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