The Shriver Report – Cinderella’s Guide to Financial Independence
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Cinderella’s Guide to Financial Independence

Prince Not So Charming by Kathleen Grace 559x771

I recall the first phone conversation I had with a potential client. A husband, dad, and CEO of a successful company, he asked me to provide financial advice for his family. During our talk, I shared what we would cover during our face-to-face appointment that would take place the following week. “I look forward to meeting your wife,” I said.

“Oh, she doesn’t have to be there because I take care of all the finances,” he said.

Clearly, this is an extreme case of a woman putting her financial well-being in someone else’s hands. At the same time, what he said succinctly illustrates how—too often— women allow someone else to take charge of their financial lives.

I wrote Prince Not So Charming® as a call to action for all women. After two decades of providing financial advice to clients from diverse backgrounds, I have learned that women have many strengths but face specific challenges when it comes to money.

Whether you have found your so-called prince or are looking for the man of your dreams, the responsibility to take complete charge of your financial life is in your hands. Do not wait for a personal crisis to occur. By then, it may be impossible to undo whatever financial damage has taken place.

Single or married, when you can proudly declare, “I know Prince Charming is not coming, I have to manage my money myself, I can do it myself, and I want to do it myself,” you are on the road to independence.

Money Is Power

An essential step in saving ourselves is to understand money’s role in our lives. Money gives you choices. Once you give up your financial independence in a romantic relationship, you are now left with fewer options. When you maintain financial independence, however, you have choices. And choices give you the freedom to not allow anyone to mistreat you. In this way, financial independence is a powerful way to help increase your self-esteem.

In addition, it is not wise to rely on husbands, significant others, or partners for your financial security. Doing so is hazardous to your financial health. Consider the following statistics:

  • Nine out of ten women will be solely responsible for their finances at some point in their lives.
  • The historical average age of widowed women is 56 years old; one in four of these women is broke within two months of being widowed.
  • Only 41% of women participate in their employer’s 401(k) plan.
  • Of poverty-stricken elderly Americans, 87% are women.

In order to thrive, despite these gloomy statistics, we must take charge of our finances. When feeling frustrated and uncertain about how to develop financial freedom—or if it’s even possible—look to high-profile women today who, married or not, are financially independent: female business leaders such as Facebook Chief Operating Officer Sheryl Sandberg, XEROX Corporation CEO Ursula Burns, Sara Blakely, founder of Spanx, and Tamara Mellon, co-founder of Jimmy Choo shoes. There are other public figures who helped pave the way for women in the media, such as Barbara Walters and Oprah Winfrey. Many of these women experienced heartbreaking setbacks and were raised under difficult circumstances, and yet through hard work and perseverance, they overcame adversity and rose to national prominence.

General Guidelines for All Cinderellas

Our beliefs about money and our emotional attachment to it strongly influence how we spend and manage money. In fact, for most of us, money is never just about money; it is a tool that helps us accomplish other goals. Thus money is love, power, happiness, security, control, independence, freedom, and more.

In Prince Not So Charming®, Paul, Cinderella’s husband, used money as a way to feel better about himself. For example, he was insecure about his age, and used money to fuel his anti-aging regimen. In addition, as Cinderella’s psychiatrist, Dr. Thompson described, her husband’s desire to display a pretense of affluence with reckless spending on personal luxuries, vacations, dining out, home furnishings, and landscaping was a façade to make him look wealthier than the reality.

By understanding the following four principles, you will be able to improve your decision making, regardless of the emotional role that money plays in your life:

1.     The key to creating wealth is to live well below your means and save the rest.

The mindset of “paying yourself first” will help you do this. It simply means to put your money in a savings account (thus “paying yourself”) before you spend and possibly accumulate debt.

2.     Do not use money to make yourself feel good.

The psychological high that comes from a purchase, like other vices, is fleeting. There is nothing wrong with buying designer handbags and shoes as long as you are living well below your means and not using the purchases as a way to make you happy.

3.     Be in control of your money. In other words, do not let money control you.

Once you’ve placed your money in a retirement fund or other portfolio, learn about your investments. If you are working with a broker or financial adviser, make sure you understand how he or she is managing your money. Your involvement will help identify any questionable activity that could negatively impact your finances.

4.     Be smart and savvy with credit card debt.

Always use credit judiciously. Pay your balances on time and in full each month. In other words, do not incur late payment penalties and do not accumulate unsecure revolving debt.

If you have debt, paying off balances should be your top priority and an important step in gaining control of your finances. Remind yourself that credit-card debt is completely within your control.

Guidelines for Cinderella’s Planning to Marry

Prior to Marriage

If you think you have found your prince, it is a good idea to be certain that both of your beliefs and habits about money align before marrying. During the dating period, determine if you both have the same values when it comes to money. In addition, observe the other’s actions: Do they live within their means, and what are their spending habits like?

Furthermore, I encourage clients to ask their partners or fiancés questions such as, “Have you ever created a financial plan or a budget?” and “Do you have debt?” I also recommend that they share credit reports and consider discussing prenuptial agreements.

There are many benefits of having a prenuptial agreement. It provides a framework for how to organize a family’s finances, it protects each partner from the other’s debts, and it defines assets that belong to each of you prior to marriage, which could protect claims on assets that would otherwise pass to children from previous marriages. If you have your own business, the agreement would protect your ownership should the marriage dissolve.

There is no doubt conversations about money and legal arrangements may be uncomfortable and tense. But consider them as preventative maintenance. Choosing a fiscally irresponsible mate is hazardous to your finances and your relationship. After all, arguments over money are one of the leading causes of divorce. Therefore, you need to think about protecting yourself and your family.

Instead, you should discuss the role of money in your lives before marriage, purchasing assets together, or commingling assets. Also, it is unwise to merge finances right away. By having a frank conversation about money, you are taking an important step toward building a financial future based on mutual respect.

During Marriage

Regardless of the divorce statistics or how solid your marriage, the reality is you still need to plan your financial future as if you will be on your own. After all, Prince Charming may die, become disabled, or turn out to be not so charming.

Therefore, I recommend that when it comes to your finances, you take the belief, “I need to always protect myself.” One way to do this is to be involved in all the financial decisions. Also, maintain your own credit by having separate credit cards and bank accounts. Next, understand how your family’s savings are being invested. Finally, work with a CFP® who values your opinions and encourages you to participate in the decision-making process.

During or after Divorce

There is no doubt that divorce hurts emotionally and financially. It often feels as if you are in the middle of a storm, surrounded by chaos, filled with fear, and uncertain about the future outcome. Meanwhile, during a marriage’s breakup, you are required to make countless decisions right away. Unfortunately, you are most likely in the worst possible emotional state to do so. This may result in underestimating or overlooking expenses, both of which can threaten your ability to receive a fair settlement agreement.

In addition, when you are in the midst of a divorce, there are countless matters that are important to you, but only a few you can control. As a result, where you should focus your attention may not always be clear. In order to avoid making poor decisions, consider surrounding yourself with a team of seasoned experts who will recommend a course of action that will protect your interests and provide the much-needed support to make better decisions.

I refer to this team as your personal “Board of Directors.” Whenever you are uncertain about the legal, financial, and emotional implications of any decision you make, consider seeking the advice of the appropriate member of your Board. Your Board may include all or some of the following professionals:

  • CFP®
  • A lawyer, such as family law attorney and estate planner
  • Certified Public Accountant (CPA)
  • Mental-health expert, such as a marriage and family counselor or psychiatrist
  • Nutritionist
  • Health and fitness consultant
  • Friends and family
  • Spiritual guide

You may already have some form of a personal Board of Directors but have never defined it as such.

Next, establish a separate financial life before you file for divorce. To start, ask your attorney if closing joint credit accounts will benefit you. In addition, consider establishing the following:

  • Credit cards
  • Investment accounts
  • Bank accounts

When it came to meeting the financial obligations you had as a couple, you might now find yourself inadvertently left paying the bills. To avoid this, develop a plan outlining each person’s financial responsibilities. A legal document between you and your soon-to-be ex-spouse is preferable to a verbal agreement.

Keep in mind that life after your divorce may be dramatically different from what you have grown used to. In the weeks, months, and years ahead, you will most likely need to make important financial decisions. In order to maintain objectivity and evaluate the benefits and drawbacks of the choices in front of you, it is important to have a solid understanding of your divorce’s settlement terms, your budget, and your financial needs and obligations. In the event that you are uncertain about a particular course of action you need to take, consider consulting the appropriate member of your Board.

Lastly, make sure your financial plan reflects your post-divorce needs. This includes updating your beneficiary designations and estate planning documents.

Financial independence is more available to women today than perhaps any other time in history. Still, most women are not where they need to be. In fact, a recent Fidelity Investments poll indicates that Gen Y women were less involved in their financial decision-making than their female counterparts of the baby-boomer generation.

“Prince Not So Charming®” is a call to action for all women, and is what women need now. After more than 20 years of providing financial advice to clients, I have learned that women have many strengths but they also face specific challenges when it comes to money. I wrote the book to illustrate the paradigm shift I see taking place in society today—where women have unprecedented opportunities to live romantically, financially and emotionally fulfilling lives. Single or married, when you empower yourself to be financially independent, you can proudly declare: “I know I can do this myself and I want to do it for myself!” Then you are on the path to living happily ever after.

This piece is an excerpt from Prince Not So Charming®, by Kathleen Grace, CFP®, CIMA®, and managing director at United Capital.  See more about Kathleen and purchase the entire book at http://princenotsocharming.com/

Kathleen Grace is a Reporter for The Shriver Report.
Kathleen Grace, CFP®, CIMA®, is a Managing Director of United Capital Financial Advisers, LLC.
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