Finances & Divorce Thought Leader: Jo Ousterhout
It’s spring! And a perfect time to assess any areas of your life that you feel need addressing, including your finances.
This month’s post is for every woman – single, married, divorced, separated.
“Our health care costs more (partly because we live longer)”
Some of the financial facts associated with being a woman:
- We make 82 cents for each $1 a man makes.
- We live longer (about 4 years on average in the US).
- Our health care costs more (partly because we live longer).
And a few more from a recent New York Times article*:
- 30% of women over age 65 are very or somewhat worried about their financial situations (compared with 20% of men)
- An AARP survey showed that 25% of women over age 65 would consider an unexpected $1000 expense as a major setback.
- 25% of women over age 55 are in danger of being among the working poor (those earning below $15.29/hour in 2021). Only 15% of men face the same danger.
3 Simple Steps To Improve Our Financial Situation:
Pretty depressing, right? And you know what’s even more depressing? The fact that so many of us could take easy, simple steps to make our financial situations so much better, and simply do not take the time and make the effort to do so.
So, since it’s spring and a great time for a fresh look at life and finances, here are a couple of Simple Steps (#1 and #2 will take about 45 minutes, #3 even less) that you can do to continue your journey towards financial fitness. (And if you’re already financially savvy and fit, congratulations! You can stop reading, or use the below to review and fine-tune your 2022 financial strategy.)
“This weekend, take 45 minutes and go through one year of your financial records..”
#1: Treating Yourself is Hurting Yourself:
Do you know how much money you spend on weekly, monthly or annually recurring charges? And how many of these are for things that aren’t really necessary, and that you’ll soon forget? I’ll bet I could go through your bank statement right now and find at least $100 from the last month that you spent on items/services that you don’t even remember.
You need to know this number, unless you’re so wealthy that you have enough money in investments and in the bank to fund your lifestyle now and in the future. (And remember, you’re likely to live into your late 80s and even well beyond. So your money has to last a LONG time!).
This weekend, take 45 minutes and go through one year of your financial records – credit/debit card/bank account statements, personal finance app totals, spreadsheets, wherever your financial records are – to identify and total all your periodic, recurring expenses. Highlight them, copy them to a separate spreadsheet, or simply write out a list.
Little Recurring Expenses:
Some, like rent, mortgage, paying off credit cards, insurance, etc. are certainly necessary. But I’ll bet you have lots of others. Examples: Netflix, Hulu, Apple Music, Spotify, gym memberships, exercise/yoga classes, food subscription boxes, online courses, memberships, newsletter subscriptions, Rent the Runway, StitchFix, other app and tech charges (online storage, backups, etc).
“These little recurring expenses are sneaky..”
(And don’t tell me that gym memberships, exercise and yoga classes are necessary expenses. They are absolutely necessary, but you don’t need to be spending money on them; you can find many excellent classes online for free.)
These little recurring expenses are sneaky – each charge seems so small, so unimportant. But collectively they really add up. They are the financial equivalent of “death by a thousand cuts”.
Services And Subscriptions:
Periodic monitoring (how much am I spending on these services?) and assessment (am I actively using and getting full benefit from this product/service?) is key.
Cancel those you don’t need/aren’t using. And, at a minimum, cancel auto-renew, so you’ll be reminded, and can make a decision at the time for any renewals.
Beware of services offering free trials but which automatically begin charging you when the free period ends (almost everything does this!)…you may mean to cancel these when the charges begin, but then forget. Set yourself a reminder to cancel the service after the free period.
“They are all perfectly reasonable expenses, unless you need money for something else, now or in the future!”
I’ll bet you’ll find a lot of truly unnecessary, and recurring, expenses while reviewing your financial statements. One of my clients recently found almost $1000 in various annual charges for services and subscriptions she no longer needed or used. $1000/yr invested in an S&P Index fund, over 20 years, is over $45,000!**
#2: Living in the Now is Destroying your Future
Now, let’s find out how much you spend on other, often fun, but (truly) unnecessary things each month/year? A very similar exercise as #1, but this time tracking purchases that aren’t automatically billed to you, such as clothes, shoes, travel, daily coffees, wine with friends after work, etc. They are all perfectly reasonable expenses, unless you need money for something else, now or in the future!
So, again, go through one year of your financial records – credit/debit card/bank account statements, personal finance app totals, spreadsheet, wherever your financial records are – to total and analyze these expenses.
The numbers will likely shock you. One well-off client found she was spending over $50,000/yr on clothes and shoes. Another was spending about $40/workday (that’s $200/week, $10,000/year) on Uber/Lyft, coffee, and lunches at her workplace! A third noticed that she had squandered a lot of money by not booking flights and rooms in advance for previously scheduled events like weddings and family holidays.
Now List All Your Expense Numbers:
Annual Total of all expenses: $___________
“Don’t judge. But do total and analyze.”
Annual Necessary/Required expenses (mortgage, rent, insurance, groceries, etc): $___________
And Annual Recurring/Discretionary (total of #1 and #2 above): $___________
Don’t judge. But do total and analyze. Do these expenses really reflect your priorities? And will spending this much on these items help you realize and achieve your goals?
Congratulations on completing this tough but necessary exercise: taking an honest look at where your finances are today. The results are eye-opening, right?
The first step in making any plan, in getting where you want to go, is answering the question: where are you now? And now you know!
#3: What Are Your Financial Goals?
Let’s move on to the fun step: figuring out where you want to go. Open a blank document, or grab a blank sheet of paper, set a timer for eight minutes and write out your financial goals. The more specific you can be, the better. Write out every goal you can think of, short, medium, and long-term. No judging, just write. Study after study shows that writing out your goals is key to achieving them. So get going!
Here are a 7 questions to get you started; you’ll doubtless think of many more:
- How much money do you want to make each month?
- Where do you want to live? How do you imagine your ideal house?
- Do you plan to have children? How many? Public or private school? College?
- If you have adult children/grandchildren, to what extent do you want to support them financially? What about extended family members?
- Do you want to start your own business? If so, when?
- How often do you want to travel? Where do you want to go? How will you get there? What type of accommodations will you stay in, and what will you do when you get there?
- Where do you want to live when you retire? What do you envision doing then?
“Financial fitness is true self-care. Being financially fit will prepare you to lead your best life”
Different Life Circumstances:
Know that many of your goals will change over time, as you age, as you develop new interests and with different life circumstances. Write what’s important to you today.
After you’re done, go back and compare your goals to your expenses list. Are you using your money to get what you truly want? Or are you sacrificing your truly important goals for what seems interesting and attractive today?
Financial fitness is true self-care. Being financially fit will prepare you to lead your best life – it’s every bit as important as being physically and mentally fit. And you spend a lot of time on those aspects of your life, don’t you?
Change What You Need To Change For Your Financial Fitness:
So change what you need to change. Set yourself up to be financially fit and resilient, with the freedom to enjoy the life you truly want, and the ability to withstand unexpected financial shocks that life throws at you.
The reason most people fail instead of succeed is they trade what they want most for what they want at the moment.****
Don’t trade what you really want – a life free of financial worry – for things you want today, things you won’t even remember a month from now.
Sex and gender exist on a spectrum. We use “women” and “men” in this article to reflect the terms assigned at birth. But gender is solely about how you identify yourself, independent of your physical body.
**Initial investment of %1000, subsequent investment of $85/month, all in the S&P500 Index over 20 years at 6.5% compounded monthly https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
***Language shamelessly copied from PsychCentral.com
About the Author:
Former Wall Streeter Jo Ousterhout helps successful, motivated women develop personalized, goal-based financial plans so they can live exactly the life they want. She has mentored hundreds of women to grow their wealth quickly and develop unshakeable confidence in making the best financial decisions for themselves and their families. A former senior executive on Wall Street, Jo has also been an entrepreneur, consultant, Board Chair and ED of a not-for-profit. She has an MBA in Finance from The Wharton School, a B.S. in Biology from William & Mary and has completed the Series 65 exam, required for individuals to act as investment advisers in the US.
To learn more, visit Acumen8.co or contact Jo directly at acumen8.co