Balance, Mindfulness and Money – Divorced Girl Smiling

What about your girlfriend that walked in swinging that $2,000 designer purse on the crook of her arm? You have no idea that she bought that purse without any regard to her family’s current financial picture. After all, why should she care? She works hard and deserves to treat herself without thinking about anyone else for once, right? Maybe. But before she left her house to meet you at the restaurant, she and her husband had a huge blow-out fight because the credit card statement just arrived in the mail and they had talked on numerous occasions about her spending habits. Her husband pleads with her for the fifth month in a row to stop the over-the-top spending. He explains that he’s so stressed out about their credit card statement each month that he’s stopped contributing to his employer’s retirement plan to ensure they have enough cash to cover the bills each month. She argues that she has a right to buy herself nice things. She does so much for the family that the least he could do is turn a blind eye to her fancy toys. After all, he just bought a new set of golf clubs three months ago! He asks that they simply communicate more when she feels the need to go purchase a big-ticket item so they can make sure it fits within that month’s budget. As she walks out of the front door, she rolls her eyes and mutters under her breath, “This is so unfair and is such a double standard!”

And those neighbors of yours that just sold their home to move into that McMansion across town? What you saw was a picture-perfect family beaming with excitement at their next big adventure. What you didn’t see was the client I had to discontinue working with within a year of buying their new home. What you didn’t see was that between the new furniture, increased utility bills, a need to keep up with their new neighbors, “The Joneses,” and the new private school tuition that inherently came with being a member of that community, they had no choice but to clear out their accounts with me to make sure all the bills were being paid. They left my office that day disappointed in themselves for letting their spending get so out of control, and saddened that the wealth they had worked so hard to build was gone in the blink of an eye.

I’m not saying the above three scenarios are a blanket for how all these people live and the turmoil they face, but I am saying I see it A LOT. In today’s world of instant gratification and “Look at me!” we often fail to reconcile that while living for today is fun and exciting, we must also financially support the person that we will be tomorrow. It’s hard to start off every day at zero dollars, or even worse, in the negative. While you’re busy living this beautiful life to the fullest and savoring and cherishing all the amazing things and experiences this world has to offer, remember the woman that’s going to wake up tomorrow trusting that you made the right decisions today.

These people tend to have savings accounts at a size you wouldn’t believe, but are also some of the most nervous and anxious people I’ve ever met. They are constantly worried that another economic recession will happen. I’m sure you remember 2008 when the market took a complete dive into the Dumpster and the entire economy slid into a valley that it took a decade to climb out of. These types of people are constantly worried they won’t have enough. They are constantly worried that the world is going to crumble around them and the only safety they will have is cold hard cash. Let me tell you something: If the entire world is crumbling around us and the market takes a total Dumpster dive that it can’t climb out of, cold hard cash isn’t going to save you, and in fact, the zombie apocalypse has probably started, and from what I’ve seen on TV, they don’t seem to care about money.

Some of these people are so busy saving for tomorrow that they’re forgetting to live for today. They impose these rules of frugality on themselves in which they alienate themselves from life’s most magical experiences shared with the people they love most. These are the people who die with multi-millions in their bank accounts, and you remember them as always at home on the couch watching TV, or walking around the neighborhood, or shopping for the best deal on something, even if waiting for the best deal meant going without something they needed for a couple of months, or saying no to vacations because it’s an “unnecessary expense.” But wow, those multimillions in the bank really do them a load of good in the afterlife, right?

Ladies, just like how overspending without regard is a detriment to the amazing, secure, and financially independent life you deserve, so is oversaving to the detriment of your life’s enjoyment today.

The idea of swinging so far over to the savings side of the spending vs. saving pendulum doesn’t just apply to those people with tight pockets and big bank accounts. Think about that young lady just starting out in her career who makes one financial mistake and then completely overcorrects. While correcting is a good thing, overcorrecting is not.

My sister-in-law is the biggest fan of coffee I’ve ever met. Iced, latte, black, steaming hot . . . heck, she’ll even drink it lukewarm as long as it’s coffee. She works in D.C., for the United States Post Office in the forensics department, and is often pulling long hours. Due to the long hours and very early mornings while working on a specific case, she got into the habit of stopping at the adorable, hipster coffee shop right by her office every morning for a coffee on the way in. It was only a couple of bucks here and there, yes?

One evening when she was over for dinner, as she visits every so often to hang out and see her nieces (read: Bring them gifts and spoil them with treats and five different bedtime stories when Riley, my oldest, knows it’s usually two), I asked her how work was going. She mentioned that she was still focused on that big project and pulling really long hours. But then she said, “I had to cut out the coffee every single morning, though. I didn’t realize what it was doing to my credit card and I’d rather get rid of my student loans.”

She has some pretty serious undergraduate and master’s degree student loans and they’re always at the forefront of our conversations when she confides in me about her finances. She mentioned that she had gone back to making coffee at home and bringing her travel mug with her. Now recall, she loves coffee, and trying all the new and seasonal flavors, so I couldn’t imagine a world in which she wasn’t ever stopping off for a cup of joe that had some razzle-dazzle to it. I’m a financial planner by trade, but a realist and lover of life by heart, so what I said to her next certainly goes against some of the financial literature currently on bookshelves that tells you to “skip buying the latte.” I told her, “That’s awesome and I’m proud of you for realizing what it was doing to your expenses. But remember to live your life. You don’t have to completely stop getting coffee out. It’s one of your favorite things to do! Why don’t you go back to treating yourself but make it a Friday thing to celebrate the weekend or a Monday thing to get you through the Monday morning blues. You’re chipping away so much at your student loans by putting extra principal down each month. Buying a coffee out once a week won’t ruin your finances.”

She looked at me puzzled at first, but then a look of relief washed over her face. “Really?”

“Really,” I said.

This life is for the living and what is the point of saving every single last dollar if you’re not enjoying today? When you can balance the right amount of spending with the right amount of saving, your wealth will become a powerful tool that you will have the master skill set to manage on your own, or more preferably, ask for help in managing. Your wealth will become a source of empowerment for you and service your current and future self in a way that creates a balanced approach that will carry you throughout your life.

Investing for the Future

Last, but certainly not least, we need to talk about investing for the future. Yes, you need to spend appropriately today, and save appropriately for tomorrow, but what about investing for your long-term future self? What about the woman who you will be twenty or thirty years from now, if not longer? What can you do today and tomorrow to make sure that you are setting her up for the life of wealth and abundance that she deserves? We know it’s not spending every last dollar we make. Maybe it’s saving every single dollar we make in a savings account at the bank? Nope, certainly not that one either. Saving for tomorrow is smart, but investing for the future is powerful.

Remember Kathy who saves every dollar she makes to her bank account out of fear? The fear of the market crashing, or that she won’t have enough, which makes her hoard all her money into a savings account. This can almost be looked at as a self-fulfilling prophecy for Kathy. By saving all her money to a simple savings account at the bank, she is essentially getting no growth on her money. It’s not invested in any stocks or bonds and doesn’t have the opportunity for any real growth beyond maybe 1 percent per year, if she’s lucky, that the bank is giving her in interest. So, every year, she sees her bank account stay stagnant, never growing besides the money she continues to deposit. In retirement, her only option will be to withdraw money from her bank account as she needs it, which will cause the constant depletion of the principal of the account. The account will never have the opportunity to “make back” the money that she withdraws from it. There is no growth on the money for her to live off of; she is simply living off the exact number of dollars she puts in today and tomorrow. When you look at it that way, of course she’s nervous about not having enough! It’s a finite pool of money and she knows exactly how much she’s put in and thus exactly how much she will have to live off in retirement.

And to be quite frank, the argument could absolutely be made that she is actually collecting a negative interest rate on this money, as inflation will eat away at these stagnant dollars. We all hear the term “inflation” thrown around, but what does that actually mean? Simply put, inflation is a general increase in prices and therefore a lessening of purchasing power of your dollar. Historically, inflation pushes prices up about 2.5 percent per year on average. A quick example: a gallon of milk today may cost $3.79, but next year that same gallon of milk may cost $3.89. Not overly significant year over year, but over twenty years, you can see how inflation starts to matter. And if prices are increasing, but the cash in your bank is not because you aren’t getting a growth return on your money in the bank, you are effectively operating in an environment where your money at the bank is not growing at the rate of the world around you.

Inflation affects not only our dollars, but the entire economy. Think about the price of a house twenty years ago, or the price of a car twenty years ago. In 2000, the price of a midrange SUV was around $20,000. Today, it’s easy to spend $40,000 on a mid-range SUV, and that’s before you add in all the bells and whistles! So, what if twenty years ago, you decided to put $20,000 dollars away in a savings account for an SUV in twenty years. You would be pretty bummed out to find that your $20,000 in today’s dollars could buy you a low-line sedan.

What if you invested that money for a long-term need? What if instead of saving all your money in the bank, for retirement, or a new car or house somewhere down the line, you invested your money in an account in a mix of stocks and bonds?

Instead of hoarding her money at the bank, what if she left herself a nice, comfortable cushion at the bank and then invested some of her money in accounts with a mix of stocks and bonds in an effort to grow her wealth over time? Her goal for investment could be to simply beat inflation. Meaning, she mostly wanted to invest in low-risk bonds, with a little bit of stock mixed in, in an effort to make more than 2.5 percent on her money a year. If we look at the stock market from 1966–2015, we see that stocks grew, on average, 9.69 percent per year before inflation. So historically, we know that if Kathy would’ve invested her money instead of hoarding it at the bank, she should’ve done well over a 2.5 percent annual return on her money, and maybe wouldn’t feel so nervous and scared when she looked at her pot of money. She’d know that her pot of money isn’t finite; it is constantly growing (yes, even when the market goes down, it will always come back up, you will just have to wait it out), and this would perhaps give her the peace of mind she needed to loosen the purse strings today because she is invested for the future.

Every facet of life requires balance and this includes wealth. So many women who come to me for financial guidance are taking the first steps to finding this balance for themselves. And honestly, until I meet you and we sit face-to-face and you tell me about your financial values and goals, I won’t know what your exact balance should be. The other thing I always tell my clients while we’re working through the right spending, saving, and investing balance for them is: “Tell me what day you’re going to die and I can have this worked out for you to the dollar!” None of us have a crystal ball and none of us know when our last day on this planet will be. If I had that ability, I would be in a very different profession!

I’ve watched a client work so hard for retirement and then die two weeks after his last day. I’ve watched as a woman came into my office completely lost and grief-stricken after her husband suddenly died of a heart attack. I’ve watched as grown children, and now beneficiaries of their late parents’ estates come to me and say, “I wish my mom and dad had met with you. They wouldn’t have been so worried about money all the time and could’ve relaxed a little. I don’t need this money from them. I wish they would’ve used it on themselves.”

The only thing we can do is everything in our power to set ourselves up for success today, tomorrow and in the long-term future. For your girlfriend with the expensive purse and the overdue bills, success may come in the form of speaking with her husband regarding big purchases and making a savings plan for these big-ticket items that fit in well with his goal of saving toward his employer retirement plan. For Kathy, success may come in the form of investing some of her money in stocks and bonds for growth which would give her some breathing room when it comes to loosening the purse strings and having dinner out with her girlfriend every once in a while.

The right wealth balance for you and your goals is something that I urge you to work through with a financial planner. The right financial planner will care about you and will want to listen to your financial values and goals. They will want to make sure you’re enjoying this beautiful life you’ve been given and are using your wealth in a way that best serves you. The right balance of spending for today, saving for tomorrow, and investing for the future is a puzzle. It is multitasking at its finest. We all need more multitasking and juggling like we need another hole in the head. However, I believe the saying is true: “If you want something done, give it to a busy woman.” You, no matter how busy you are, have the ability to reach out and ask for help to better understand your wealth balance.

From a holistic standpoint, finding balance in your wealth is a huge component to finding overall balance in your health and life. Self-care comes down to the mental state of our health. While yes, having a balanced wealth plan contributes to a large part of our overall well-being, have you ever paused to take a mental self-reflection of what’s going on upstairs in that beautiful brain of yours? Do you find yourself so tangled up, overwhelmed by thoughts of figuring out your wealth and finances? Girlfriend, there is nothing more empowering than a solid spending, saving, and investing plan that you can wrap your head around, commit to, and see through to fruition. Start putting yourself first and get this figured out. Your happiness, your health, and your wealth depend on it.