Does money stress you out? Confused about how to invest it? If so, read this interview with Amanda Steinberg, founder & CEO of DailyWorth, the leading financial media company for women and WorthFM, a new money management & investing platform for women.
Q: Would you say that women have more challenges when it comes to being financially savvy than men?
A: Yes, a lot of it comes down to historical roles in the household and, for a really long time, money has been a man's job. It's been seen as unsentimental to know too much about finances because that would be taking away from the man's job. Obviously that is changing for a vast number of reasons.
Q: What would you say are the reasons things are changing?
A: There are a number of factors contributing to this change. The first and foremost is that I think general rules across the board are changing. More than 50% of adult women in United States are now single. Whether by desire or just out of necessity, women are now in the financial role. The second factor is the rise of the woman breadwinner. Women make up 40% of household breadwinners in the country now. If these trends continue, it looks like within the next 15 years women may exceed men as household breadwinners. Why would you care about your career and care about your health and all these other things but leave your money to somebody else? It just doesn't make sense, and I think there's a broader awareness growing in that regard.
Q: What would you say is particularly challenging for women when it comes to investing their money?
A: When measured for straight aptitude, men and women typically know the same things about investing, but, for whatever reason, men have a lot more confidence about it. I think the reality is that everyone is confused by investing because there is a lot of noise in the financial services market about what you should be investing in, and a lot of it is driven by the markets that go up and down, up and down. As much as people like to think they can predict the behavior, they really can't. I think women are just more ready to admit that they are horribly confused by all their options. I also think financial services companies have profited off of people's confusion for a very long time.
Q: What would say are your top three tips to women on how they can be better with their money?
A: I think that the most important thing that women need to focus on is creating a short-term savings account for unexpected expenses. After 7 years of listening to the DailyWorth subscribership of over a million women, what I've seen is a pattern in which women are typically contributing to their 401(k) at work, but many of them do not have an emergency fund in the form of a short-term savings account. Then when they hit a cash crunch, they put it on a credit card. So even though they have retirement investments, they are taking on risk around debt and the cost of debt. While 401ks often come with tax benefits, and oftentimes an employer match, these benefits are outweighed by the cost of debt and the benefit of having actual liquid cash in a separate savings account when you need it.
The second tip is to focus on creating this short-term savings account even when you already have credit card debt. When people have credit card debt they are in a big rush to pay that debt down, and they don't also contribute to a short-term savings account. Even before you pay the majority of your debt down you really need to make sure that you have about three months of cash saved up. Rather than putting every spare penny that you can towards your debt, split it 50-50 so that it goes half towards your debt and half towards your emergency fund.
The third tip I would recommend is for women to change their mindset about investing. Being an investor doesn't mean you need to spend all day, every day, studying the markets. Learn about low-cost, passive investing options, like index funds, and think about investing as a way to earn money conservatively over time. Don't think about investing as, "How am I going to double my money in the next year or so", because that's really very risky and very hard to do. It's much safer to grow your money over the long term by focusing on holding a portfolio of diversified investments for the long term as opposed to short-term stock-picking.