,
  • time management,
  • increasing productivity.

If you are feeling stuck on the way to your ideal life, give Susan a call for a complementary half-hour coaching session.

She provides keynotes and seminars to business and organizations on the topics of:

  • leadership strategies for women,
  • relationships,
  • work-life balance,
  • change.

She offers her audiences a follow-up coaching session because she knows that workshops don’t work.

Contact Susan for your coaching, speaking, or seminar needs at Susan@BossWoman.org or at 410-465-5892.


3. Up and coming workshops

I have booked a number of work/life balance workshops for the winter that are not open to the public.
Contact me if your group needs a speaker on any of the topics listed above.

Title: “Staying Sane in Insane Places: Managing Diverse Faculty Responsibilities with Clarity, Balance and Ease.”
Date: May 31, 2006
Place: Faculty College, University of Wisconsin



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BossWoman e-Newsletter is intended for informational and educational purposes only. Coaching should not be construed as a form of, or substitute for, counseling, psychotherapy, legal, or financial services.

© Copyright 2006 Susan Robison. All rights reserved. The above material is copyrighted but you may retransmit or distribute it to whomever you wish as long as not a single word is changed, added or deleted, including the contact information. However, you may not copy it to a web site without the publisher’s permission.

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