How to Save Money In Your 20s

Your 20s are all about change; graduating college, starting a career, exploring new relationships, and living on your own. Many of these are tremendously exciting; I’ll never forget my first client presentation to six senior executives only a few months after starting my first job. I walked on air after impressing them with my research.

That said, many of these changes are stressful and costly. I racked up a massive credit card bill right after I moved to Washington, D.C. for my first job. I thoughtlessly swiped my credit card to buy essentials for my first solo apartment, shop for a work-appropriate wardrobe, and splurge in D.C. bars and restaurants.

It can be tempting to put off saving money, but if you save small amounts early in your career, you create massive wealth for your future self. When you save and invest, your money makes more money on your behalf, and that’s an amazing thing! So let’s do this - here’s how to save money in your 20s.

Automate. Set up an automatic transfer to your savings account on payday. Start with the biggest amount you can - that might be $20, or $200. Increase this amount at least once every three months - even if only by one dollar.

Invest. Yes, you need to start now! If you work for an employer that offers a 401(k) or other retirement plan, sign up immediately. Some employers will match your contribution up to a certain percentage; if you’re lucky enough to have this benefit, take advantage of this free money! If you’re new to investing, that’s okay. Here’s a primer on all you need to know.

Bring your lunch. If you pack your lunch four days each week, you’re saving $10 a meal on average, or $40 weekly compared to someone that goes out for lunch every day. That gives you over $1,000 to save each year, compared to the cost of making lunch at home. Make a “bring your own lunch” date with fabulous brown-baggers in your office to stay motivated.

Talk about money. Seriously. Women are curious about money, but are often taught that it is a taboo topic. A Fidelity study found that 92% of us want to learn more about financial planning; that means nearly every woman in your life is interested in talking about finances. Start the conversation by sharing posts (like this one) and following financial gurus on social media. By sharing that you’re interested in saving money, you’ll get creative ideas from your girlfriends and hold one another accountable. Ban any shame and judgment from your money conversations and you’ll be amazed at what you can learn.

Stop comparing. President Theodore Roosevelt said, “Comparison is the thief of joy.” Social media gives us the amazing power to stay connected to friends and icons, but heavy use has been linked to depression. Scrolling through everyone’s life highlights can make us feel like we’re not enough - which can trigger emotional spending to make ourselves feel better, temporarily. Make a conscious effort to stop yourself any time you start comparing yourself to others; run your own race!

Track your spending. You work hard for your money and deserve to know where it goes. Popular apps like Mint, YNAB, and Quicken can help you understand if you’re falling prey to the sneaky ways we spend more than we mean to. Figure out where you’re spending too much, and divert those expenses to more important goals like your next vacation or your investment account.

I’d love to hear if you have any other suggestions to save money in your 20s. What tactics worked for you? If you make saving a habit now, your future self will be so pleased with all the wealth created when you were just starting out. You’ve got this! 

xoxo, Ms. Financier

This post also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.

How Many Credit Cards Should You Have?

Credit can be a beautiful thing – allowing you to safely make purchases and earn rewards. Managing credit cards responsibly can help your credit, which can make you a more attractive renter, get you a better interest rate, and can even impact your candidacy for a new job.

However, paying with credit cards disassociates us from the physical act of spending cash, making it easier to spend more money. Further, there’s a reason that card companies offer bonuses and points. The average American household has a credit card balance of $8,377 and has an interest rate that is greater than 12%.

While credit can be powerful, it can also be a nightmare; I’ve struggled out of credit card debt many times. I’m now out of credit card debt and have vowed to never rack up a balance again. One key to reining in my debt was properly managing the right number of credit cards. So, how many credit cards should you have? My answer is at least two, and no more than four.

Why do you need to have at least two cards? You may run into a situation where your card isn’t taken by a particular merchant. Select at least two cards and ensure at least one is a Visa or MasterCard; these are widely accepted. Discover and American Express can offer powerful benefits but tend to be accepted by fewer stores.

Why shouldn’t you have more than four cards? Because complexity makes it more difficult to manage your debts. Psychologically, it can be “easier” to spend if you have more cards – your Visa may have a $2,300 balance, but your Discover is paid off; so charging that new maxi dress to your Discover isn’t that bad…(Yes, it is!)

Beyond your two basic credit cards, add up to two more that allow for special benefits. For example, one of these might be a card tied to a hotel chain or airline that you frequent and provide additional value like upgrades or early boarding. One might be a card linked to a charity you support; this allows you to donate regularly to a cause via your regular spending.

What shouldn’t you do?

No store cards. I’m serious; store cards offered by retailers have very high interest rates and generate huge profits for the businesses that offer them. There’s a reason why every cashier asks if you’d like to save today by signing up – many are compensated to do so because of the revenue these cards generate.

Avoid cards with annual fees. There’s no reason to pay an annual fee for a card unless you’re absolutely certain it is a good value. One of my frequent traveling friends has an airline-branded credit card, with an annual fee of nearly $500. However, because she’s constantly on the road, the cost of the lounge access provided by this card is worth the high annual fee. She can grab free snacks, drinks, and a quiet place to recharge between flights; some lounges even have showers for post-red-eye refreshing.

No foreign transaction fees. If you travel, secure at least one card that doesn’t have a foreign transaction fee. Foreign transaction fees hover around 3% and are charged when you buy an item in a foreign currency. That can add up for frequent travelers.

Don’t add your partner to your card too early. Credit card debt accumulated on a joint card is the responsibility of both parties. If your partner racks up a $25,000 credit card bill on a joint account, you share liability for that debt. I would not add someone to my credit card account unless I had a legal agreement in place that dictated payment responsibilities in situations like this; (a cohabitation agreement or prenuptial agreement can cover this.)

Don’t churn cards for points (unless you have the time and are extremely disciplined). There are many stories about people who funded luxury vacations using the “free” points they got from “churning” credit cards (signing up for cards temporarily to take advantage of card bonuses.) Most of us don’t have the time and focus to keep track of the details needed to profit from this exercise.

If you have too many cards, start canceling them gradually. Your credit score may take a small dip, but it is worth it to avoid managing many cards. You could also cut up your cards and wait to close the actual account (unless there is a fee associated with the card, in which case I’d suggest canceling it right away.)

Sort your cards by interest rate and credit limit; keep those you've had the longest, with the lowest rates and highest credit limits. You may also elect to negotiate those before you cancel, if there’s a card you love to use but it has a very high interest rate, for example.

Don’t ring up a balance you can’t pay off. Get into the habit of paying your credit card debt off every month. As someone who has struggled with credit card debt, I have to put steps in place to ensure I don’t overspend. I only put expenses greater than $100 on credit cards, and I transfer the money immediately from my checking account to my credit card – typically the day I make the purchase.

Get your finances in order by getting the right number of credit cards in your wallet! There are many resources for you to compare credit cards and select the right one for you, including NerdwalletCredit Card Tune-Up, and Consumer Reports.

What are your credit card tips? Is there anything I missed? Let me know your thoughts - you’ve got this!

xoxo, Ms. Financier

This post also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.

My Money Mistakes: The Four Times I Accumulated Credit Card Debt

I’ve made a commitment to share my money-related mistakes. These financial lowlights aren’t my proudest moments, but I hope sharing my missteps can help remove some shame and embarrassment from the topic of personal finance.

My mistake with credit cards is a series of mistakes that repeated it four times. Unfortunately, I’m not alone in accumulating too much credit card debt. As of this writing, the average American household has a credit card balance of $8,377 and has an interest rate that is greater than 12%. Consumers typically have 9 credit cards and approximately 14% of Americans have more than 10 cards. (This is far more than the number of credit cards I recommend, which I’ll cover in the next post.)

Mistake #1: Credit card debt in college. I was thrilled when I got accepted into the University of Michigan, the only school I wanted to attend. (Go Blue!) When school started, I couldn’t believe how lucky I was to be attending a school in beautiful Ann Arbor, with fascinating classes, inspiring campus life, and creative, thoughtful students.

It was also my first exposure to those who appeared very wealthy. Some students had cars that cost more than my childhood home, parents that bought them an Ann Arbor house as “an investment property,” or spent their winter break in Switzerland. My sturdy Eddie Bauer backpack seemed out of place - many of the women in my classes carried their books in Kate Spade, Fendi, and Louis Vuitton bags, which I had only seen on Sex and the City.

By the time I reached my junior year, I had accumulated around $2,500 of credit card debt. This debt wasn’t for my books or school supplies, but all splurges I felt I had “earned.” You know, because I was working so hard in school...and “all” my peers had nice stuff, too, so...

To manage the credit card debt, I ignored it and headed off to my summer internship in Washington, D.C. One evening, I was walking to the Metro when my cell phone rang. It was the credit card company, frustrated by my lack of payment. The representative offered to “charge off” my debt. I happily accepted.

Once I returned to campus to begin my senior year, I checked my credit score. It was in the toilet because of my decision to ignore my debt. I worked out an arrangement to repay the debt, which modestly improved my score. My first experience with credit card debt was a double-whammy; I accumulated debt buying things I didn’t need and did a horrible job of managing the debt. I swore I’d never get into credit card debt again.

Mistake #2: Credit card debt after moving to D.C. After I graduated, I moved to the nation’s capital and promptly racked up another credit card bill, around $2,700. I thoughtlessly swiped my credit card to buy essentials for my first solo apartment, shop for a work-appropriate wardrobe, and splurge in D.C. bars and restaurants.

Further, if I had been shocked by the wealth I saw on display in Ann Arbor, D.C. was another level. I vividly remember going to “pregame” one evening at a colleague’s apartment, which had amazing views of the National Mall. He told me it was his parent’s second home, which he’d be getting when his trust fund kicked in. This started a conversation on provisions in trust funds; I finally understood how my peers could afford their lifestyle. Unlike me, they had another meaningful source of income beyond their entry-level job.

About six months into my new job, I got my act together, stopped spending thoughtlessly, and actively sought out friends that didn’t live a lavish lifestyle. I also earned a promotion (and pay increase); all of my extra income went towards my credit card debt. I promised myself I’d never get into credit card debt again.

Mistake #3: Credit card debt after buying a home. I’ve shared the massive size and wild terms of my first mortgage. When my partner and I moved in, we left a 500-square-foot studio apartment for a 3,000+ square-foot house.

There were plenty of things we needed (fire extinguisher, household tools, window coverings for our bedroom) and plenty of things we convinced ourselves we needed (brand new furniture). Together, we racked up over $12,000 in credit card debt. This was the largest amount yet; a massive mortgage and large credit card balance made me feel trapped.

In 2006, Mr. Financier and I created a goal to eliminate our credit card debt in one year, with two $500 payments each month, diverting any “found” money to debt, and reducing three household expenses. We paid the debt off earlier than planned; I kept a handwritten log next to my bed to track our progress.

This was the most significant credit card debt I’d ever paid off, and I swore I’d never get into credit card debt again.

Mistake #4: Credit card debt following a significant raise. When I started my consulting career, I set a goal to be a Director by the time I turned 30. Colleagues in this position were generally 35 or older, but my career ambition and desire to grow my income inspired me to put my nose to the grindstone and shoot for this lofty goal. I earned a promotion into the Director position the month after I turned 30; my base salary rose to $150,000.

In End Financial Stress Now, Emily Guy Birken writes about the windfall effect. When we receive a windfall - an unanticipated bonus, or a generous birthday check - we’re more tempted to frivolously, quickly spend it. Our brains tend to compartmentalize and we view the extra money as distinct from our paycheck (which we spend more responsibly). One study on the psychology of unexpected, windfall gains concluded, “...the unanticipated nature of windfall gains is responsible for their heightened proclivity to be spent.”

I had one hell of a windfall on my hands, so I did what all responsible adults do in that situation. I rewarded myself well before I had actually saved the money to do so. Yup, you guessed it - I racked up another $3,100 in credit card debt. After the high from my shopping sprees wore off, I felt sick to my stomach. How in the world did I end up in debt, again?

It was this fourth time in debt that forced me to break my pattern. I was ashamed to be carrying a balance on my credit cards (yet again) and my debt dulled the achievement associated with my promotion. I had more than enough in my emergency fund to pay the debt off, but refused to do so, forcing myself to pay the costly interest charges as penance.

My fourth time in debt finally caused me to reflect on what habits I needed to change; there were four.

1. Watch out for life changes. I realized that I’m vulnerable to credit card debt during big life changes or times of stress. I’d feel like I “deserve” something nice and this emotional spending would push me into debt. This may not be unique to me, but since I’m conscious of this fact, I put my credit cards on lockdown when change is afoot and watch my spending even more closely.

2. Increase my save-to-spend account. I needed a cushion to fund the things I enjoy. My budget was so lean that I didn’t leave myself enough space for occasional splurges. I adjusted my automatic savings, increasing the amount going to my “save-to-spend” accounts to allow for the things I love, like shoes and dining out, that can tempt me into debt.

3. Change my shopping habits. I adjusted my shopping patterns to make myself less vulnerable to temptations. I stopped meeting up with girlfriends to shop - instead, we went to art galleries, parks, vineyards. I stopped browsing and only go shopping (online or in a store) when I have a specific item missing from my wardrobe. And, I unsubscribed from the many email lists I was on from my favorite retailers. If I missed out on a huge sale, so be it - I wouldn’t miss the possibility of subsequent debt.

4. Stop using credit cards by default. I changed my default card to my debit card, which pulled directly out of my checking account. Today, I only “allow” myself to put expenses greater than $100 on credit cards and I transfer the payment immediately from my checking to my credit card, so I can’t be surprised by large credit card bills.

I currently remain out of credit card debt and love getting zero-balance credit card bills in the mail. My money mistake with credit cards is one that I chose to repeat until I took the time to address the underlying issues. Have you struggled with credit card debt? Or, are you one of the lucky ones that excel at keeping your cards under control?

xoxo, Ms. Financier

How to Set Money Goals That Align with Your Values

Each of us has a unique set of values that we hold dear, even if we haven’t defined them. For example, I value security and exploration very highly; in the past few years, I’ve gotten better at consistently aligning my money with these values. As a result, I’m a happier person. Exploration includes mountaineering adventures, local hiking and kayaking, as well as traveling to new cities and continents. Therefore, I prioritize funding my travel budget; it is one of the six expenses I’ll never cut back on. I also prioritize donating to nonprofits that support conservation and preserve the beautiful spaces I enjoy exploring.

I recommend that each person (or couple, if you’re partnered) first take the time to define what they value. Financial guru David Bach says, “When your values are clear your financial decisions become easy.” I couldn’t agree more. Defining and recording your values may seem like an unnecessary step, but they serve as the foundation to your money goals. If you’re struggling with this step, watch David Bach and Marie Forleo have a candid discussion about this philosophy.

However, without goals, your values can go unfulfilled. The next step is to define goals to align your finances with your values. Otherwise, it can be terribly easy to spend on material goods that provide momentary joy, but don’t have a long-term impact on your life.

There’s a type of goal you should create, referred to as a SMART goal. These are Specific, Measurable, Achievable, Relevant, and Time-bound objectives that will define your plan and allow you to measure your progress.

My partner and I consistently use SMART goals in our financial planning. In 2006, we were in credit card debt. I had over $10,000, and Mr. Financier had over $2,000. We created a goal to eliminate that $12,000 debt completely in one year, with two $500 payments each month, diverting any “found” money to debt, and reducing three household expenses. We paid the debt off earlier than planned; having a SMART goal helped us stay the course and remain accountable.

I recommend you focus on no more than three SMART goals at any given time. Ideally, these goals have different time horizons, with one that you can accomplish in six months or less. For example – today, I have a goal to save for an upcoming trip (in the next three months) and another long-term goal to achieve financial freedom before the year 2027.

By recording and defining your values and creating SMART goals to align your finances accordingly, you’re taking a critical step to strengthen your future. What values do you hold dear? How are your money goals supporting those values? I’d love to hear from you.

xoxo, Ms. Financier

I also wrote about values-based budgeting in the She Spends newsletter. She Spends is a weekly newsletter and website created to close the wage gap, investment gap and board seat gap among women. I admire their goals and love their content.

Is This Real Life!? The Feminist Financier Is Now an Award-Winning Blog!

This morning, I found out that The Feminist Financier was named Best Investing Blog at the 8th annual Plutus Awards. I was surprised, humbled, and thrilled...and subsequently spent a solid hour on Twitter eagerly exploring the other winners and joyfully reading the notes of congratulations from other personal finance gurus.

You read this blog for personal finance perspective, not blogger awards. But let me tell you why this award is so amazing, and then we’ll return to our regularly-scheduled money-focused programming.

The Plutus Awards celebrate the best in personal finance, and are affiliated with The Plutus Foundation, a nonprofit that provides, “...opportunities for the financial media to create, develop, and administer community-based programs that enhance financial literacy, education, and empowerment.”

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As you know, I believe wealth equality is at the heart of gender equality. Wealth provides the holder with security, options, and power. I started this blog to be a drop in the sea of change...in order to help more women build wealth. This blog is not a business - it doesn’t earn me any money, nor do I offer any affiliate links. The Feminist Financier was created with the sole focus of supporting wealth equality.

Today, the finance industry is not set up well to serve women. Sallie Krawcheck puts this so well - she says the investing industry has been, “by men, for men,” and has historically kept women from achieving their financial goals. That’s problematic because investing early and often is at the heart of building wealth.

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The power of compound interest means that the earlier women invest, the sooner our investments start growing and making money on our behalf. And, today, women invest less than men. We tend to keep 10% more of our savings in cash than our male counterparts. Millennial women report a lower level of financial comfort - on average, we are less confident in our financial future, and less likely to feel “in control” or “confident” about our financial future.

This blog is all about changing that trend, and that’s why I’m so thrilled to receive acknowledgment that this is the best investing blog out there! It means that no-nonsense straight talk that cuts through the jargon is providing you with the information you need to succeed.

You can easily browse all the blog posts on the site, or view only those related to investing. An easy way to start is the “investing in four steps” series, which includes:

As always, I welcome your feedback and am honored that you spend some of your valuable time with me. I’m looking forward to continuing to support financial literacy and help more women improve our finances and build wealth.

xoxo, Ms. Financier

Six Expenses I’ll Never Cut Back On

The difference between cheap and frugal lies in priorities. Someone that is cheap enjoys spending as little as possible. They prioritize cost reduction in all expenses, in every area of their life. 

Someone that is frugal reduces expenses selectively. They prioritize specific experiences or things that deliver value and are okay with spending more in those areas. Those that are frugal do focus on reducing or eliminating expenses associated with things that aren’t a priority.

I've shared three ways I live frugally - but there's another side to that, as I don't view myself as cheap. In this post, I’ll share six areas where I splurge. This topic is important because many personal finance enthusiasts inadvertently create a culture of shame, judgment, and embarrassment around spending more than the minimum on any item. I’ve fallen into that trap myself; it isn’t motivating to others. We all have different values; part of becoming financially free is aligning your spending with your unique goals. For many of us, that doesn’t include deprive ourselves of all of life’s luxuries.

Shoes. I have a weakness for fabulous shoes, which are often (but not always) expensive. I prefer shoes to either clothes or handbags and get an irrational frisson of happiness when I’m wearing a pair that I love. As I write this, I'm wearing a pair of studded Marc Jacobs mouse flats. These little rodents make my day. The right pair of shoes bolsters my confidence, lifts my mood, and takes my primarily monochromatic wardrobe to the next level.

When my grandmother passed away, she had accumulated over 100 pairs of shoes. Clearly, I inherited her passion for footwear. My shoe collection includes inexpensive, unique heels that I snapped up at no-name shops alongside fabulous Manolos, Louboutins, and Choos. It’s a Carrie Bradshaw cliché - a woman who loves shoes. But I do!

Wine. In the past several years, I’ve become an amateur wine enthusiast. My splurge on wine doesn’t include endless cases of Chateau Mouton Rothschild, but I do have a 200-bottle wine fridge that I keep stocked with delicious discoveries. Wine allows me to explore the world with each bottle and I get quite a lot of enjoyment from the different tastes, characteristics, and regions represented in my collection.

I use CellarTracker to keep track of my wine; what I’ve bought, tasted, or have on my wish list. It also keeps track of how much I spend on the bottles I log. I could save more money if I drank less wine, visited fewer wineries, or switched completely to Bota Box (which I enjoy and often have in my pantry, it's a great price-to-value.)

Benjamin Franklin was quoted as saying, “Wine makes daily living easier, less hurried, with fewer tensions and more tolerance.” I couldn’t agree more.

Sunscreen. My daily sunscreen is an indulgent beauty splurge. While I buy drugstore brand makeup, the Kiehl’s sunscreen I prefer is over $20 an ounce. It protects my skin and feels amazing. Similarly, I splurge on two other skincare items, my nightly moisturizer from Dermalogica and a lovely Origins moisturizer ironically called Starting Over. These products might have less expensive alternatives, but I haven’t yet identified them.

I had terrible skin in my late teens and used to spend a ridiculous amount on high-end skin care and makeup in my early 20s. Once I figured out the right way to protect and manage my skin, I happily continued to buy the pricier items made a difference in my complexion.

Travel. Exploring is something I value tremendously and will always budget for. I aim to spend more on traveling as I age; my current retirement budget includes a line item that is three times what we spend today.

My partner and I both enjoy a wide range of travel experiences; we have as much fun climbing a mountain in the Pacific Northwest or camping in West Virginia’s gorgeous Monongahela National Forest as we do on a luxurious Parisian getaway. Even in lean times, I’ve been fortunate to continue to invest in travel experiences that both broaden my perspective and recharge my batteries.

Home. This is my biggest splurge; Mr. Financier and I live in a home that is quite generously sized for two people. I’ve shared the ridiculous terms of my first mortgage and I’ve occasionally considered selling, downsizing, and investing the balance.

However, my partner and I have created a home that provides us with plenty of space to enjoy a variety of different experiences without leaving our property. We have a library where I can curl up and read, a theater room to enjoy our favorite movies, a dining room that we use regularly, a basement bar to serve wine and mixed drinks, and an outdoor space that allows us to explore nature.

We’re lucky to have these experiences at our fingertips and while a tinier space in a lower-cost location would make financial sense, I’m quite certain we wouldn’t be as happy. Mr. Financier and I enjoy socializing, but both of us are introverts, so having a space that is truly ours to retreat to is our biggest luxury.

Giving. This is an area I aim to increase over time. Ever since I started working, I’ve been contributing regular, automatic donations to a few of my favorite nonprofits. With each raise or bonus I earn, I always set aside a portion for these groups. Many that I support are related to nature and conservation, as well as supporting and enabling women. One of the most exciting things about increasing my household income has been the ability to donate even more meaningful sums to the causes I care about.

My giving strategy is to engage more deeply with fewer causes; this can be difficult because there are so many amazing groups doing powerful work. However, I enjoy getting to know the leaders of the nonprofits I support, understand their short- and long-term objectives, and connect them to valuable resources. I aim to spend even more time (and money) with these organizations once I reach financial freedom.

Those are six expenses I’ll never cut back on, which means I need to work longer and grow my income consistently in order to fund them. I’m curious to hear if there are expenses that you’ll never cut back on? What are the things you happily spend more than the bare minimum on?

xoxo, Ms. Financier

Three Ways I Live Frugally

Being frugal gets a bad rap. It is often confused with its less forgiving cousin, being cheap. I love the distinction between the two in this article by Stefanie O’Connell: “Being cheap is about spending less; being frugal is about prioritizing your spending so that you can have more of the things you really care about.”

I experienced this in a recent conversation with my girlfriends; I mentioned something I didn’t purchase because I’m too frugal. My friend replied, “With those shoes!? You are NOT frugal!” But, frugality isn’t about always buying the least expensive item. Here are three ways that I live frugally:

Identify low-value budget categories to reduce (or eliminate). As I became more mindful about my spending, I identified several expenses that cost more than I was willing to pay. Your categories may differ; here is where I decided to reduce (or eliminate) spend. These changes freed saved me $540 monthly, creating another $6,480 annually to invest in financial freedom.

  • Cable Television: My television bill was over $100 and provided plenty of channels; In order to save money and give myself more free time, I cut the cord. I now watch far fewer shows, most of them on Netflix.

  • Dining Out: Restaurant meals had ballooned to nearly $400 of my monthly budget. I decided to break the habit of eating out regularly and instead treated restaurant outings like an event. Planning meals and creating easy options for breakfast and lunch contributed to my savings.

  • Housekeeper: My weekly housekeeping service was convenient but costly. My partner and I decided that we could roll up our sleeves and keep our own house tidy, investing a little extra time each week and saving significantly. I will occasionally splurge for their services, but not on a scheduled basis.

  • Expensive Cell Phones: Switching from a traditional cell provider to Republic Wireless allowed us to keep great connectivity, without confusing contracts and expensive plans. There’s a misperception that pay-as-you-go plans are less reliable; in fact, many run on the exact same networks as the big guys. Like all cell services, your coverage may vary, but I’ve been a very happy customer for years.

Optimize entertainment expenses. For anyone near a large city, the wide availability of shows, events, speakers, and entertainment can be a huge benefit. I really value these experiences and in DC area we are fortunate to have amazing entertainment venues alongside Smithsonian Institution museums that are completely free (though they welcome donations). Every now and then, I’ll splurge on tickets to an amazing Kennedy Center performance, but I’ve found that free and low-cost events fill my entertainment need without breaking my budget.

I’ve nearly eliminated some entertainment costs; I am a huge reader and intentionally use the services at my local library to reduce my spending on books and magazines. My library also offers great programming and workshops. I’ve taken free classes on everything from gardening to personal finance.

Local wineries in the metro DC area are also of increasingly high quality. Wine Enthusiast covered some of the leaders in Virginia’s wine scene and visiting local wineries is one of my favorite lower-cost outings. Many wineries allow you to bring your own picnic lunch, and after a few dollars enjoying a tasting, I select my favorite bottle and enjoy it with a homemade charcuterie platter.

Finally, I live frugally by learning new skills. There are two areas where this has helped me save money. First, I learned to cook! I actively rejected learning to cook for years because I had an irrational fear that it would make me too domestic. This all changed in 2015 when I got fed up with boring dinners and tried Blue Apron after a colleague’s encouragement.

My first recipes included Chicken Rollatini alla Cacciatore with Radiatore Pasta and Chicken Mole with Sweet Potatoes, Avocado, and Queso Fresco. These recipes intimidated me and initially took me forever to prepare. However, they were incredibly delicious and I kept customizing my deliveries and enjoying the satisfaction that comes with creating an amazing meal. Over time, I improved my confidence in the kitchen, became more skilled, and invested in a few key kitchen gadgets that made cooking a lot easier.

Learning to cook allows me to enjoy amazing meals at home, which means if I get a hankering for an amazing meal, I can often make it myself. My partner is a great chef but doesn’t enjoy eating out as much as I do, so it works out well that he can pitch in as sous chef (and do the dishes).

Additionally, my partner and I have developed our do-it-yourself skills. I grew up in a house where my parents tried to outsource as little as possible - so I was used to things like painting, wallpapering, landscaping, and installing tile. Mr. Financier often says the most valuable class he took in high school was a home improvement course, which culminated in each student building their own bathroom project, which included plumbing, electrical, and drywall.

When we moved into a house that we simply couldn’t afford (but bought anyway), being able to DIY saved us a tremendous amount. With so many fabulous resources available, we regularly build the knowledge and confidence to try ambitious projects. You can find a step-by-step tutorial for nearly anything. One of my favorites is House-Improvements, a YouTube channel and website run by an experienced contractor, Shannon, who is an excellent teacher.

When a home improvement project or repair doesn’t require the cost of labor, you can immediately pocket the difference, which can result in huge savings over time. You also get the priceless feeling that results from your own handiwork, something I feel anytime I look at the myriad of projects that Mr. Financier and I have completed around our home!

Those are three ways I live frugally, by reducing or eliminating low-value expenses, optimizing my entertainment spend, and learning new skills. I’m curious if you call yourself frugal...or if that’s a label you reject? If you are frugal, what tips would you share?

xoxo, Ms. Financer

“Why Should We Hire You?” How to Answer This Key Interview Question

Last year, my friend was interviewing for an amazing job at a great company. In her final interview, she was asked, “Why should we hire you? We get hundreds of applicants for each position - why should we offer you the job?” Normally quick on her feet, this question made her freeze.

She thought about her previous positions, the other candidates, her skills, the experiences she had managing teams...she said, “I don't know the qualifications of the other people you're considering, I'm sure they have similar credentials, and I know you wouldn't interview them if they didn't meet the criteria, but I also meet most of what the job description asks for.” She didn't get the job.

In her quest to be fair and accurate, my fabulous friend flubbed this critical interview question. When she asked the recruiter for feedback, her poor answer to that question was cited. The recruiter shared, “Our interviewer was concerned that you couldn’t sell yourself; therefore, we worry about you being able to sell an idea to clients or management.” Ouch.

The interview process boils down to the question my friend was asked. Hiring managers scan resumes, conduct assessments, check references, and do interviews to find the right candidate. They want to understand why they should hire you over anyone else. I’ve interviewed hundreds of candidates, and ask this question in every interview. Make it easy on hiring managers by nailing your answer; here's how.

 The question, “Why should we hire you?” is testing both how you respond and the content of your answer. In my friend’s quest for an accurate response, she unfortunately, missed both elements. Her focus on the other candidates didn’t help her, and her lack of preparation for this question meant she was caught unprepared and didn’t come across as confident in her fit for the role.

First, let’s address how you respond. When this question is asked, your reply should be delivered with confidence, include specifics, and be succinct. I recommend signaling that you welcome the question, with something like, “I’m so glad you asked; as you can imagine I’ve been thinking about that question a lot myself.”

Practice your response with a savvy friend. Ask her if you used too much jargon, whether you were convincing, and explore how to improve your reply. Conveying confidence in your answer will put the interviewer at ease and demonstrate that you have put serious thought into why you would succeed in this specific role.

The content of the response is also critical. When crafting your reply, prepare to address three things: your skills, the company’s goals, and your interviewer.

First your skills and experiences; this is the area you know far better than your interviewer. Prepare a simple explanation of how your capabilities will be a unique asset in the position. Three to five examples that you can relate directly to the role will suffice.

Here’s what this might sound like, “I bring four unique skills and experiences to this role; I’m experienced in managing difficult clients, am an effective presenter, have worked in the tech industry for several years, and have a degree in history. That combination means you’ll have an employee that performs well under client pressure, will be comfortable and effective in client presentations, understands the software space, and can bring historical perspective to modern-day challenges.”

Next, you need to address company goals. This demonstrates that you understand the business and makes it easy for your interviewer to connect your skills to the company’s objectives. Usually, you can find the company’s goals on their website, press releases, or earnings reports (for public companies). Clearly link these goals to your experiences. For example, “Your CEO cites client retention as a critical business goal for this year; the skills I just discussed are important to retain both happy and challenging clients in the tech industry.”

Conclude with something personalized to the interviewer. Research your interviewer - many have public social media profiles or have been mentioned in articles. Perhaps your interviewer was recently quoted discussing the importance of customer service - acknowledge that in your reply. You could share, “I also saw you were recently quoted about exceptional customer service - as you’ll see at the bottom of my resume, I received the highest customer service scores on my team last year, which will contribute to my success on your team.”

For bonus points, consider any proof points or references that might reinforce your candidacy. For example, do you have a manager from a prior role that has agreed to serve as a reference? Cite their qualifications and offer to make an introduction. Did you go to the same university? Mention a professor that provided a glowing review of your senior thesis, if relevant to the role.

If you practice both the content of your response and how you convey it to the interviewer, you’ll be far ahead of many candidates. I’m often surprised by how many applicants appear to be unprepared for this question, or even signal to me they haven’t thought about it. I’ve heard replies that begin with, “That’s an interesting question, let me think about it,” and “Hm, I’m not sure…” Those replies do not express that you’re taking this position seriously.

Walk into your next interview ready to nail this question. If your interviewer doesn’t ask it, offer your perspective during your discussion. You can say, “I've put some thought into why you should select me for this position,” and share your reply. This will demonstrate your confidence, understanding of the position, and help the interviewer better understand your skills. After all, if you can't make the case for why the interviewer should hire you - how can you expect her to?

I’m curious if you’ve answered this question in interviews. How did you respond? What tips would you suggest?

xoxo, Ms. Financier

This post also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.

Health Insurance Basics

Health insurance, something that is designed to reduce risk and mitigate costs, can be a source of stress and anxiety. Expensive plans, confusing coverage, and plenty of acronyms might cause you to throw your hands up in frustration, thinking you’ll never wrap your head around insurance.

Many Americans do just that. A 2016 survey indicated that only 4% of Americans can define the key terms that dictate how much they must pay medical costs; deductible, coinsurance, copay, and out-of-pocket maximum. That same survey found only a small difference (3%) between the knowledge of men and women; all of us struggle to wrap our heads around this topic. There is some good news: if you can grasp the very basics around health insurance, you can make big strides in your confidence in tackling this topic. The ladies at theSkimm, who produce a daily newsletter that makes it easier to stay informed, have put together a thoughtful, succinct guide on healthcare policy.

Currently, you must get health insurance in the US via your employer or independently during open enrollment (in 2017, this is from November 1 to December 15). However, if you become pregnant, or have another significant life event, and do not have health insurance, you are eligible to apply for a “Special Enrollment Period” that can allow you to add insurance at times other than open enrollment.

Once you have insurance, it is critical to understand is exactly how your policy works. I recommend using at least three sources to gather your information: your insurance provider, others that have the same plan (for example, your peers at work), and your medical providers (your doctors and preferred hospital).

Here are the questions you should answer; ask for documentation from medical providers and your insurer to confirm the details of your plan.

What type of insurance do I have? There are many types of health insurance. For example, Health Maintenance Organization (HMO) plans provide better coverage if you visit providers that are in their network but can cost you dearly if you go outside the network.

How does my insurance work, exactly? What health care costs are your responsibility, and which are covered by the insurer? Plans vary heavily and can include copays (where you pay a flat fee for certain services) or may require you to first spend a certain dollar amount on health care before insurance coverage kicks in.

What information can I access online? Today, many insurance providers have portals that will help you find doctors, examine your current coverage, and see how much you’ve spent towards your deductible (the portion of your health care costs that you are responsible for paying for). Taking time to understand the information you can access can save time and empower you to better manage your care.

Among the common insurance types – HMOs, PPOs, EPOs, high deductibles – what’s most likely to keep out-of-pocket costs down? What may come with hidden risks?

Health Maintenance Organization (HMO) plans are tightly linked to the network of providers that they have agreements with. If you have an HMO plan, your costs will be lower if every provider you visit is within the network. HMO plans usually require you to have a Primary Care Physician who acts as your health “quarterback” and refers you to other doctors/specialists. Speak with (and get documentation from) your healthcare providers about what happens in an emergency situation – is there any risk of you ending up being served by a provider that is outside the network?

Exclusive Provider Organization (EPO) plans generally do not require you to have a specific Primary Care Physician. However, similar to an HMO, they restrict coverage to providers in their network. Costs incurred out of network are often the patient’s full responsibility. There are some exceptions for emergencies, but each plan varies. EPO plan premiums are usually less expensive than HMO plans.

Preferred Provider Organization (PPO) plans generally have higher premiums than both HMO and EPO plans, but offer the patient more choice in health care providers. PPO plans rely on a network of healthcare providers; your costs (co-pays) are lower and coverage is better when you are served by providers that are in the network. However, unlike HMO plans, PPO plans may provide some level of coverage for non-network health care. I generally prefer PPO plans to all other options, if I can afford the premiums. PPO plans create cost savings through the network of providers, but aren’t as restrictive as HMO or EPO plans, nor do they require the highest deductibles.

High-deductible health plans (HDHP) incur the highest out-of-pocket costs, which mean you run the risk of paying more than other plan types. These are often intended for catastrophic situations, but I find many that select these plans do so for two reasons: HDHP plans have very low premiums and are often associated with a tax-free health savings plan. Health savings plans are often marketed as a fabulous way to save money, tax-free, for healthcare. However, there is no such thing as a free lunch and these savings plans are often paired with HDHPs because of the significant costs that are the patient’s responsibility. To be clear – a HDHP is far, far better than no insurance coverage. However, if given the option, I would strongly encourage new parents to invest in plans that they can afford with lower out-of-pocket deductibles.

In addition to the insurance options outlined above, Medicaid is available to provide health coverage to low-income citizens. Medicare serves a different community; focusing largely on senior citizens and providing support to disabled.

There’s certainly much more to explore on this topic, but I hope this helps you get started. What other health insurance resources do you recommend? I’d love to hear from you.

xoxo, Ms. Financier

How to Manage Money with Your Partner: Six Questions You Need to Answer

If you’re in a serious relationship and regularly share significant expenses, this post is for you. Money can be a major source of friction in partnerships and if you aren’t financially intimate, it is difficult to achieve your goals. Sharing financial details is a powerful start to financial intimacy. Next, you need to determine how you will manage money together.

Every couple manages their money differently and there’s no “one size fits all” answer. Further, the money management approach that works for your relationship today may need to evolve as responsibilities shift at work and at home in the future. That said, there are six questions partners can answer to determine the right approach for them. I’ll start with the more strategic questions first; answering these makes the tactical questions easier.

1. What are our biggest financial goals? Defining your top three joint financial goals provides motivation and clarity. I recommend identifying at least one goal with a short timeline (within the next six months). Record your financial goals, discuss them, and celebrate the progress you make. When you achieve a goal, replace it with a new objective to continue your momentum.

Start this conversation with your partner by defining your joint values, if you haven’t already. This is a common approach that financial planners and experts like David Bach recommend, because aligning your money with the things you value is powerful. For example, if you and your partner value security, you could focus on paying off debt or purchase a home you can afford to increase the security in your life.

2. How often should we check in on our money? Progressing against your goals is easier when you’re keeping an eye on your finances. Your money doesn't sit still when you ignore it. This can be wonderful (automatic investing growing your wealth faster than expected) or stressful (unattended credit card debt generating late fees and interest charges).

You should regularly check in on how you’re progressing towards your financial goals. Scheduling recurring “money dates” with your partner (at least once every three months) ensures you address problems and celebrate progress. Keep a running list of what you need to discuss; your top three financial goals should always be on the agenda. 

If the idea of a money date sounds painful, use the concept of Temptation Bundling in your favor. Temptation Bundling is when you link two activities together - one you enjoy and one you’d prefer to avoid. In this example, you may choose to reward yourself after a money date with a meal at a favorite restaurant.

3. How will we pay for joint expenses? Paying for expenses like housing, utilities, travel, and vehicles should be done equitably, so one partner doesn’t feel beholden to the other. 

First, define joint expenses. Some couples label anything spent by either partner as a joint expense, others put a certain limit in place where they need to “clear” the expense with their partner (say, over $200), and some decide that only certain expenses are joint responsibilities. My partner and I do the latter; we consider utilities, housing, maintenance, groceries, and life insurance to be joint expenses. In contrast, my shoes, evenings out with my friends, and conferences I attend are my responsibility.

Next, determine how you’ll fund joint expenses. My recommendation is to split joint expenses in proportion to income. Here’s an example: Ava is a journalist with a salary of $57,500; she recently married Dinah, whose job as an engineer brings in $125,000. Together, they enjoy $182,500 in gross income. Ava’s income is 32% of their household total, while Dinah’s contributes 68%.

Therefore, to pay their monthly mortgage of $2,500, Ava contributes 32% ($788) and Dinah contributes 68% ($1,712). They’re savvy women, so they signed a prenuptial agreement beforehand that outlines how they’d divvy up these joint assets in the event of a divorce.

4. How will we save and invest together? Investing and saving are critical to building wealth. As a couple, you should decide how much to save and invest. Your emergency fund is critical, but once that’s funded you should focus on retirement, save-to-spend accounts, college (for those with kids), and then investing beyond retirement. Here’s a four-step guide to getting started with investing.

Consider how evenly you are funding investment accounts. I’ve often heard women say, “My partner makes more, so we max out their 401(k) contributions. I can only afford to contribute a little.” If this is your situation, I urge you to consider a more equal strategy. Unequal investing can result in very different account balances; in the unfortunate event of a divorce, you may not receive a financial outcome you’re happy with. Even partners that don’t work outside the home are eligible for a spousal IRA to save for retirement.

5. Where will our money live? Managing your money becomes easier with fewer banks and accounts. When you address this question, consider where you’d like to keep your savings, daily checking, and investment accounts. For investing, I always recommend Vanguard; they have a low-cost strategy and are investor-owned.

Since my partner and I manage our money with a “yours, mine, and ours” strategy, our bank accounts mirror that. Mr. Financier and I have separate checking accounts for individual expenses. We also have a joint checking account for joint household expenses. Our savings and investments are set up the same way; some are jointly held (like our emergency savings account) and some are individual (like my investment account that I started before we were married).

6. Who manages the bills? Deciding who pays which bills will reduce bill-paying stress and ensure you’re not blaming one another for any late fees. Consistency can also help you catch errors. A few months ago, my internet bill unexpectedly increased by $15; I noticed the change because I always pay that bill. I called customer service and immediately received a correction.

It is important for both partners to provide transparency around joint bills. In our house, I am responsible for any joint bill (the mortgage, utilities, auto insurance). However, Mr. Financier knows how to access our mortgage account at any time and we review the statements together. This ensures we’re both aware of jointly-held debts and accounts.

You may elect to pay many of your regular bills automatically. I recommend that if you can schedule the payment from your bank to the service provider, versus giving the service provider permission to pull payments from your bank account. Your comfort level may differ, but I avoid giving my bank information to the cable company, mortgage company, or insurance provider.

Those are the six questions partners can answer to determine their money-management approach. It will take some time to create the right guidelines, but you’ll benefit tremendously when you find the methods that work for your relationship. I would love your feedback; which question was the most difficult for you and your partner to answer? Do you have any other big questions that you recommend couples address?

xoxo, Ms. Financier

Five Signs You Aren't Financially Intimate With Your Partner

In a strong relationship, you often feel compelled to share just about everything with your partner – your fears, goals, interests, and passions. As your relationship develops, your connection deepens, and you become even more intimate. But does your intimacy include the topic of finance?

Being financially intimate means sharing your financial status, goals, and struggles with your partner. Money is a tremendous cause of friction in partnerships and fighting about money is a top predictor of divorce in married couples. Many of us are raised not to talk about money or have shame about some aspect of our financial situation. But hiding information does not strengthen a relationship.

There’s some good news; one survey conducted by MONEY found that, “…couples who trust their partner with finances felt more secure, argued less, and had more fulfilling sex lives.” That sounds pretty good, doesn’t it? How open are you with your partner? Here are five signs that you aren’t financially intimate with your partner, in order of increasing intimacy.

You don’t know whether they save or invest. Do you know if your partner has an emergency fund? Are they investing in a 401k or other retirement plan? Saving and investing are necessary to build wealth and create financial stability, so you should know whether your partner is doing so on a regular basis. If you’re in a very serious relationship or married, you should have an understanding of how much is in their accounts.

You don’t know if they have debt. Does your partner have credit card, student loan, auto, real estate, or other debt? How do they feel about this debt; is it under control or is it a source of stress? Are they actively paying it off? How much debt is does your partner owe, in total? Debt is something that many of us take on to achieve other goals, but it can hamper financial freedom if not managed effectively.

You don’t know their credit score. How healthy is your partner’s credit? If it is weak, what steps are they taking to strengthen it? Before you merge finances, move in together, or get married, you should see your partner’s full credit report. Many of us have had credit issues; I’m no stranger to credit card debt myself. However, credit affects a wide range of financial decisions – credit card and loan rates, housing decisions, and even hiring decisions. Sharing credit reports can help you make better joint financial decisions and work together to strengthen them if needed.

You don’t know their salary and compensation. What is your partner’s base salary? What other forms of compensation are they eligible for (bonuses, company stock, profit sharing, etc.)? Women can struggle to address this topic with their partners because of the damaging and outdated “gold digger” stereotype. However, starting and maintaining an open dialogue about compensation ensures you can address joint finances productively.

You don’t know where their accounts are. Where does your partner bank? Where (and how) is their 401k invested? Which credit cards does your partner have? Yes, you should know where your partner banks. You might not have access to the funds in each account, depending on how you’ve set up your joint finances, but knowing where the money is located can be important in an emergency and promotes transparency between partners.

If any of these are knowledge gaps in your relationship, I suggest starting the conversation with your partner as soon as possible. Each couple addresses the topic of finance differently and to open the conversation, you can share this post, schedule a money date, or bring the topic up in the course of regular conversation.

Approach your partner with authenticity and remove all judgment. If you’re nervous about talking about your student loan debt and don’t know if your partner has debt, you could say: “I’m nervous to talk about my student loan debt, but it is very important to our relationship that we can openly discuss money and personal finance. I haven’t shared the details with you, but I have $52,300 of student loan debts to pay off. I’m working hard to get my smallest loan paid off in the next few years. I’m curious - do you have any student loan or credit card debt?”

By sharing your emotions about the topic, giving your partner information about your status, and then asking a neutral, non-judgmental question of your partner, you’re starting the dialogue in a productive manner. Give your partner some slack; they may be nervous, scared, or worried to talk money. On the other hand, your partner may be relieved about the chance to share what they’ve been working on, or a secret personal finance nerd that has a lot of knowledge to share.

Good luck in building even more financial intimacy with your partner. I’m curious about what topics you and your partner have tackled together to build your financial intimacy; let me know!

xoxo, Ms. Financier

Why You Need a Prenup (or a Postnup if You're Already Married)

Yes, you read the title correctly - you need a prenup. If you're ready to commit to someone for the rest of your life, your relationship should be mature enough to tackle this topic. And, if you’re already married and without a prenup, then you should get a postnup. For simplicity, I’ll refer to prenups throughout this post; a postnuptial agreement serves a similar role for those that have already walked down the aisle.

 When a couple decides to marry, divorce is often (understandably) the furthest thing from their mind. However, data suggests that divorce rates range from 38 - 50%, depending on the source. Humans have an optimism bias; each of us tends to believe that we are less at risk of experiencing a negative event compared to others. It’s a beautiful term that puts our financial health at risk. Our optimism bias makes us less prone to expect (and prepare for) events like disability, illness, divorce, and death.

Ladies, I urge you to hope for the best marriage you could ever imagine, but plan for a worst-case scenario, just in case. The data backs up my suggestion. Women’s finances are hit disproportionately hard by divorce; on average, their income drops 40% (while men face a smaller decline of 25%). Infuriatingly, the standard of living actually rises for many men in the first year after a divorce. Women face a 27% decline, while men may see an increase in up to 10%. Note that most of the data on women and divorce is for heterosexual couples.

Further, there has been a marked increase in divorces among couples fifty years of age and older; the divorce rate in that age range has doubled between 1990 and 2010. The data suggest that divorces happening later in life have an even more devastating impact on the finances of both parties.

There are also many women who remain trapped in marriages for financial reasons. While a prenup doesn’t alleviate financial anxiety, it does provide a set of legal agreements that can simplify the path to a divorce and prevent surprises for women ready to leave their relationship.

Like other forms of legal risk management tackling a prenuptial agreement isn’t fun, but can be invaluable should the worst case occur. You’re ready to get married? Congratulations! There’s a lot of fun to be had at your engagement party, bridal shower, bachelorette party, and wedding; tackle this less-fun topic like the adult you are, in order to future-proof your relationship.

Here are some of the objections I hear when I bring this topic up with friends. (Yes, I am the person who eventually asks, “Are you considering a prenup?” My friends know I love talking about money; they expect it.)

We don't need a prenup, we aren’t rich and don’t have many assets. That means your prenup will be simple, but it doesn’t mean you should avoid it. A strong prenup can cover other important topics like:

  • Who gets first right of refusal to stay in the house you own, or apartment you rent?

  • How will joint household goods, like television sets and furniture, be divided?

  • Will splitting the home 50/50 upon sale be fair, or is another arrangement required?

  • Will your grandmother’s jewelry collection stay with you upon divorce?

  • Who gets custody of Fido, who your partner adopted two months before your engagement?

  • How will you split your joint bank accounts?

  • If you divorce, would you expect to split your 401k or other investments with your partner?

  • Given you currently out-earn your partner, can they expect some sort of alimony? If so, how much and for how long?

  • What about children, if you have them? How will their custody be managed? 

Further, you might not have many assets now, but do you plan to stay married for a long time? Do you plan to grow your income over time? I encourage you to think long-term and put an agreement in place today to address your earnings, investments, and savings.

Legal agreements like this are too expensive for me. This is tremendously short-sighted thinking that puts your future self at real financial and emotional risk. My fairly complex agreement cost $2,677 in the expensive DC area. Your partner may also engage a separate attorney to review and suggest changes, which could contribute to higher costs. However, consider the financial impact of a 40% decline in your standard of living post-divorce; that puts the prenup investment in context, doesn’t it?

My partner makes more than I do, a prenup would only hurt me. In a situation where you’re enjoying a higher standard of living due to your partner, a prenup could play a critical role in creating predictability if your marriage ends. Further, there are plenty of non-monetary questions that need to be decided when a relationship ends, as outlined above. Do you simply want to roll the dice and hope your partner would be completely fair during the difficult and emotional divorce process? Do you know, with complete certainty that you both have the same definition of fair?

We have a strong marriage; I don’t think we need a postnup. I'm happy for you; truly, I am. But remember your human optimism bias; and the statistics on divorce. How many divorced women say, “I knew walking down the aisle we were headed for divorce.” Not many. Instead, family law attorneys I know are regaled with, “I never saw it coming,” and “I never thought this could happen to me.” And that painful realization that a marriage is ending completely, totally sucks. So, further strengthen your great marriage and force a conversation around the worst case scenario. The opportunity cost of a few difficult conversations and the legal cost is worth it.

If you decide to pursue a prenup or postnup, seek out a family law attorney to put the right legal agreements in place to manage your risk and preserve your wealth. Friends, family, and local services providers (like doctors, insurance agents, and financial planners) can be a great source for recommendations.

Importantly, how can you start this dialogue with your partner? It can be a sensitive topic. You could share this post. If you have a regular money check-in, you could bring it up then. Use words that reinforce you aren’t worried about your relationship but want to smartly plan for the worst, while hoping and working towards the absolute best. 

I found that Mr. Financier responded well when I talked about a future situation, “Imagine how much stress we’d save our future selves if, God forbid, our marriage doesn’t work, and we’d already thought through all the really hard stuff ahead of time.” During the process, I also found we had different assumptions about money and property that we’d never spoken about. Working through the details together helped strengthen our understanding of one another, not weaken it.

Some amazing, strong, powerful divorcées have offered to share their perspective on prenups with you, below. If you’re partnered have you put a pre- or postnup in place? If you have, what advice would you give others? If you don’t have one, why did you feel it wasn’t necessary?

xoxo, Ms. Financier


My divorce, which was two and a half years ago, left me almost penniless since I paid for the whole thing...despite my ex making twice what I did. I was left with my pre-marriage retirement savings intact, thank goodness!

I would not get remarried without a prenup. It will be non-negotiable and part of my safety net in case something happens. I wish I had done that with my first marriage (and small bungalow that I owned at the time). Having that house to sell or as an income stream would have helped prevent some of the financial difficulties I’ve faced since the dissolution of the marriage. - T.A., Georgia

 

My divorce was a horror story. Truly. If I told you the gory details, you'd think that I was making it all up. But let's just say that I don't plan on getting legally married ever again (even if it's Ryan Reynolds.)

I was 23 when I started dating the man that would become my husband. It never occurred to me to have a prenup. In hindsight, the investment in a thoughtful and thorough agreement may have saved me three years of divorce hell; emotional and financial.

It's taken me three years (post-divorce) to just begin to bounce back and there is still so much that still isn't and probably won't ever be "right." Even if you think you don't have enough property or assets to warrant one, there are so many other considerations that may impact your post-divorce quality of life. - The Lady in the Black

 

I'm divorced and didn't have a prenup. Had I thought to have one, I think I would have learned a lot about my soon-to-be husband during the process of creating the agreement.

I won't get married again without one. I see it like planning for a business; people don't usually think about how they will want to exit the business. How would you want things to go IF you get divorced? Plan for that before it happens. - P.L., Colorado

 

I remember going out for lunch with a group of women about five years ago, just weeks after my wedding. All of them were divorced and the entire conversation was them talking about their divorces and ex-husbands. I remember judging them because they were divorced; this would never happen to me because I did everything right. I married a man whose parents were still together, like mine. One could say I married down, so he wouldn't leave me. No one in my family was divorced, so in my opinion, we were not going to be another statistic. Fast forward not even two years and he left me for another woman.

After the birth of our second daughter, my husband shut right down. He had an affair and I forgave him the first time but then he started another one. Throughout our marriage, I managed our finances, not because I wanted to but because I had to. I guess I have him to thank for my interest in personal finance and financial independence.

My now ex-husband was an impulse spender and had a lot of debt from before we got married. I spent the first two years of our marriage paying it off. Conveniently, when he no longer owed any money on his debts he left. He demanded half of everything,  though I paid for every item in our home with a few minor exceptions. Luckily we settled our financials within six months of our separation.

My ex-husband was impulsive, so I dangled a buyout of the family home in front of him for a fraction of the equity knowing he would jump at it since he had no savings. With that, I consider myself very lucky as it set me up to be more financially responsible while he spent all that money and more - he is now $80,000 in debt with nothing to show for himself and he doesn't pay child support.

A prenup would have saved a lot of money on lawyers fees and would have set us both up to know what would happen in the case of a separation. Had I had a prenuptial agreement I would have likely been able to keep most items in our home which I acquired prior to us getting married. I ended up having to sell the home my girls spent their first years in to access equity in the home. That home was supposed to be a rental and part of my retirement plan due to its desirable location.

Currently, I have a home and have rental property. I will not enter into another marriage without a prenup in order to protect both myself and my daughters. It is my future, my retirement and their future that is at stake.

I've seen other friends go through divorces and most of them are financially ruined. Most will likely have to declare bankruptcy. My custody battle took almost three years and cost $50k in lawyers fees. Most individuals cannot afford that. I drained my savings and had a mere $6,000 in my retirement account.

Luckily, I am young and have been able to rebound well considering as I no longer have to deal with an impulse spender. That said, my career affords me more than most and I have made decisions that set myself up for career success.

My partner and father of my son understands what I’ve been through with my ex, and we talk openly about this. He came into the relationship with his own savings and home. He is a child of divorce and witnessed his parents’ financial hardships firsthand. We both understand and respect each other enough to agree with this idea in case the unimaginable happens to us. - Courtney, @splitfinances

Business Travel Tips From an Expert Traveler

I’ve been traveling for business for more than a dozen years. Looking for business travel tips? I’ve got you. These are some of the travel hacks that help me survive on the road.

Enjoy the experience. There are many articles about the drudgery of travel, but visiting new places is a tremendous luxury. It is estimated that two-thirds of American adults haven’t flown in the past 12 months and 18% haven’t flown in their life. Only 36% of Americans hold a valid passport, meaning that 64% cannot travel outside the United States (though they may have previously.) Look to meet new people, try a new type of cuisine, and broaden your own horizons through your trips.

Pack a good attitude. Confirmation bias is the tendency to seek, interpret, and recall information that confirms our biases. If you travel with a negative attitude (thinking airlines are terrible, people are annoying, stations are crowded), your brain will seek those experiences and reinforce your bias towards the horrors of travel. I encourage you to pack another attitude: that travel is interesting, exciting, and offers an opportunity to experience things you never would in your home office.

Be loyal. While rewards programs aren’t as rich as they used to be, they’re still useful. I have a colleague in a different department that was traveling sporadically for five years without any loyalty programs. Since they only traveled four or five times a year, they didn’t think signing up for anything was worth the effort. Understand your company’s travel policies and look for a few airlines and hotels you can remain loyal to in order to earn rewards.

Sign up for TSA Precheck and Global Entry. Not optional. Global Entry includes TSA Precheck, so once you are vetted, you’ll have both benefits. The current cost is $85 for five years. Precheck saves you time and effort at the beginning of your journey - you can move more quickly through dedicated security lines that also include Precheck travelers (who tend to be more experienced, and therefore efficient.) Global Entry saves you time when you return from an international flight; you simply enter information at a kiosk as opposed to standing in a queue to interact with a live agent.

Invest in excellent luggage. This really, really matters. I prefer Briggs & Riley and Tumi, as both have excellent customer service and provide warranties. If possible, select your luggage in person, and ensure it works with the items you pack, is comfortable to wheel when full, and is something you can lift into an overhead bin.

Invest in a travel-friendly wardrobe. Look for pieces that can mix and match easily with one another, in neutral colors, that don’t wrinkle. Here’s where women get a big leg up on men - they are often in suits with pressed shirts; women in a professional role can often get away with an amazing shift dress. Much easier to pack. Other critical items include good scarves and statement jewelry; both add flavor to a wardrobe without taking up much space. I’m also mindful of my pyjamas; I have been in hotels that have been evacuated at night and have been standing outside with colleagues. It can happen.

Use a list and pre-pack. Even experienced travelers forget things! I have a packing list that I use for my business trips, which ensures I don’t forget small items, like socks, hosiery, and my sports bra. I also pre-pack, meaning that there are certain items that never leave my luggage. These items include: an umbrella, travel pyjamas, chargers for my electronics, and my makeup/toiletry kit (which include Band-Aids, aspirin, and Imodium, which you should never be without). I also travel with my beautiful Shhhowercap; life is too short for the ineffective plastic caps provided by most hotels.

Keep your work bag stocked. Some items that are critical for flights stay in my work bag at all times, like lip balm, hand sanitizer, tissues, gum, and a travel-friendly pouch of wet wipes in case I end up in a seat with a dirty tray table that hasn’t yet been cleaned. I also always have a large scarf in my bag; temperature is unpredictable while traveling and it can double as a blanket.

Use packing cubes. You never know when you’re going to have to open your luggage in front of colleagues, clients, or the TSA. I use Eagle Creek packing cubes, laundry bags, and shoe sacks so I can easily dig through my bag without any embarrassment.

Never check your luggage. I’m serious - even if you’re headed overseas for a few weeks, it is possible to go carry-on only if you have excellent luggage and a travel-friendly wardrobe. At best, checking your luggage wastes your time (and that of your colleagues if you’re traveling together); at worst, it puts you at risk of not having what you need for tomorrow’s meeting.

Pack an extra bag. Sometimes, you end up adding things to your luggage on your journey. This may be binders or books from your clients or something fun like an unexpected piece of art and a splurge at Duty Free. I keep Tumi’s ultra-lightweight Just-In-Case® tote packed in my luggage for these emergencies. In this case, you are then allowed to check your luggage on the return flight!

Consider noise-cancelling headphones. I travel with mine for flights that are over 2-3 hours; shorter than that, I can get by with smaller earbuds to drown out the noise. Your experience may differ, but my ears get irritated after a few hours, so an over-the-ear model works best for me on long flights.

Identify a pair of “airport flats” that work for you. I’m usually in business professional clothing when I travel, and I prefer to wear heels to client meetings. If you’re often in heels, I recommend identifying a pair of neutral “airport flats” that you keep in your luggage and can change into after a client meeting, before you have to dash through the airport to catch your flight. Comfortable ballet flats work well.

Prepare for long-haul flights. Long-haul and overnight flights require a little extra effort. When I’m flying overnight, I add a few things to my work bag, including: my noise-cancelling headphones, eye drops, panty liners (I’m serious, pack a few to stay fresh on long flights!), woolen socks, an eye mask (I prefer the 40 Blinks mask from Bucky), and a superb travel pillow (I prefer the Aeris neck pillow; Travel and Leisure has an excellent list for different types of sleepers). I also drink a lot of water and use Airborne; I’m not sure if the Airborne actually does anything but I rarely get sick while traveling.

Stay active healthy. Whether I’m traveling for a single night or several weeks, my gym clothes and sneakers come with me. Staying active on the road helps my energy and keeps me healthy. Nearly every hotel has a fitness facility, and it’s possible to get a great workout in your room, too. I also eat healthy, looking for fresh fruits and vegetables and avoiding the temptation to grab a “treat” just because I’m on the road. Since I often travel to the same locations, I’ve learned where I can get a healthy meal on the go. And in an unfamiliar airport or city, a quick Google search can reveal the best options nearby. Hydration is also really important when you're traveling; drink a lot of water if you'll be stationary and near a bathroom for a few hours!

Set two alarms. I’ll end on a very practical note. Never, ever rely on just one alarm to wake you up. If you use the hotel clock, set your phone as a backup. And, if you use your phone, call down to reception to request a wakeup call.

Those are some of my very favorite business travel tips. In a future post, I’ll share my favorite travel hacks, tech, and apps to make the journey easier. I’d love to hear if there are any that are new to you, or if you have any you’d like to add. Travel safely, and enjoy the journey!

xoxo,

Ms. Financier

25 Things Women Should Stop Apologizing For At Work

It’s time to stop being sorry. Many of us were taught to be nice, mind our manners, and apologize. Those well-intended (gendered) behavior guidelines can hurt us in the workplace.

 Women apologize more than men. Pantene even created an ad that highlighted our tendency to say sorry. However, it is important to note that when evaluating the same set of situations, we identify more of them as apology-worthy compared to men. That said, “I’m sorry,” weakens your position and puts you on the defensive in the workplace. 

Save your “sorry” for when it is needed; a difficult situation your coworker is going through at home...not before you ask a question. Here are 25 things we must stop apologizing for at work.

  1. Bumping into someone: “Pardon me,” is a perfectly acceptable response when you bump into a colleague. Acknowledge, but don’t apologize.

  2. Asking a question: Don’t start your question with, “I’m sorry;” instead use language like, “Excuse me,” “Could you clarify…,” or “I  have a question.”

  3. Answering a question: You’re asked something you don’t have the answer to. “I’ll look into that,” or “No, I don’t have the analysis for Asia,” is better than apologizing.

  4. Getting sick: Whether you stay home or leave suddenly during the day, do not apologize for falling ill! Presenteeism hurts productivity; if you’re contagious, your coworkers will thank you for staying home.

  5. Caring for a family member: If a family member or friend falls ill or needs help following a medical procedure, don’t apologize for using your time off to care for them.

  6. Declining a request: You’re asked by a peer to do something you can’t (or shouldn’t). Decline without apology; suggest other colleagues or related resources if you’d like.

  7. Requesting materials: You’re preparing for a meeting, and need certain supplies. State your request, not: “I’m sorry, but could get a projector for today’s session?”

  8. Starting a meeting: The meeting you’re leading is about to begin and everyone is still chatting. Start with, “Good afternoon, let’s begin,” and not, “I’m sorry to interrupt…”

  9. Being busy: Your colleague wants to meet with you, but your calendar is full. Don’t apologize; see if you can skip a “nice to have” meeting or suggest a few alternative dates.

  10. Asking for benefits information: HR teams are designed to source, attract, and keep great employees. When you ask for clarification on your benefits, don’t apologize. State your question clearly so they can get you the information you need.

  11. Asking for time off: In America, time off is a benefit that more than half of us don’t use in full. Don’t start with, “I’m sorry to ask for a few days next month;” simply communicate the dates you’re requesting.

  12. Announcing a pregnancy: It can be scary to tell your employer about an upcoming pregnancy, even though it shouldn’t be. Here’s how to tell your boss - no apologies permitted!

  13. Writing an email: Don’t add “sorry” to your emails. It undermines your credibility and unnecessarily documents an apology.

  14. Rescheduling a meeting: Don’t make a huge deal out of having to move a meeting. A simple, “We will need to reschedule,” with alternative times will suffice.

  15. Beginning your presentation: Right before you begin presenting, an apology slips out, like: “Sorry, these slides aren’t as organized as I’d like,” or “Sorry I only prepared this yesterday.” Don’t undercut your authority before you’ve even begun!

  16. Addressing a disruptive colleague: “Sorry, we need to move on to the next agenda item,” may silence Disruptive Dan, but why are you apologizing? Instead, try, “Dan, your point is noted. Now, we’ll address the next item, to ensure we cover everything on today’s agenda.”

  17. Requesting time from a senior executive: Senior sponsors play a critical role in career advancement. Here’s how to cultivate those relationships. Importantly, do not start off by apologizing when you ask for their time.

  18. Catching up after returning from leave: When you return back from vacation, parental leave, or an illness, you need help to catch up. Be gracious to your colleagues, but don’t apologize for being out or needing assistance to get back up to speed.

  19. Participating in an important life event: Everyone’s life outside of work is different. If you’re not available because you’re at your daughter’s important recital, or cheering for your best friend in her first marathon, don’t apologize - find another way to get the information or suggest a different time.

  20. Popping into the boss’ office: Your boss’ door is open, and you’d like to tell her about the fantastic client feedback you received. Don’t start with, “I’m sorry, Sheryl, do you have a minute?” Instead, try: “Sheryl, since your door is open, I know you’d appreciate some fantastic client feedback.” She’ll let you know if she doesn’t have time.

  21. Admitting a big mistake: Yikes - the report you sent to Alpha Company included two massive data errors. Immediately alert your boss; bring her the details of the situation and at least two ideas on how to fix it, not an apology.

  22. Informing an employee they didn’t get promoted: This is tough, but a well-intended apology undermines your promotion processes. Be direct and empathetic but not apologetic; “Cameron, you didn’t receive a promotion. You may be disappointed; I can provide a detailed summary of feedback on the two skills you’ll need to improve.”

  23. Giving a client bad news: Communicating bad news gracefully is challenging. Your client wants to understand the situation, why it occurred, and what alternatives they are now facing - not how sorry you are.

  24. Giving an employee a poor review: Ideally, you’ve had prior discussions about where they are failing to meet expectations. However, discussing a poor performance review is difficult. Stick to the facts; apologizing can only undermine the feedback you’re providing.

  25. Firing someone: Letting someone go is best done swiftly, directly, and in partnership with HR. You may be tempted to apologize, but doing so can muddy the message. “I’m so sorry, Andre I have to let you go,” may sound nice, but it’s not clear. Instead, use language like; “Andre, today is your last day at Alpha Company. You have not achieved your goals in the last three months and are frequently late to work. Here is the paperwork to complete in order to receive your last paycheck.”

Stop apologizing and start being direct. If you think you apologize frequently, share this article with a trusted colleague or friend who can hold you accountable. And, if you’re mentoring other women, let them know if you observe them over-apologizing - they’ll thank you for it!

Are there any that I missed? Do you disagree with my recommendations? Let me know.

xoxo, Ms. Financier

This post also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.

Five Money Lessons From My Childhood

I am lucky. I grew up in a household where we talked about money. I was raised in a middle-class, Midwestern suburb, and I credit Momma and Papa Financier for so, so much, particularly when it comes to my relationship with money. 

In the 80’s, we faced times where my father’s work (tied to the Detroit auto industry) slowed down, and that often meant my parents worked more while the entire family tightened our belts. We’d look for creative ways to find money - which included me taking on babysitting jobs and my siblings and me biking to local construction sites and picking up pop cans. (Cans could be returned for a ten cent deposit in Michigan, famously exploited by Kramer in a Seinfeld episode.)

When we wanted to buy the Nintendo Entertainment System, the money generated from our pop can-foraging expeditions contributed greatly. Transparency around costs and wants (like the NES) and needs, helped me understand how money worked as a little tyke. Here are five money lessons that stemmed from my early childhood.

1. All money is not created equal. My parents had a large glass jar on our wet bar that was full of spare change. At four years old, I would gaze at it in awe, thinking it contained the riches of the world. One day, my babysitter and I counted the money - we started with the copper coins and had over 100 of them. I’ll never forget the heartbreak I felt when she said, “One hundred pennies means we have one whole dollar!”

I remember thinking, “ALL of those pennies equal ONE lousy dollar?!” My shock must have shown on my little money-minded face. Next, my sitter explained that I only needed four of the large silver coins to make one dollar (much more palatable). Even better, we had a few Kennedy half dollars which added up quite quickly.

This lesson taught that all currency is not created equal. Today, I can apply today to other categories of finance, like mutual funds and ETFs. Simply because they are in the same category does not mean they have the same value, risk, or cost.

2. Doing the things no one wants to do can get you paid. We had an apple tree in our backyard, which was a superb climbing apparatus. However, every fall it also dropped loads of apples that my dad had to gather in order to cut the grass.

Papa Financier hated picking the apples up, and I offered to do it for a penny an apple. Any apples that deemed “very gross” were worth five cents, though I had to be ready to show them to my dad for inspection (they had to be rotten, or crawling with bugs and worms).

I'd tear around the yard with my apple bucket, excited because we didn't ever get paid for chores like these. Dad must really hate this task to pay me for it (or, I was very, very cheap labor)!  

Taking this approach as an adult can help generate extra income or create opportunities. One of the things I encourage new employees to do is find something that you can get good at, ideally that no one else wants to do. Take it, own it, kill it and make more income from it than I did with my buckets of apples.

3. Your money can make you money. I referenced this briefly in my introduction; one of my very early financial memories. I was five years old and my dad explained that the bank would pay me interest in exchange for my savings. This blew my mind - money without having to work for it!

At the time, U.S. savings bonds were earning 7.5%; as a comparison, the current rate through October 2017 is 0.10% (yes, only ten basis points.) The idea that I could put one dollar in the bank and earn more than a nickel by the end of the year was miraculous. This concept made saving money both compelling and tangible. I could see that free nickel from the bank with every dollar I got my hands on.

This concept is at the heart of financial freedom, which is the point at which our assets (investments and income from real estate, for example) produce enough regular income to cover our expenses. It’s also at the heart of the most powerful element of investing - compound interest.

4. Save at least half of any unexpected income. Starting as early as I can recall, my parents suggested I save at least some of the gifts I would receive for birthdays or other celebrations. They didn’t require it, or take it from me, but they’d remind me of the power of saving...versus spending it all.

Nearly 30 years later, I still remember a girlfriend who got three beautifully crisp $20 bills in her Easter Basket when we were 8 years old. The Financier household had fun, sugar-fueled Easters but our bunny hid candy, not cash. My friend showed me those three Jacksons and immediately started rattling off what she was going to buy. My heart hurt that not one dollar was going to the bank!

When we receive a windfall - an unanticipated bonus, or a generous birthday check - we’re more tempted to frivolously, quickly spend it. Our brains tend to compartmentalize and we view the extra money as distinct from our paycheck (which we spend more responsibly). One study on the psychology of unexpected, windfall gains concluded, “...the unanticipated nature of windfall gains is responsible for their heightened proclivity to be spent.” Emily Guy Birken also writes about this concept in her book, End Financial Stress Now

Don't let windfall gains slip through your fingers! I see this today. In management consulting, I'd see folks at bonus time rattle off the vacations, cars, treats they'd be buying with their bonus...and rarely hear folks talk about how excited they were to invest or save some of it. Today, I usually treat myself with at least one splurge when bonus season comes around. But most of it goes to longer-term financial goals, like saving for travel, debt payoff, or my Vanguard Financial Freedom account.

5. Anything worth buying is worth saving for. In the 80s and 90s, many retailers offered something called “layaway” where you could pick an item out and the store would set it aside for you; you could pay the store over a period of time, and receive the item once you’d submitted enough money to pay for the item. Importantly to me, Toys ‘R Us had this service.

When I outgrew my first bicycle, I started saving (along with my parents) for a pink and purple Huffy bike. This bike was absolutely outstanding. It even had a matching bag that attached to the handlebars, so I could carry my He-Man and She-Ra characters around the neighborhood with me. Sweet, right?!

To pay for this bike, I'd save up money and go with my parents to the customer service counter, present our funds, and get a ticket showing me exactly how much we had left to submit before the bike was mine to take home. What an amazing illustration of how to save up for a specific item!

This taught me to save first, spend next. When credit cards came into my life, I forgot this lesson and paid for it dearly. Now that I finally have my credit card debt under control (more on that later), I use a “layaway” approach for big purchases, from new Charlotte Olympias to appliance replacements, home improvement projects, and vacations.

I'm so grateful that I grew up with these five lessons. And while they didn't prevent me from making money mistakes they've certainly given me a strong financial foundation.

What about you? Are there money lessons you learned when you were little? I’d love to hear from you.

xoxo, Ms. Financier

Three Answers You’ll Get From “End Financial Stress Now”

One of the most fabulous things about exploring the world of personal finance is meeting other money-minded gurus. On Twitter, I follow loads of personal finance bloggers, advisors, and money mavens. There’s the practical benefit; a constant flow of interesting perspective on money and there’s also the benefit of being part of (and contributing to) a community. 

One of the finance writers I’ve had the chance to meet (virtually) is Emily Guy Birken, author of End Financial Stress Now, The 5 Years Before You Retire, and Choose Your Retirement. Emily shipped me a copy of her latest book, saying, “While [my new book] is not specifically feminist, it is geared toward helping people manage their financial stress at all income levels. (I hate that most PF books are clearly geared toward upper middle class readers). Thought it could be a good fit for you if you're interested...” I devoured End Financial Stress Now in just a few days; here’s my review and the three answers you’ll get from Emily’s book.

I’m overwhelmed with life and money, where should I start? I could imagine this book being particularly useful for those going through a big life change. New high school or college graduates, someone who is recently separated, or a person with a brand new job. Emily doesn’t shy away from the fact that money can be a stressor, damage relationships, and make us feel not-so-great.

Emily pushes us to first understand our relationship to money, so we can improve it. Her book starts with a section on Redefining Money and the first chapter asks, What Does Money Mean to You? She includes common feelings about money: shame, respect, security, freedom, success, love, time and encourages us to determine what money means to us. I found this section to be particularly powerful; as women, many of us are encouraged explicitly to be good, helpful, and kind - but not powerful or successful. This can hamper us from having a productive and respectful relationship with money.

Later, Emily encourages us to explore our money scripts. She writes, “A money script is an unconscious core belief about money. Such scripts inform everything you do with money.” Chapter seven explores four money scripts; avoidance, worship, status, and vigilance. She briefly describes the positive and negative characteristics of each and outlines the tactics you can employ to ensure your money scripts aren’t creating financial stress.

There’s also a short quiz you can take to quantify your relationship to the four scripts. Mr. Financier and I took it together, which started an interesting conversation. We both scored highly on Money Vigilance, but I also scored highly on Money Worship. This didn’t surprise me; I always have to remind myself money isn’t the answer to all my problems. As a couple, our joint tendency towards Money Vigilance has caused friction. At one point, our budget was so restrictive it created stress for both of us, because we were denying ourselves too many experiences we valued. Emily’s quiz helped us re-visit this topic in a really productive way.

How does human behavior relate to personal finance? Throughout the book, Emily explains powerful, academic concepts down using simple language. For anyone that has a curious, nerdy, academic streak - you’ll find these portions fascinating! Many of us are really interested in human motivations and Emily’s exploration into common biases and behaviors is really interesting.

Two of my favorites are restraint bias (explored on page 86) and the loss aversion (page 91). Restraint bias acknowledges that most of us think we can resist temptation, even though we often fall prey to it when faced with something tempting. I’ve been in credit card debt at least six times in my life. Each time I’ve paid off a balance, I swear, “I’ll never, ever use my cards to buy something I can’t afford.” But then, an email hits my inbox advertising a fabulous shoe sale at Neiman Marcus, and I let myself to splurge, racking up debt on my card again! Emily explains you need to know your weaknesses and plan for them; in my case, I have to unsubscribe from Neiman Marcus emails and avoid going to the mall “for shopping,” because I’ll be far too tempted.

Emily devotes an entire chapter to loss aversion, a term that describes how humans feel loss more acutely than gain. For example, finding a $5 bill on the sidewalk provides a momentary burst of happiness; but misplacing $5 that you just know you had in your coat pocket is more painful. I believe that women can particularly benefit from this chapter; we are often in the role of managing all the “things” in our home - buying gifts for others, decorating, shopping for clothes for our family members. If we better understand and combat loss aversion, we’ll save more money and avoid cluttering our lives with things we don’t need.

What practical, easy-to-follow financial advice can I adopt immediately? While understanding our biases and human behavior is critical, End Financial Stress Now includes plenty of practical tips. I particularly enjoyed the last part of the book, Achieving a Stress-Free Financial Life, where Emily digs into budgeting, managing expenses, and self-discipline.

I’m a big fan of negotiation (see my thoughts about asking for a raise). On page 161, Emily highlights a series of expenses we should be negotiating (and provides tips on how to do so.) Many women were taught to follow the rules as little girls; a nice sentiment, but the rules of commerce are often unwritten. Everything is negotiable. That doesn’t mean we’ll always get what we want, but I find women are more anxious than men to ask for lower prices or different payment terms. Researchers have found similar gender differences, particularly around initiating a negotiation. What is the absolute worst that will happen? Your offer will be declined and you’ll be where you are now, in the status quo. Let’s start negotiating, ladies!

The very practical section on budgeting is entitled, Budgeting with Your Psychology in Mind. I absolutely love this approach, because what works for one person might not for another. I’ve shared my approach, scarcity budgeting, but have come across many other approaches that work well for others. This section includes worksheets that help you think through what to include in your budget, as well as a variety of suggestions on how to budget. If I could copy one section and give it out to the women in my life, it would be this chapter!

Emily Guy Birken’s book is incredibly accessible and thoughtful. As someone who has read a lot of personal finance advice, I found her take to be a unique blend of human behavior and practical advice. If you’re in a book club, I love the idea of suggesting End Financial Stress Now as a way to open up the topic of money with your friends. Or, grab a copy for yourself and lend it out liberally as a way to gently broach the topic of money with important people in your life.

As a bookworm, I’m curious to understand some of your favorite financial books. What are your go-to favorites? Is there another that you would recommend I read and review? Let me know! 

xoxo, Ms. Financier

My Money Mistakes: The Wild Terms (and Size) of My First Mortgage

Money mistakes - we all make them, don’t we? Some are bigger than others. This one's a doozy.

In late 2004, Mr. Financier and I got swept up in the housing bubble. We were in the Washington, D.C. area and struggling to afford this expensive city. So, we did what every young couple should do - buy a home. (Please read that with the full sarcasm with which it was intended.) 

Colleagues, friends, and the media concurred; while D.C. housing was expensive, real estate prices never, ever dropped. So, if we didn’t buy now, we’d never get on the property ladder. We started looking and were promptly floored by the prices. We’re Midwesterners and grew up in areas where $250,000 could buy you more house than you could ever need. In D.C., we blew right past our $300,000 maximum after a weekend of looking for properties. Shortly, we found a beautiful, obscenely sized home perfect for a couple barely out of college. (Again, sarcasm.)

Along the way, my gut told me it was all too good to be true. Yet, I was reassured at every turn. The real estate agent pointed to the rising prices, reinforcing that housing was the safest financial bet one could make. A family member encouraged me to stop investing in my 401k, because my house could become my retirement account. The lender’s very first question was, “How much do you want to borrow?” Colleagues talked excitedly about the massive tax deduction that a house provides. “Everyone in D.C. has a massive mortgage,” they assured us.

Our first mortgage had terms that make me cringe. Our combined gross pay in 2004 was $105,000; Mr. Financier has an engineering degree and I have a business degree. We were lucky to secure excellent jobs after graduation. But, our total housing debt was $607,430. We didn’t put a penny down. The mortgage was creatively assembled, as so many were in the heydays of the boom leading up to the 2008 financial crisis.

The primary mortgage was a 5/1 LIBOR interest-only loan for $472,500 at 4.75%. Interest-only meant we were only required to pay the interest during the initial five years of the loan. Regular payments we made wouldn’t decrease our outstanding balance. After five years, our loan would amortize for the remaining term and the rate would adjust. (In layman’s terms - the payment would go WAY up.) LIBOR loans are tied to the London Interbank Offered Rate, which serves as a benchmark for interest rates that banks use to loan themselves money.

The remaining debt was a home equity line of credit provided by National City. (Subsequently, National City was hit hard by the financial crisis and was acquired by PNC.) The $134,930 line of credit started with an APR of 5% but fluctuated, as lines of credit do. The rate steadily rose during the time we had this mortgage; our initial payment of $562.65 grew to $668.37 in less than a year; an increase of 18.8%. 

Initially, we were swept up in home buying excitement and assured by the encouraging chorus around us (real estate agents, lenders, media buzz, family, and friends). It wasn’t until we were in the home for a few months that we appreciated how incredibly stupid our mortgage was. We stressed as we saw the line of credit payment increase, rising steadily as the interest rate changed.

In 2005, we scrambled to find a loan officer that could refinance this ticking time bomb of a mortgage. Mr. Financier and I worked our tails off at work, trying to increase our income to both make us more attractive to lenders and reduce the balance on our interest-only mortgage.

We got very, very lucky - in October 2005, we refinanced into a more stable mortgage. Our new loans were a $520,000 first mortgage (30-year fixed at 5.75%) and a $90,000 second mortgage (20-year fixed at 7.13%). We were lucky because we refinanced before the economy imploded. Also, our rising income made it possible to secure the new mortgage - by that time, our gross income had grown to $135,900. I also give a tremendous amount of credit to my family - my parents realized what a bind we were in and offered to lend us some money to help with the payments on our new, more expensive, mortgage until we could afford it on our own. (This resulted in another money mistake; stay tuned.)

For those of you keeping track of the numbers, you noticed that our second set of mortgages was higher than the first. No, we didn’t take any cash out; the increased mortgage covered the fees associated with refinancing. We bought for $607,430 and our second set of mortgages was for $610,000 (a difference of $2,570). In the eleven months that we had our wild first mortgages, we did pay off some principal.

The first painful part of this money mistake is the $25,730.48 we paid to our lenders during the time we had the 5/1 ARM and line of credit. Much of that was interest, of course, and is money that we never got back. As I write this, well over a decade later, I still feel sick at how much stress our original mortgage added to our lives. And I feel ill thinking about what would have happened if we hadn’t been able to move to a “better” mortgage before the housing bubble popped.

The second part of this money mistake is the fact that we bought a house we couldn’t afford at a very early point in our lives. We dedicated our twenties to furiously growing our incomes in order to pay our mortgage and build our savings. Because the housing market collapsed shortly after we refinanced, we didn’t attempt to sell the house. D.C. housting was also negatively impacted by the crash and we were underwater on our home for years, which meant we were stuck.

You might be interested in what’s happening today. We are still in the same home and completed what I hope is our last refinance in 2012. We currently have a 15-year fixed rate mortgage at 3.375%, and I recommend everyone consider a 15-year mortgage when purchasing a home. Mr. Financier and I aim to eliminate our mortgage in the next five years and regularly make extra payments. 

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Whew, that was a painful money mistake to relive! But, we learn from the mistakes of others. I share this story as an example of why you should listen to your gut and resist getting caught up in the frenzy created by others, particularly when making big financial decisions. We’re so, so lucky we didn’t lose our home (or jobs) and got through the financial crisis ok. However, luck is not a sound financial strategy. 

Have you ever had a loan with wild terms or one that you regretted? What other money mistakes have you made?

xoxo, Ms. Financier

How Do You Budget? Scarcity Budgeting Works Best for Me.

Wealth is created in the space between your income and expenses. If you’re interested in growing wealth, I suggest you grow your income and manage your expenses. If you’re like me, you enjoy increasing income more than reducing costs. But, if you don’t keep an eye on your expenses it is very easy to over-spend. 

I believe the most efficient way to manage your expenses is to find a budgeting method that works for you. If you’re partnered, you need to determine how to blend your approach with your partner’s - but we’ll explore that in a future post. 

The budgeting approach that works best for me is something I call scarcity budgeting. At a high level, the idea is to set up your finances such that you do not have excess money in your checking account. By creating scarcity, you don’t have the ability to comfortably over-spend or let your money sneak away from you.

Here are the four steps to scarcity budgeting:

1. Track your expenses to understand what you’re currently spending. Then, based on your actual expenses, decide what you want to reduce, change, or keep the same. For example, you might be appalled that you’re spending $1,250 monthly on food, drink, and eating out. Or, you may be disappointed that you aren’t investing enough for your future or donating enough to the charitable causes that matter most to you.

2. Automate your finances. I do this by having separate accounts for things that aren’t daily expenses. Travel, fun money to splurge on shoes or gifts, and boring necessities like car maintenance are funneled into different savings accounts. Each payday, a certain amount of money automatically transfers out of my account and into these savings accounts. Same for charitable contributions, regular bills, and investing; money is sent to those organizations on a defined schedule.

3. Spend only what’s left. After my money is whisked away, I’m only left with enough to buy gas, groceries, household items, and restaurant meals in accordance with my budget. I keep an eye on my checking account and don’t give in to putting things on credit cards to “tide me over” until my next payday.

4. Save or invest any excess. This is the fun part of scarcity budgeting! (Yes, I’m serious). If my checking account grows too large (because I haven’t been spending that much on regular expenses), I save or invest. This “found money” contributes to my other financial goals and gives me an unexpected financial boost. 

That’s my approach to scarcity budgeting in four steps. For me, this budgeting approach has worked wonders. Because I do not have excess money in my checking at any given time, I am not tempted to spend. Importantly, I rarely use credit cards because I have struggled with credit card debt in the past.

Do you use scarcity budgeting? Is there another approach to budgeting that you prefer? Or, are you one of the financial unicorns who doesn’t budget yet still manages to build wealth? Let me know!

xoxo, Ms. Financier

Three Reasons Why Financial Freedom Is a Priority For Me

There aren’t many people in my life that know about my goal to retire by 45. While I love to talk about money and personal finance, only a few people know I’m spending most of my money trying to reach financial freedom (the point at which our investments produce enough regular income to cover our expenses). 

That said, when I get brave enough to share, one of the common reactions is incredulity. Some suspect I have a major trust fund (I don’t), or that Mr. Financier and I have inherited wealth (we haven’t); others are curious about the math behind financial independence; and others say, “Retire by 45?! Why would you want to retire so early - what will you DO with yourself!?”  

 The answer to that question is exactly why I’m so focused on financial freedom, so I’d like to share my perspective. I also recognize how lucky I am that my circumstances and hard work have put me in a position to consider leaving the workforce at a relatively early age. Here are three reasons why I’m so focused on this goal.

#1: I Need More Time for Hobbies

There’s a lot that I enjoy...reading, traveling, hiking, bicycling, volunteering, mountaineering, kayaking, discussing personal finance, bird watching, running, weightlifting, yoga, cooking, learning and taking classes, enjoying a nice glass of wine...to name a few.  With my current career, I am left with only two precious days each week - Saturday and Sunday - to focus on my hobbies. Realistically, those days are currently also filled with chores that get neglected during the workweek.

I get more enjoyment from a day that allows me to focus on the things that bring me joy. A day that starts with a morning yoga class, a post-class coffee with local volunteers to strategize about an upcoming campaign, followed by a hike in the woods and picnic lunch with my partner, ending with starting the first several chapters of a huge novel before a delicious home cooked dinner and glass of wine - that’s a dream.

If I’m lucky, I get 4 days like that a month.  If I’m realistic, it’s only 1 - and that’s depressing, to me. The idea that I might be able to escape the daily grind and have more time to spend on the things I enjoy is incredibly motivating, empowering, and liberating.

#2: I’m Sick of Working

I’ve been earning a paycheck in some way, shape, or form since I was 13. Before that, I babysat for neighborhood kids (I even had my own business cards and completed the American Red Cross Babysitting & Child Care Training) and did clerical work or physical labor as needed for my dad’s small business. When I was able to take a job outside the neighborhood at 13, I began earning paychecks. I’ve worked at a daycare center, served as a restaurant hostess, was a cashier at a sporting goods store, interned at a financial planner’s office, served as a lifeguard, and interned at a law firm...all before turning 21.

Since graduating from college, I have worked in consulting. There’s plenty to love about my career; the client challenges are fascinating, I work with smart colleagues, and I get to travel extensively. As most businesspeople know, traveling for work is both a pleasure and a grind; on the whole, I realize that I’m lucky to explore the world as part of my work. However, the massive time commitment and consistent stamina required of at a full-time job in management consulting is something I’d gladly leave behind. At the end of the day - it’s work. It's work I have to do because I need money to live.

#3: I Finally Realized That Experiences > Things

I think of 2011 as the year that the scales fell from my eyes around the value of material goods. I won’t tell you that I have sworn off beautiful things - I still salivate over a gorgeous pair of Louboutins. But, during the financial crisis, I was terrified I’d lose my retirement savings, job, and home. When the economy began to improve, I bounced back in a very financially counterproductive way. I rewarded myself with a lot of things. And those things weren’t necessarily making me feel happier or more secure. I’d often open up my credit card bills and feel nauseous about how much I spent on “stuff.”

That year, I started taking smaller steps to get my financial house in order. I stopped planning shopping afternoons with friends and instead suggested museums or picnic lunches. I canceled my recurring housekeeping service and began cleaning my own home. Mr. Financier and I started reviewing our budgets even more regularly and critically to look for areas where we were leaking money. We re-routed “fun money” that we had previously spent mindlessly towards investments. I got more serious about my career, knowing that if I grew my income, I’d have more to invest. Simultaneously I started exploring the FIRE movement and was very inspired by others that had saved enough to stop full-time work in their 50s, 40s, or earlier!

I began to internalize that, for me, life experiences will always deliver more value than material goods. And I’ve always been a fan of aligning money with your personal values. This series of realizations helped me put my money to work for my future, instead of on things I’d enjoy in the present.

As you can see by these three reasons, the goal of achieving financial freedom is so important to me because time is an incredibly precious asset and given the choice (which I’m grateful to have), I prefer free up time for experiences outside of work. I’m curious if you’ve contemplated financial freedom - either earlier in your 30s or 40s or later in life. If so, what drove you to explore the idea? Let me know your thoughts.

 xoxo, Ms. Financier

How To Create Your Retirement Budget

I get incredibly excited about the idea of creating a retirement budget. It is a chance to imagine my life at a point when I no longer have to work and can fill my time as I choose. I think about my retirement budget as a “financial freedom budget;" I aim to stop working a traditional job (or before) I reach the age of 45. Those that know about my goal of financial freedom ask about my budget. In this post, I’ll share how I think about my future spending.

I created my first financial freedom budget in 2013 when I started exploring the FIRE community (Financially Independent, Retired Early). Before that, I'd always thought, “Retirement is so far away, I can’t imagine what my budget will look like.” I had never considered how I’d be living when I stopped working; it was always “off in the future” and so “far away.” I could figure it out later, right?

My thinking changed once I was bitten by the bug to achieve financial independence. I became inspired to figure out exactly how much Mr. Financier and I would need to save to become financially free. A key part of that is how much we’d be spending, so modeling our future budget became critically important. 

At first, thinking about the expenses we’d incur for the rest of our lives was overwhelming. There are so many variables and assumptions. So, I began in the most obvious place - with our current household budget. I reviewed our annual expenses from 2012 and began making adjustments from there. The first adjustment was easy; I immediately deleted my two largest monthly expenditures. These were our mortgage (which we plan to pay off before we stop working) and our retirement savings. That change immediately reduced our monthly expenses by 59%.

Are you surprised that we were spending nearly 60% of our income on retirement and our mortgage?  Two things to keep in mind: First, we refinanced our generously-sized home (and associated generously-sized mortgage) into a 15-year loan that we pay extra on each month. Second, in 2011 and 2012 we had already optimized our budget to remove extra expenses in order to invest more our income.

Note that many mortgage payments include property taxes and homeowners insurance payments; these won’t disappear once your loan is paid off. If you plan to pay off your mortgage before retirement, include your taxes and insurance payments in your retirement budget.

Next, we reviewed our entire budget and made adjustments to reflect what we expected to spend once in the future. Like any budget, ours is a best guess and a living document that we keep coming back to and modifying over time. Here is a summary of the major changes we made.

Home Maintenance Saving: We added a dedicated line item equivalent to 1% of our home’s value to save each month for repairs, since we would not have salary and bonuses to help pay for any big expenses out of upcoming cash flows.

Health Insurance and Healthcare: We increased costs for health and dental insurance for us both, estimated based on visiting online sites and getting quotes (pretending we were 55.) We assumed we’d be paying more for healthcare as we age and increased spending in that category.

Auto Insurance: This line item decreased, as we’d sell one of our two cars in retirement (no more dual commuting) and we’d also be driving fewer miles annually, without the daily trip to work.

Travel: I love exploring, so this line item went up significantly. I increased our travel expenses three-fold. Right now, Mr. Financier and I are very time constrained and don’t travel as much as we’d like given our careers. I look forward to “slow travel” when we’re financially free - weeks or months in one location, living more like a local.

Clothes & Dry Cleaning: This went WAY down, as we wouldn’t need to be in our professional work gear every day. I still plan to buy shoes, but perhaps not quite as many new pairs each year!

Food, Wine, Dining: We increased these slightly; business travel subsidizes some of our fine dining today and we do plan to enjoy going out weekly in our financially free days. I’m also a wine enthusiast, and I’d like to explore it even more in the future.

Hobbies: We increased our hobby expenses, though not by much as we have pretty inexpensive hobbies (reading, running, hiking, camping, and yoga). I did add in additional costs for classes and seminars; there are so many amazing programs in the D.C. area and I regularly can’t participate because of my work schedule.

With these adjustments, Mr. Financier and ended up with a total monthly requirement that is far lower than our expenses today. When I did the math, I was stunned that we could have the lifestyle reflected in this retirement budget, for so much less than we were living on.

What about inflation? Many prefer to include inflation in their modeling. I do all of my calculations in today’s dollars.  Yes, inflation is real, but we never intend to move our entire portfolio out of the market, so we expect that keeping our money in the market will combat inflation - just like it does for us today.

Is my retirement budget perfect? Like any model, I know it isn’t. However, it is a starting point that allows me to explore how much income I’ll likely need to replace when I stop working full time. Many that approach financial freedom begin to live on their post-retirement budget a few years before they stop working. I like this idea as a way to reality-check and pressure-test the budget.

Have you built a budget that reflects your expenses post-career? If so, how did you do it? What feedback or suggestions do you have for me?

xoxo, Ms. Financier