Reading: When Doing Nothing Can Cost You Everything

Last year, in preparation for writing the book Money Bitch: A No BS-Guide for Smart Women Who Want to Own Their Financial Future, which was coauthored with my partner Sarah Blankenship, we interviewed over 100 women.

The women we interviewed were diverse in race, income, education, occupation, and age. Some were in their early twenties and at the beginning of their careers, while others were seasoned C-level executives and entrepreneurs. Their incomes ranged from $40,000 a year to well into seven figures.

The biggest takeaway? We share a shocking array of financial issues and attitudes.

Number one on the list: When it comes to money, many of us feel vulnerable.

Why We Don’t Protect Ourselves Financially 

Yes, many of us know what to do with our money, but we get caught up in life’s distractions. We procrastinate (due to anxiety, fear, or just not wanting to have an uncomfortable conversation). Sometimes we just like to avoid reality. 

Some of us tell ourselves we will get to it tomorrow, which often means never.

Some of us tell ourselves we can’t be helped.

Know this: we live in the reality of what we tell ourselves. As Henry Ford once said, “Whether you think you can or whether you think you can’t, you’re right.” The danger is that doing nothing can cost you a lot!

A great (and unfortunate) example of trying to hide from your financial future came from a conversation I had just the other day with my friend (who we’ll call Amy), a CEO with a great salary.

Amy was stressing because she’d just received news that she has cancer. What took me by surprise is that she wasn’t terrified of the cancer. She was hyperventilating because chemotherapy meant she’d be out of work for six to eight weeks — without full pay. She couldn’t fathom the financial burden of not having that salary. She was completely overwhelmed by the financial stress, not the cancer. Let me repeat: not the cancer. 

You Can Guard Against (the Financial Impact of) Tragedy

Of course, no one can possibly plan or prepare for the emotional wreckage and unknown health consequences that cancer can inflict. What we can gird ourselves for, however, is the financial impact of an unexpected tragedy. Being prepared financially for cancer is actually 100 percent within our control.

If Amy had taken a moment to create a financial plan when she began working years ago, she might have been able to dedicate herself to simply recuperating from the disease. She would have been able to investigate disability insurance and buy it before she became ill. She would have known how to divvy up her paycheck between living expenses, discretionary spending, retirement, and an emergency reserve account.  

The big problem is that most of us prefer not to be intentional about where our money goes. So it just goes. 

The no-duh thing with financial planning is that the sooner you get started, the more choices and freedom you’ll have later in life. It shouldn’t take devastating news to get you going.

When Couples Disagree About Strategy

A new client came to my office the other day to talk about financial stress. “I’m having so much anxiety and I feel so uneasy because I have no idea what to do with my money,” she said. “I’m driving myself crazy between what I read and what I hear, and I just need someone to help point me in the right direction.” Her instinct was to use any extra money she earned for paying off credit card debt. Her husband preferred the money go to retirement savings. They couldn’t find a compromise. She also mentioned that they were both finally at a point where they were making good money, but were spending too much. She knew they should have more to show for their labors.

Of course, what I know is that all of her problems could be solved with a plan.

So here’s what I told her:

• One of the top reasons people file for bankruptcy is an unplanned disability that tanks their savings. Approximately 70 percent of Americans have less than $1,000 saved. That means that approximately 70 percent of us are NOT prepared for an emergency.
• If you aren’t being intentional about what you purchase, hundreds or thousands of dollars are leaking out of your wallet on “dumb shit stuff” that could be allocated toward an important goal. The earlier you start saving, the less you need to save, due to the wonderful powers of compounding interest. This is what is meant by making your money “work for you.” 
• You don’t need to be 20 to start effectively planning.

Create Your Roadmap to Freedom

A lot of the financial planning process is thinking about what you really want and making a road map for achieving your goals. Until you have an idea what the unintended consequences are of your current behaviors, you won’t change them. It’s powerful to see how small tweaks in your everyday life can grow your wealth.

If you really want to understand the impact planning can have on your life, exchange the word “money” with “freedom.” When you have more control over your money, you have more freedom in your life. It’s just that simple.