women and investing

A little more than two months before my due date, panic set in. Though I had much experience as an aunt and babysitter, and in spite of my life-long fantasies of motherhood, the moment was quickly approaching where my life would change forever.

Change, even joyous change, can be terrifying. In my case, a difficult twin pregnancy kept very dire possibilities hanging in the balance. My husband was eerily calm; if I didn’t know better I would have thought he was medicated.

I spoke to my sister-in-law, whose support was always there for me like a welcoming smile.

“Were you scared that you wouldn’t be able to do it?” I asked.

“Childbirth?” she laughed.

“No. I can’t even think about that! What if I can’t do this job?” I was near tears.

Every twin book I read described delirium to the point of doubling up on feeding one baby, while accidentally starving the other. Was this really something I would do?

She laughed and gave me the best advice I have ever received, “Stop reading these books because what they can’t tell you is how you will feel about your babies. You will throw yourself in front of a moving train for them, and you won’t think twice. It’s a lot of work and you’ll be exhausted, but your heart will be so full of love that you will be able to do things you never imagined.”

She was right, of course.

Though my sons are no longer babies, that reflex to put their needs ahead of mine is very strong (even when it is not beneficial to them, or me). I am not alone in having mastered this “talent.”

Perhaps it is biology, or maybe it’s not, but women (in general) are too good at putting themselves second or third. We would be smart to remember that there are no awards for martyrs — just tombstones.

The data backs it up, of course. Women earn less than men because their careers have often taken a backseat to caregiving for children or parents. They have less saved for retirement, because of this — yet they live longer, on average, than men.

Many times I have talked a mother out of funding a college savings plan in favor of contributing to her malnourished retirement account. The “carrot” is for her to get financially secure and then she can eventually set up a college fund. It’s obvious, but needs to be repeated: There are no loans for retirement.

The often-used cliché is true — if oxygen masks come tumbling down on an airplane, parents have to put on their masks first before helping their children. Here is what this looks like in the world of personal finance:

Fund an IRA or Roth IRA (maximum contribution rates are $5,500 or $6,500 for those 50 or older).
Participate in your employer’s retirement plan – whether there is a match or not. If you are already contributing, work towards funding it to the maximum. My colleague, Bill Sweet, put together a checklist that gives guidance on funding minimums among other useful information that can help you sock away more money and reduce your tax burden.
Set aside money every month to pay yourself first. This can be used for an emergency fund if you haven’t established one. Make sure any short-term funds (for goals taking place in five years or less) are kept in cash; money for longer term goals can be invested.
Pay off high-interest credit card debt. Unless you have a special 0% financing deal, pay off this debt ASAP. Reverse compounding is devastating to long-term financial health.
Make sure you have adequate TERM life insurance that will get your child through the college years.
Do not neglect basic estate planning — have a will, durable power of attorney and health care proxy established. If your children are minors, make sure that you select a guardian (to raise them in the event of your demise) and a trustee (who will handle the finances).
Check the beneficiaries on life insurance policies and retirement accounts to make sure they are current and accurate.

If you’ve tackled this list – congratulations! Now is the fun part. You get to plan for your financial future so that your goals are not merely wishful thinking.

Mothers, if you have trouble finding the time and motivation to get started — think of your kids. Being financially secure is not a selfish indulgence — it is most beneficial to those you care about. If you’re not sure where to start, check out this blog that I wrote earlier in the year.

By taking these steps, you won’t need to throw yourself in front of a moving train to help your kids. You might just be there with your feet up and a tiny umbrella in your drink guiding your daughter to be the financially savvy woman you have become.

Tell me where you are on your journey or what questions you have by emailing me: dina@ritholtzwealth.com.

Coming up on the (gasp) 30^th anniversary of my graduation from Fairfield University, I find myself nostalgic for the courses that taught me so much beyond the classroom.

The (late) Dr. Art Anderson gave his Sociology students much to chew on, including this nugget: “In the work world, all of you are ahead of the game. You have straight white teeth and a nice smile.”

He wasn’t paying us a compliment though. Being a Jesuit school with an emphasis on education and social justice, the underlying challenge was to be more than another fresh face in a fancy suit with a captivating smile. If you’re not familiar with Jesuits, think Pope Francis; the most outspoken Jesuit of all.

The financial services industry could use a little Jesuit influence, if you ask me; everyone would be a fee-only fiduciary.

Regardless of religious affiliation (or lack thereof), financial professionals would do well to take a page from the Pope’s book:

He puts the interests of others ahead of his own, with clear intentions;
He treats people with respect and compassion;
He guides them to realize their potential;
He says the difficult things that need to be said, for the good of correcting what must be righted; and
He never manipulates or takes advantage of others, but rather chooses to look out for them.

When I speak with people who are unhappy with their advisors, none of these attributes appears to be present.

These disgruntled people have felt shamed, embarrassed, ignored, marginalized or taken advantage of. Intentional or not, these advisors spoke in a language that put their clients at a handicap at the get-go. They never divulged the motivation behind their recommendations was directly tied to how much they earn; and it was reflected in portfolios “constructed” with no rhyme or reason.

In short, their actions were guided by transacting for the client to make the most money.

In a recent TED Talk, Why the Future Worth Building Includes Everyone, Pope Francis said, “Only by educating people to a true solidarity will we be able to overcome the “culture of waste,” which doesn’t concern only food and goods but, first and foremost, the people who are cast aside by our techno-economic systems which, without even realizing it, are now putting products at their core, instead of people.”

I don’t believe that the Pope was specifically referring to the financial services industry, but clearly it has application here – and to life in general. Substitute any word for product (money, power, prestige) and everything shifts away from caring for people. Nowhere has this been more apparent than in the Wild West of retirement plans for teachers, where I have seen people taken gross advantage of; the fact that it is legal turns my stomach.

I am very fortunate to be surrounded by colleagues who do care. They support the endeavors of my husband, Tony, and me as we try to educate and right the wrongs we see in the 403(b) space; where teachers, and other non-profit employees have a minefield to navigate.

I can hear cynics everywhere asking, “What’s in it for you? How much do you make off of them?” Glad you asked: A whopping 0.40% per year. On a $50,000 account, that comes to $200 for the year.

Working with clients in a meaningful way; addressing their fears and concerns; helping them plot a course through it all; and assuaging their discomfort is more rewarding than any fee I can be paid. Making sure they don’t fall prey to unscrupulous salesmen just waiting to sell them an annuity with 3% in annual fees and surrender charges that last 15 years, is an added bonus.

I’ve been accused by some of being too Pollyanna for this industry. I’ll take that as a compliment.

In the words of Pope Francis, “…each and everyone’s existence is deeply tied to that of others: life is not time merely passing by, life is about interactions.”

Amen.

Focusing on the quality of those interactions can make the future very bright, indeed.

Too bad some of us need reminding.

RealSmartica

Educate parents and young adults in practical money matters

Ladies, First!

Pope Francis: The Best Case for Fiduciaries