Sometimes we say or believe things about money because it’s what we’ve been taught. It’s what we’ve come to hold as true.

Perhaps, your parents told you “renting was a waste of money”, and “if you want to be a ‘real adult,’ you have to buy a home.”

Or, maybe you grew up thinking college was the only way to have a successful career because it’s what you heard from teachers, parents, and friends your entire life.

There are many things people say and believe about money simply because it’s what they’ve come to know as true. No facts, no research, just unquestioning belief.

Here are six of the more ridiculous things people say and believe about money.

 

1. “I bought a house for the tax deduction”

There are plenty of other ways to take advantage of tax deductions, ones that don’t require a large down payment and a 30-year financial commitment.

Okay, so it’s rare someone buys a home just for the tax deduction. What usually happens is someone is already looking for a home and uses the “tax deduction” as justification for buying more home than they can afford.

The self-deception works because it’s grounded in truth: you do get a tax deduction. But, it’s a half-truth.

What if I framed the tax deduction another way and said, “Hey, I’ve got a deal for you. Spend $100 more than you should and I’ll give you back 25 bucks. So, in the end, you’ll only spend $75 than you should.”

Spending a dollar to save a quarter doesn’t make sense. In fact, it’s ridiculous.

 

 

2. “Renting is a waste of money”

This debate has been going on for forever and shows no signs of stopping anytime soon. While many people adamantly believe it never makes financial sense to rent instead of buying, this is simply not true.

Choosing to buy or rent comes down to a number of financial calculations and lifestyle choices.

Do you plan to stay in your home for a long time? Do you like to move around? Do you want to take on the risk and responsibilities that come with homeownership? Do you have enough money saved for a downpayment? Can you afford all of the extra costs associated with homeownership (maintenance, property taxes, utilities)? What is the housing market like?

It’s the answers to these questions (and many others) that will help you make an informed decision as to which route is best for you.

The next time someone tells you “renting is a waste of money,” ask them to provide the answers to the questions listed above. They won’t able to. You can then tell them how ridiculous they sound.

 

3. “I don’t want to make more money because I’ll have to pay more in taxes”

Wait … let me get this straight. You want to forgo a big raise at work because you don’t want to pay more taxes? You lament getting a bonus because “it’s taxed at a higher rate?”

Some people are afraid to make more money because it will “push them into a higher tax bracket” and, presumably, means less take-home pay because of higher taxes. That’s just not how this works.

Making more money may indeed push you into a higher tax bracket but this does not result in less take-home pay.

In the U.S., we have a progressive tax system. This means as we make more money, we’re taxed at progressively higher rates. But, here’s the important part: you only pay a higher rate on the portion of your income that has moved into the higher bracket.

This means your original salary will NOT be affected by the “bonus” and only the new money will be taxed at a higher rate. Yes, you will be paying a higher rate on the new money, but it doesn’t affect all of the money you’ve earned.

Bottom line: it’s ridiculous to make less money just because you’re worried about being bumped up into a higher tax bracket.*

*Note: this is not to be construed as tax advice. Consult with your accountant about your specific situation.

 

 

4. “A college education is always worth the money”

It’s true. A college education is often an important step in finding a good career. In fact, many companies require a degree just to get a foot in the door. But, things are changing.

Today, many of the leading tech companies like Google and Apple don’t require employees to have a college degree. Instead of looking for “credentials,” companies are focused on whether or not you can do the job.

Additionally, many of the trades don’t require a college degree and offer high starting wages, union-quality benefits, and higher job security. In fact, the trades can’t find enough young talent to take these quality jobs.

In contrast, the thirst for a college education, and the high price tag that comes with it, is running on all cylinders. Student loan debt in America sits at $1.68 trillion. The average federal student loan debt is $36,520. Student loan debt is growing at a rate 6 times faster than the national economy.

This is staggering.

Part of the blame falls on predatory colleges. Part on consumers.

We can’t control what colleges do, but we can control how much debt we take on and what degrees we’re getting for that debt.

Taking on $80,000 in student loan debt to get a degree in a low demand, low paying field is a terrible financial investment.

College is a wonderful thing for many, but not all. It’s not always worth the money, and it’s not always worth the debt. The financial cost of getting a degree can’t be greater than the financial benefit. Too often we forget this and simply go with the old trope “an investment in your education is always worth it.”

 

5. “To determine your stock allocation, subtract your age from 100”

It can be challenging to figure out how much of your long-term investments you should allocate to stocks. To help with this decision, a simple rule of thumb grew popular in the 1970s and ‘80s and persists to this day.

The rule: subtract your age from 100 to determine your stock allocation.

For example, if you’re 40 years old, subtract your age (40) from 100 (100-40) and that tells you how much to contribute to stocks (60). This means 60% of your money should be allocated in stocks and 40% in bonds.

This rule of thumb has stuck because it provides a simple answer to a complicated question. And, logically, it kinda makes sense. It follows the fundamental investment principle of matching your level of risk to your time frame. This crude formula does this.

The formula is: 100 – age of investor = % in stocks

Going back to our example, of the 40 year old investor.

100 – 40 (age) = 60% in stocks

If the investor is 70 years old:

100 – 70 (age) = 30% in stocks

According to the formula, if you’re 40 years old and have a longer investment time frame, you’d invest 60% of your money in stocks.

But, if you were 70 years old and have a shorter time frame, the formula says you should only invest 30% of your money in stocks.

This matches the basic principle of investing more in stocks if you have a longer time frame and less if you have less time.

So, it fits the pattern of: older means less money in stocks

Unfortunately, outside of this weak correlation, there’s little validity to the formula.

In general, the formula is too conservative for younger investors. In the example above, the 40 year old investor allocates 60% of her money to stocks. For many investors, this is far too conservative especially for women who have longer life spans. It also doesn’t allow for an investor to be 100% invested in stocks irrespective of her age. How can that be the rule?

As humans, our brains have developed to seek the simplest, quickest answer to the question even if the answer isn’t exactly right. This is fine for avoiding sudden, physical danger but doesn’t work well for complex, intellectual problems.

The formula of subtracting your age from 100 and investing that amount in stocks is painfully inadequate for solving such a complex problem.

 

 

6. “You should have 5 times your current income in life insurance

Here we go again with using the simplest of solutions for a complex problem.

People like rules of thumb and heuristics because it means we don’t have to think so hard. The math of “5x your income” is a lot easier than working through an actual financial analysis.

How much life insurance you need is a function of what you want your life insurance to cover.

Here are a few questions to consider:

  • How many years of income do you want to replace? One, five, ten, twenty years?
  • What debts do you want to pay off? The house? The cars? Any and all debt?
  • Will your spouse continue/go back to work? How much income can he/she expect to make? Does he want to take time off to be with the kids?
  • What future goals do you want to fund? College, weddings, retirement?
  • Will you remain in the same house? Downsize? Move back home?

You can see why people are quick to latch onto an answer like “buy 5x your income.” It’s simple and you’re doing something. But, you’d have to get awfully lucky for it to be the right answer. Chances are you’re either overinsured and paying for something you don’t need or you’re underinsured and unknowingly putting your family at risk.

It treats everyone the same. It doesn’t account for marital status and number of dependents which is ridiculous. Should my business partner who is single and has no dependents have the same amount of life insurance as me who has 6 dependents?

Ridiculous.

Remember, personal finance is personal

When you hear people say things like, “You should always do this” or “You should never do that,” take it with a grain of salt.

 

 

Everyone’s situation is different. One person’s ideal financial decision could be another person’s worst decision. Rules of thumb sound reasonable on the surface, but quickly fall apart and can reach “ridiculous” status when under increased scrutiny.

You work too hard for your money to leave things to chance. Be inquisitive and don’t be afraid to challenge long-held beliefs even if you feel a little ridiculous in the process. Chances are you’re on the right track.

 

 

It’s a fair question.  Why does this “finance guy” feel so strongly about financial empowerment for women?

The short answer:  My mother. My 5 daughters.  My almost 20 years of working with women clients.

I’ve dedicated my professional life to helping women take control of their financial lives and, in doing so, helped them approach their life goals with confidence and anticipation. Unfortunately, far too many women don’t know such a life is possible and that they are deserving of such a life.

That’s the short story.  For the full story, of enlightenHer, continue reading.

May it change the way women view money and its place in our world.

 

Why This Story Starts With My Momma

My first “why” and the topic of this blog centers on the first woman I’ve ever met – my momma.

 

 

My mother and father met in South Korea during the Vietnam War. My father, born and raised in Cleveland, Ohio, was drafted into the Army and sent to South Korea where he served as a Staff Sergeant and Military Policeman.

It is there that my future parents met, fell in love, and were married. My older brother was born there and shortly thereafter they set forth for America and a new life together.

I’d like you to pause for a moment and put yourself in the shoes of my momma.

You’re 22 years old. Have just married an American GI and you have a young son. You’re about to leave your family behind and move halfway across the world to a place you’ve never set eyes on before.

You arrive and the only person you know is your husband and young son. You barely speak the language. You can’t read. You can’t write. You don’t drive. You don’t work.

Three more kids follow – a son (that’s me), a daughter, and another son.

This is your new life and it’s supposed to be a partnership for life.

My Father

US Army, Vietnam Vet.

Staff Sergeant.

Military Policeman.

Steelworker.

Doesn’t take much more than that to paint a picture of the type of man my father was. A stern, tough, imposing man with strict rules and little patience for painting outside the lines. He was also a generous man when he could be, had a good heart, and was full of good intentions.

But, like many of his time, he fell victim to alcoholism and there were many dark days for our family, particularly my mother. The occasional fight between my mom and dad grew in frequency until it became a way of life. One long shouting match broken up with moments of quiet.

To be fair, this isn’t me saying my father was bad and my mother was good. As we all know, relationships, especially marriage, can be hard. Sure, sometimes there are truly evil people, people who are black and white “bad”. But most relationships aren’t black and white, they’re far more nuanced.

That is the case with my parents. Unfortunately, my father’s alcoholism, and the corresponding verbal abuse that ensued from it, made it an unhealthy relationship for my mother to continue to be in.

And this is where the real damage was done, and “why” I am drawn to help women become financially savvy/empowered/strong.

My mom wanted to leave far earlier than she did. She remained in an abusive relationship for far longer than she should have. For far longer than was healthy for her. And it wasn’t by choice.

She couldn’t leave because she didn’t have any money and no way to earn a living. It was fifteen years later and she still couldn’t read. Still couldn’t write. Still couldn’t drive.

I’ve never been able to get a straight answer as to whether or not this was imposed upon her by my father or not but I have my suspicions. People do crazy things when they’re in love. Crazier still when you’re used to being in charge and in control (remember: Sergeant, Military Policeman).

The simple truth is for a long time my mom had no way out.

How do you leave your husband when you have no money, no job, no family, and few friends?

Oh, and you have four young children you have to care for. How do you get out?

Memories That Shaped Me

I don’t exactly remember when or how it happened, but I remember my dad saying “your mom is going to be staying at a friend’s house for a little while” and not really knowing what that meant. Turns out “a little while” was more like two years.

It’s strange because I don’t ever remember seeing her during those two years but I have to think I did. Isn’t that a strange thing? To not be able to remember if you saw your mother at all when you were 9 and 10 years old? In fact, I’m not even sure if that’s how old I was.

Truth is, there is only one thing I remember clearly from that time in my life. I remember it the same way every time and it’s emotional every time I allow myself to go there.

The funny thing about memories is they can feel more like dreams than something that actually happened. 

You ever get that feeling? Well, that’s how this memory feels for me. I don’t experience it as if it’s happening to me, but as if I am a spectator witnessing it from afar.

I see myself in my parents’ bedroom. I’m hiding behind soft, thin, almost see-through yellow curtains as I peek out of the big picture window and look on at the scene playing out before me. There in the driveway is everyone. Everyone but me.

My dad is there. My older and younger brothers are there too as is my younger sister. They are there to say goodbye to momma. This is the day where my mom leaves for real. Things have progressed from “just staying at a friends for a little while”, to she’s leaving and never coming back.

To my young mind, she’s not just leaving. She’s leaving “us” and I just can’t bear to be a part of it. So, there I hide. All by myself, gripping the faded yellow curtains and full of resentment towards my momma for leaving us.

I’ll carry that resentment with me and refuse to speak to her for the next three years.

A Long Road to Enlightenment

When I look back at that time in my life, I do so without regret or judgment. Generally speaking, I’m not one to question the past and certainly not one to judge it. Examine to learn from it, absolutely. But to judge it, well, that’s a road to nowhere.

Over the years I started to understand who my mother was and what she went through.

The learnings come in different forms:

  • I realized how intelligent my mother is. Not being able to read or write made it difficult to understand how smart she was. Plus, she left when I was pretty young – 9 years old – so I was incapable of seeing how smart she was in other ways. It wasn’t until much later in life – college and beyond that I started to truly appreciate how smart she truly is. Imagine being a really intelligent person but never having the ability to truly express that to others?
  • I realized how caring my mother is. One of the more surprising pieces of my story is my dad being the one who raised us. The father as the single parent. As difficult as it was, my mother knew my father was in the best position to raise us given her challenges with the language and employment. In those days, the mother almost always won custody of the children. The selfish thing to do would be to take custody of the kids and figure it out later. The harder path meant giving us up. The resentful, eleven year old kid hiding behind curtains had no idea of a mother’s pain at having to make such a decision.
  • I realized my mother was held hostage by not having financial/economic mobility. If my mother had her own money or the ability to earn a living of her own, she would have had a very different life. Perhaps, a life where she didn’t have to choose between living for herself without her children or living for children without living for herself.

I don’t ever want a woman to have to go through what my mom went through.

I can’t address interpersonal relationships, alcoholism, verbal abuse, or the like but I can address financial abuse. I can address using money as a weapon. I can address using money to control the actions and behaviors of others.

There’s no reason women should be subjected to the lack of economic/financial mobility my mom faced and the hardships and life choices that accompany it.

 

 

 

I have a saying I frequently bandy about – if you’re in a position to help, you should help. This is me doing something about it.

I’m in a unique position to help due to the shortcomings of my chosen profession – financial services. Quite frankly, there aren’t enough financial advisors out there who are willing to meet women where they are and build their businesses in ways that support women.

Aside from all that, I know I can help and I know firsthand the negative impact it can have on the lives of women and their children.

  • My first “why” is all about the consequences of getting it wrong
  • My second “why” is all about the promise of getting it right
  • My third “why” focuses on my five daughters and my passion to raise strong, independent, formidable women

You cannot be a strong, independent, formidable woman if you’re out of control/power financially.

So, knowing what I know today and what I’ve personally experienced as the child of a woman who was financially handicapped by another, I don’t take offense at the sneers or whispers or outright hostility I sometimes get from women who don’t know my story. I know my “why” and I am comfortable in my skin as a man operating in a woman’s world. And, no, the irony isn’t lost on me.

Continue reading the next chapter of this journey….. Raising Strong, Independent, Formidable Women