4. Let’s Talk About Money In Midlife
The following is a transcript of this episode. It has been edited for clarity.
Intro: So when you’re hanging out with friends, you talk about everything right? relationships, work, health, even sex. But what about money? I didn’t think so. On today’s show, I’m chatting with Kara Duckworth, a certified financial planner and a managing director at Mercer. We’re discussing how your childhood may still be affecting how you handle money today, how you can overcome some of life’s biggest financial hurdles, why it’s still so hard for women to talk about money, and why we absolutely should. Welcome to More Beautiful, the podcast for women rewriting the midlife playbook. I’m Maryann LoRusso, and I invite you to join me and a guest each week as we strive for a life that’s more adventurous, more fulfilling, and more beautiful than ever before.
Maryann: Hi, Kara, thanks so much for joining us today.
Kara: Hi, Maryann. Thanks for having me. I’m so delighted to be here.
Maryann: As you guys know, we’re here to talk about money in midlife. As a financial planner, Kara, can you tell us why, even at this age in midlife, women are still sometimes so reluctant to talk about money?
Kara: You know, that’s such a great question, Maryann. It seems like money is the very last taboo. So you know, we probably all talk to our girl friends about things we don’t like on our bodies, or relationships, or things that aggravate us about our kids. But the one thing that we don’t ever seem to talk about, at least directly, with each other is money. And having been a financial advisor for a long time, what I’ve come to think about is, I think it’s because money represents something different to everybody. And sometimes that can really be triggering. So some of us haven’t had a thought that money might be how people show love to you. It might be about power, it might be about control, it might be about how you’re valued. And if you don’t know how the person that is talking to you thinks about money, you don’t know how your messaging and your thinking is going to be received. So we just stay away from it.
Maryann: Right. Yeah, because I found that when you go out to dinner with a group of friends, everyone’s more than happy to discuss, as you said, body, sex, childbirth, other personal subjects. But when it comes to personal finance, not so much, and I get what you’re saying, that we feel like we’re tiptoeing around each other because we don’t know each other’s backgrounds. We don’t know where we’re coming from. It could be a potential landmine, right?
Kara: For sure, for sure.
Maryann: Yeah. So why do you think we bring this baggage into our financial lives? And how can we become more aware of how our upbringings and our history with money affects the way we handle our finances, for better or worse?
Kara; Well, there’s a great exercise that I have done with all of my clients and all of my friends. And it’s to think about what your first money memory is. I don’t necessarily mean the first time that you made money, but the first time you became aware of money as a presence in your life. So for some people, it might be as a child. I’ve heard things like, well, only my father worked. And so he’d come home and give an allowance to my mom. And maybe that wasn’t enough, and they have a scarcity mindset around money. Or I’ve heard things like, my mom worked. And so she was very independent. And that impressed upon me as a young age that she was able to have some control and some, maybe, equality in a relationship. And I wanted that. For me, when I was six, my father started his own firm. And I sat down with my parents, and they said, “Dad’s gonna start his own business. And we need to all now know that we’re gonna have to do some sacrificing, and you’re not gonna get to have the yogurt raisons.” Which were my absolute favorite treat at the time. And also told me that everybody had to pitch in. This was our family business. So I was six, I didn’t have a whole lot of professional skills at that point. But I knew my alphabet. So I was told I was going to do all of the filing in the office. So that obviously gave me a greatly exaggerated sense of how important accurate filing was to the success of the business. But it also gave me this great sense of, money is something you earn and you have to work for it.
Maryann: Right. What a great message. So healthy, you grew up in a really nice environment. It’s funny, we didn’t have a lot of money growing up and I think my earliest memory was of my Italian grandma, or one of my aunts, like, pressing a $5 bill into my hand. Like every time I saw them, it was like here, honey, you know? But my sister and I had a paper route. I mean, I was 12 and we got up every morning at 5:30 to deliver that paper and that was my first introduction into earning money.
Kara: It probably made you feel really independent. Like, I can do this and I can—maybe you saved for something that you really wanted. And it gives you an ability then to think about, OK, what did I think about that? Do I still feel that way about money in my life? And it’s amazing how often people will say, yep. Interesting, that still controls how I think about money, even if it’s way back in your mind.
Maryann: Right. And also, whether or not your parents even discussed it probably informs your relationship with money, right?
Kara: Absolutely. If that was something—particularly if there was some scarcity, or there were some financial struggles, if your family had a “we don’t talk about money”, you might be kind of secretive or reluctant to be open about it. And that probably shows through in not only relationship with money, but how you deal with it in your own relationships and family.
Maryann: Wow, I can see couples who are watching this now running to therapy to find out each other’s feelings about money. It would be very beneficial! OK, you know what would be great if we could do? If we could go down the list of the most common financial scenarios that women in midlife find themselves in and get your advice on how women in these different situations can be proactive in securing their financial futures and protecting their families. And maybe you can tell us what types of emotional issues come up with each of these scenarios.
Yeah, I think the first one…What about if you’re in a relationship, whether you’re married or not? Whether you’re the breadwinner or not, maybe you can break it down for us?
Kara: Sure, well, I think overarching, women have some commonality of three issues about money, and then they’re played out differently in whatever life phase you are in. So the first is this kind of concern that you don’t have, quote on quote, enough. And sometimes not having a definition of what enough is to you, whether that’s a certain dollar amount, or a certain lifestyle, or just this sort of idea of, I’m gonna know that I am ready to buy a house or retire or buy a second home or whatever it is. The second one is very common, to have a fear about losing your independence. And that can be with a divorce, that can be with becoming a widow, that can be with just getting older and aging—that can come up. And then the third is, it’s not all women, but there’s oftentimes just this concern about, “Do I know enough? Do I have all the information?” And that can cause some anxiety if you’re feeling unsure about your financial position.
Maryann: Yeah, that seems like a common one. As much as we all like to think of ourselves as very, you know, modern women, I have a lot of friends who don’t really know what’s going on.
Kara: Absolutely. And it is one of those things that a lot of times women feel like, well, I should, and this is some source of failure. But it’s not. I’m a financial advisor, so I know a lot about money and financial planning. But I am not a doctor, I don’t try to diagnose my own ear infection, or, you know, cut my own hair or anything like that. So you know, just know that you are the expert of what you know about, and just acknowledge, great, this is something that I want some professional, trusted help with, to help me learn what I want to know about it. Particularly in these different phases of your life that you were talking about.
Maryann: Yeah. What about if you’re widowed, or divorced? Maybe you can talk a little bit about your background, too? Sure. Sure. So, well, to start with, I am a certified financial planner. But I’ve also done a lot of work through working with women and men who are getting divorced. So I’ve had a lot of experience going through the divorce issue. But my my personal history is that I became a widow when I was 34. My husband was diagnosed with brain cancer a year after we got married. I consider myself to be very blessed to have loved him like I did, and have him love me back. But it certainly changed what I thought my life was going to look like. When we were just married and were thinking we were going to start having children, I was in my early 30s. And then he was diagnosed, and he had a terminal illness. And I realized, okay, so that life isn’t going to happen for me.
Kara: And that changed everything. Everything we had talked about and planned for together completely changed again when I became widowed, especially in my 30s. But I think that’s true of anybody who becomes widowed or divorced. There’s this idea in your head of how your life is going to turn out and this is what I’ve planned for. And you need to, I think, if you’re in either one of those situations, give yourself permission to grieve. And you normally only think of grieving as something like, well, when someone passes away, of course, there’s grieving. But you’re not only grieving the person that you lost, and a grief happens in a divorce as well, what you’re really grieving is the life you had planned and who you were in that life. And recognizing that there are some changes that you need to make. So first and foremost, when someone’s either getting divorced, or is widowed, I’ve worked through that here are certain things you have to do at certain times. And those are priority decisions, and you have to do them, whether they’re things like filing a tax return by a certain date. But most of your big life decisions don’t need to be made in 30 days or 60 days after these life events happen to you. It’s okay to take that time, adjust to who you are, figure out how your priorities have changed. And then work backwards and figure out how the finances work into that. And be aware of that, that it is a process.
Maryann: Yeah, I think I mentioned to you earlier that my mother was a widow at age 45. My father died of a heart attack, and they were so young, and she had never managed the money before she was a stay at home mom. And I was just amazed. She knew nothing. But she really, I mean, she snapped out of that funk, she went back to work, she learned how to manage her money, do our taxes. It was you know, really incredible to watch her empower herself. I know, though, she had some confusion about, you know, who do I turn to? Do I go find someone professional? Do I, you know, go to a trusted family friend, like what would be the thing, who would be the person that you would turn to?
Kara: Well, I think just like what you’re talking about with your mom, you know, recognizing this, OK, I don’t have a choice, I have to learn all of these things, because I have children and a life that I need to deal with…And so those two things that you listed are great sources. Quite often turning to trusted family friends and saying, who do you trust? So you get a trusted referral to a trusted advisor. And that’ll help you get on the path. And they can help you assemble a team of who you need. Not everybody needs the same advisors. But in most cases, if you’re trying to get your arms around your financial life, you’re going to want to look for a financial advisor. And typically, they’re going to have a team of an accountant to help you with tax issues, and probably an attorney to help you with estate planning issues. And hopefully, your team will be coordinated between those so that you don’t have to be you know, playing the telephone game in between to get all of those things organized together. And it can be overwhelming when you think about all of those different things you have to coordinate, so you just have to do it one step at a time like you’re saying with your mom.
Maryann: While you’re grieving, too. I mean, it’s just a lot of emotions. OK, that’s a good plan of action. And how about if you’re single? Like, what should you be thinking about?
Kara: So if you’re single, it’s interesting, because people think, well, gosh, it would be easier to plan if you’re single. And we can talk about being in a relationship too, two people and how they plan together. But if you’re single, you have to be really deliberate about how you do your planning. Because if you’re you’re married, or you’re in a relationship, you typically think, OK, I’m going to figure that my spouse or my partner is going to handle something if I couldn’t. When you’re single, you have to figure out who those people are going to be. So maybe it is, again, a trusted friend. Maybe it’s a family member, maybe you aren’t comfortable with any of those and you actually need to hire a professional to do that. You can hire a corporate trustee. So the key thing there is you want to have a power of attorney, someone who could take over financial affairs if something happened to you, whether you passed away or you’re incapacitated. And a lot of single women are looking carefully into their long term care needs, because you think about if you have a family, maybe you have someone who could take care of you, but maybe they have their own lives or they live far away. Do you need that as you get older? Do you pay for an insurance policy to cover that? Do you have sufficient assets to cover that? You need to have that conversation. If you’re working, you need to look into disability insurance. I am single, I can support myself. But if something happened to me where I couldn’t do my current job, I would need some insurance to help me be able to continue to pay the bills. So it’s important to know what you have there. And overall, just a financial plan, so you can feel like, I’m confident in my own ability as a single woman to be able to meet my financial goals.
Maryann: Right. I think this pandemic, too, just put a lot of us, you know, in touch with reality about what could happen, right? I see a lot of people doing more planning than they probably would have normally.
Kara: Absolutely, absolutely. We’ve seen a huge uptick—and both from single and people in a relationship because I think they’re also realizing, oh gosh, if something happened to my partner who I rely on to do something, whether it’s, I assumed they were going to be here to provide care for me, or they’re providing care for our children, or our extended family members—if something happened to that person, what would we do? And those are good topics. I know you asked me about what you do if you’re in a relationship. One of the best things that I have seen—and I wish I could take credit for it, but one of my clients actually coined this phrase—she said, we have a monthly meeting about the business of us.
Maryann: I like that a lot.
Kara: And it gives you an ability. In most relationships, people divide up the labor, right? Somebody takes out the trash and someone does the dishes. Someone pays the bills and someone handles the investments, all of those sorts of things. But you sit down and you just say, OK, where are we? You report on what you handle, I report on what I handle, are we still on track? Great, we’ve all agreed to that. And it also takes some of the pressure off feeling like you have to talk about money all the darn time. Like, great. We don’t need to talk about this every night. People are worried about it, like, do I bring this up, because what if this is, you know…You have a set time and you sit down and you do it and it takes an hour and everyone knows that you’re going to be on the same page, and it really, really helps get your plans aligned together.
Maryann: While we’re on the topic of couples, again—is this still an issue? I know there’s a lot of talk constantly about women who are the breadwinners, and that bringing all sorts of issues into the relationship because men apparently still have this issue with that. Are you finding that when you counsel couples, that’s still a thing?
Kara: Well, we certainly see it a lot in changing dynamics, particularly in divorce work, where traditionally it would always be thought, well, the man’s going to pay alimony to the woman. And now I’m seeing a whole lot more of, nope, she’s paying alimony to him, because she’s the breadwinner starting a business. As more and more women are starting their own businesses, becoming breadwinners, we’re starting to see women earning more money. But what I see now is that actually takes a lot of pressure off some of these relationships, because now there’s a safety net. One or the other of them loses their job or their business doesn’t work well. Great, I’ve got the other one to rely on it. And it’s brought a lot more conversation to the forefront as well in couples to do that. So I think that’s a real positive.
Maryann: Do you advise actually doing a monthly budget? The old fashioned way? Roughly?
Kara: Well, the funny thing is, so many times people hear the word budget and think, nope, not doing that, I hate that.
Maryann: Right, it’s a loaded word.
Kara: Yes, I very carefully call it a spending plan, because nobody likes the word budget. But what I do it for…
Maryann: Can I have a shoe spending plan?
Kara: Exactly. Right, right. I want an allocation for, can we not talk about this category?
Maryann: Discretionary.
Kara: Exactly. But if we put together a spending plan, what I want people to do with them is not more just, dollars in, dollars out. I mean, most people understand the practicalities of what a budget supposed to do: you’re not supposed to earn more than you make. That’s pretty basic. What I think it actually gives you something to think about is if you look at what you’re spending on category wise, and you think, at the end of the year, people will say: our main priority is that we want to take two family vacations a year and we want to go to these two places, so we estimate it’s going to be about this much. And then you work it out and you say, well, that’s not going to work in our spending plan. But we’re spending a lot of money here on just getting a bunch of takeout and DoorDash because it’s convenient. If we move half of that over to this category, you could take those vacations you really want. And that’s what helps you, I think, understand what we really want to do. Is that what we’re spending money on? And the adjusting, rather than just…
Maryann: Also because what you think you’re spending in your head is sometimes completely different when you see it on paper. Right? When you see those numbers, sometimes you go, “Wow, I spent how much at Whole Foods?”
Kara: Right, right. You get that credit card summary at the end of the year and you’re like, this cannot be right.
Maryann: Right. It’s a wake up call for sure. I do it sporadically, you know, like once every couple of years I just go OK, I’m doing my budget again. And I always dig up something new. I learn something new.
Kara: Right, right. And if we do it periodically like that too, then you catch all the things you forgot. Like there’s some bills we only pay once a year. So if you’re doing your monthly budget you’ll just say, well, I’m gonna forget that I, you know, spend $250 a month on our homeowners insurance, but I only pay that bill in April. And if you only did it in April, you might have missed it.
Maryann: Right, and now with all these auto pay things we do, we don’t even notice these charges. And then every time you subscribe to something online, another newspaper or magazine, you know, it’s just like ding, ding, ding.
Kara: Well, then sometimes you find the things too where like, I have not looked at that for three years. Why am I sending them $12 a month? You know?
Maryann: Right. So it’s like cleaning out your closet. So one thing I wanted to bring up is that this generation, Gen X primarily, we are known as the sandwich generation because we are unfortunately dealing with both kids going off to college and aging parents, both of which are very expensive ordeals. How do you help people kind of juggle that? And if something gotta give, give what gives?
Kara: Absolutely. And those are always two really big topics of stress, too, financially. Like, well, what if my kids can’t go to the private university that their dream school is because my mom needs to pay for this private nursing care because she fell? And how do I tell one or the other they’re more important? So what I actually say is, we’re prioritizing your life based on what do we have options for. So there are options to pay for college. You can take out a loan, you can get scholarships, there’s merit, aid, all of those things are possibilities to pay for college. May not be your ideal, maybe you don’t want to have to have your child take out student loans. But there are at least options that exist. There are options to pay for aging parent care. Again, we talked about the long term care insurance. There’s aid, if they qualify, from the states based on their financial need. There are ways to pay for those things. The one thing that you can’t pay for or get help on is your own retirement fund. So I tell people, you know, there’s a reason why on airplanes, they say you have to take the air mask and put it on yourself first before you put it on somebody else. And you’re not going to be able to pay for college or your parents if you’re retiring or need those funds for yourself. So take care of your retirement first. Once that settled, then look at what’s left and figure out what you have options for to pay for those other things that you may be concerned about.
Maryann: That’s really good advice, yeah. And also, our generation has historically had greater credit card debt—I didn’t even realize that till I was researching this—than previous generations, due to a bunch of factors, you know, several recessions that we rode through. How would you advise women out there who are still catching up, and may not have enough money yet to retire when they’re 45, 55?
Kara: Yes, and sometimes that’s really disheartening. Some of them think, why do I even bother? I’m just not going to be able to do this. And it’s discouraging. So mostly what I think you do is you look at what you really want retirement to look like. So if the answer is, I don’t think I have enough to live the lifestyle that I’m hoping for…Could I do a couple things about it? Your choice are either, could I reduce some things about my lifestyle? If I did, and they’re not things that I’m not particularly tied to, I could retire earlier because I’d be spending less money. And sometimes people say that, oh, well, that’s not a big deal. I’d rather be able to retire and have the freedom to do that. And only take, you know, one vacation a year instead of two, because my friends are here and we can do that. Or whatever the case may be. You know, sometimes people tell me, well, I was hoping you’d be able to play golf and have a golf membership. Well, maybe you can get a social membership instead of the full membership and still play and see your friends. Those types of things you look through to figure out if you can alter that. The other option is, if you don’t have things that you want to change, maybe working part time for a few more years makes that retirement goal work. So you still get some time to do what you want to, slow down. You’re working, but it allows and makes those things doable. So be flexible. And really talk through what your options are to decide what’s available. But don’t get discouraged. There are always ways to make it happen.
Maryann: Right. And you know, also some women think that midlife is, quote, too late to even start saving and investing. It seems hopeless sometimes, or maybe they have, you know, a nest egg, but they don’t feel like it’s big enough. What do you say to that?
Kara: Again, that’s one of those things where you think, OK, don’t be discouraged. Sometimes people will say to me, if I’d only started saving when I was 20, and investing, then I would have X amount of dollars now. And that’s true. Certainly the power of compound interest is amazing.
Maryann: You don’t want to play that “if only” game, because you can do it with a lot of things. If only I started using SPF…
Kara: No kidding. Right, exactly. So I always tell people, it’s never too late to start. Starting now is better than not starting at all, but just recognize that it may mean that you need to save more than you would have if you’d started when you were 20. And also it gives you the opportunity to just think about what it is that you want to spend the money on, and how much you need. What really is enough for what you’re trying to accomplish? Oftentimes, we have this number in our head. Like, I’ve heard I can’t retire until I have two million dollars. Maybe, but maybe not. And so really go through that exercise and think through.
Maryann: Yeah, and I think that’s one other thing that the pandemic may have affected: people’s idea of what enough is. Right? Because people now are doing without more than one car, because they were walking everywhere during the pandemic. They don’t need as many clothes. I mean, you just realize you can live with less.
Kara: Absolutely. And I’ve even had to go through the exercise with the spending plan. And they say, well, I need to have this amount of money in my travel budget, because I want to be able to see my kids and grandkids, you know, five times a year, they’re the most important things in my life. And then we go through the time and we think, do you need to stay where you are to do that? Would you rather live by them? And if that’s the case, then maybe the amount that you have saved is enough. Maybe it’s not enough because of where they live. But it gives you the ability to go through that exercise and figure out what it is. That’s far more important than deciding what this magical number is that’s enough. Enough is different for every one of us.
Maryann: Right. And you may have heard that number from somewhere else, from someone else.
Kara: Oh, sure. But all the headlines on the financial press, you must have at least… Sometimes it’s two million, sometimes it’s five million, sometimes you can’t withdraw more than 4% or you’re going to be living under a freeway bridge. All of those things are different for each person, and you need to figure out what it is for you. What your number is.
Maryann: Right. So Kara, say you’re OK, you have some savings, and you have a little bit of money you want to invest. Obviously, how you invest is going to be a little different than how you did it when you were 25 or 35. How does that look in midlife.
Kara: So if you’ve received a windfall, come into some money, whether it’s a bonus or an inheritance, or let’s say you won the lottery, whatever it is, you cover the basics first. Obviously, we’ve all heard you need to have an emergency fund and you need to not have any consumer debt. So assuming you’ve paid those, you’re in good state there, you’ve got an adequate emergency fund, you aren’t carrying significant debt. I oftentimes tell people you need to probably think about it in different buckets. So just like your same area, and you don’t know what’s going to happen. So sometimes I encourage people, is there something that’s really going to make you happy? And what is it? Is it that you’d really like to, you know, take a trip? You’d really like to do some gifting to a family member or you know, your kids or grandkids, and see them enjoy something? Maybe it’s a thing. I have always wanted to own a pearl ring or something like that—all those things are valid. And you shouldn’t feel like you have to with something. If that really is going to add a lot to it, think through that. If it makes financial sense, then do it. Because you don’t know what’s coming, and that might be the thing that your kids…You might say, I want to take the entire family on a trip and we’re going to go somewhere, and we’re going to remember that for the rest of my life and their lives. And that matters. Or you take a girlfriend trip. So often it’s the, I need to spend some money just on some me time.
Maryann: Especially after what we’ve been through.
Kara: Yes, absolutely. And maybe that means you have friends that don’t have the means to do that and you’d like to treat. Those things are all OK in figuring out what’s important to you. Cover the basics, obviously. But then I think if it’s unexpected, then really think about something that’s going to make you happier.
Maryann: You know, this is a little off topic, but you reminded me of something. When I was in my 20s and I was living in New York, I was in the library once and I just came across this book, I don’t even remember the name of it. But the premise of the book is that money is sort of this spiritual thing. You know, what comes around goes around, like energy, right? Like, if you put it out there in the universe with generosity and goodwill, it’s going to come back to you. And that always stuck in my mind. And I kind of think about money like that now. I mean, I’m practical, but I also think I’m gonna be generous with my friends. Because one day if I need them, they’re going to be generous with me. Or even if I’m not even thinking about what I’m going to get back in return, I feel like it just happens that way. Right?
Kara: The act of the giving is what gives you the joy in it. And that’s important. And for a lot of people, you have a really hard time thinking, well, the most responsible thing that I need to do with my money is…But I guarantee you there’s absolutely nobody that, when they’re on their deathbed, is like, oh man, I’m so glad I saved that extra $1,000.
Maryann: Right, right. It’s kind of like love. I mean, not to be corny, but if you don’t give love you’re not gonna get love, right? And if you don’t have a generous spirit, in a way—I’m not saying give away all your money, I’m just saying the hoarding is, I think, what kind of…I know a couple of hoarders. I just see them as being kind of emotionally unhealthy to some extent. Does that make any sense?
Kara: Yep. Yeah, absolutely. So I really feel like it’s okay to own how you feel about something and let that have value. And it’s okay to spend money on that, which is probably completely different than anything you thought that a financial planner would ever say—like, no, save it and invest it. And I feel like you can do that and be responsible, but you also need to have the value of what money brings into your life. And it’s okay to pay for that.
Maryann: No, it makes absolute sense what you’re saying. OK, so what if you didn’t come into an inheritance or a windfall and you’re just investing? You know, a lot of women say, I’m too old to invest, I’m going to just play it safe. Is it possible at this age to experiment a little? Take a few risks?
Kara: Absolutely. And I think that it’s never too late to invest. What I normally want to have people think about is, here’s sort of my core nest egg. I know that I could cover all of my expenses with this amount and feel confident about that. If there’s money outside of that, then great. Take some risks. This is a company I’m really interested in, I think that they do great work. Or, I want to help someone start a business and invest in them. Or, I want to really fund a nonprofit so that they can get off the ground and do that, and I’m investing in that. Those are all very valid things to do. I mean, certainly don’t if you think you need that money in order to be able to support your retirement lifestyle. That’s not the greatest use of that. But if you if you have enough, and you want to carve some off, a small portion of that, do something that resonates with you, that you understand what you’re accomplishing with the money, but that you’re interested in and you feel like does something positive for you or benefits the world. And then you feel great about that investment, even if it goes up and down over time.
Maryann: And you have to be patient to some extent, right? You’re not gonna expect to make money overnight.
Kara: Yes, yes, yes.
Maryann: Yeah, a lot of women I know are experimenting with angel investing right now. It seems like it’s become huge. For people out there who maybe don’t know what angel investing is, could you give us a little lowdown?
Kara: Absolutely. So, angel investing is very similar to just investing in a startup business where people have this idea and they need to get it off the ground, so they’re asking people to make private investments. And you don’t know if it’s going to work or not, but it’s something that you are interested in doing. And I will tell you the track record on Angel investing. Most people who do it say, well, if one in 10 of my investments works, then that’s great. I’ll get my money back and probably more. Like you don’t go into it thinking, I’m probably going to make a great return out of it. But typically, what happens is, if you find that one, then it covers that. So it’s important to kind of diversify out also what you’re investing in. Just in case you got the nine instead of the one. You want to make sure that you’ve diversified there.
Maryann: Yeah. I think we were talking last week about this, but in the near future, women will hold more of the world’s wealth than men, something I find very intriguing. As women gain this power, there’s also been an uptick in more ethical investing. That’s also power. Where do you foresee women taking, you know, the economy and the world going forward through this power?
Kara: I really hope in the future, there isn’t something called investing with women, by women, for women. You know, you get the invitation to the seminar that’s on pink paper. It’ll just be called investing because women do it. But, what we are seeing, as women get more involved in companies, whether they’re running them, whether they are working at them, they’re starting them, or they’re investing in them, is that they are aligning what they believe and what they hope for the future of the world to be with their business interests. And so it’s creating things like cultures of corporate responsibility, people exploring, well, we want to do well or do good. Well, now you’d like to do both. And that’s what’s going to make our viable business interest work. So you’re starting to see women align more around supporting those businesses and to fund them with their capital, whether they start their own business or they’re investing in businesses that do that and that they feel good about that. That’s I think, where you’re starting to see a change. You see a lot of things talking about, well, it’s socially responsible investing. And 10 years ago—they think that this is all new. It’s not. Socially responsible investing has been around, gosh, I’m gonna say for the last 20 years of my career. It’s been there. But in the beginning, it was thought of as, well, you have to give up some of your investment return to do socially responsible investing. It’s a trade off. Now, people realize that’s not true. The companies that are considered to be socially responsible, they have better business results. So you’re actually just getting a darn good investment that’s also doing well. That’s a win win. And we’re seeing more and more of that come in, where people are realizing, I can invest in a line around my values and still make a market return. I’m not giving something up for that. And that makes it a much more appealing investment. And I think that’s where investing is going, forward.
Maryann: Yeah, and that’s something that I actually do credit the generation beneath us, the millennials, with. I feel like they have a real sense of social responsibility.
Kara: Most definitely.
Maryann: And it’s good. I think we can learn from each other.
Kara: Well, and you’ve always heard that phrase, you know, you vote with your feet. Well, you can also vote with your money. And we’re starting to see a lot that was started with the younger generations. Now people are realizing that that’s important, and we want to support those companies. Plus, I also think there’s a lot more emphasis on financial literacy and education coming. I will say one of the things that happens when you give women more money is they tend to invest in education, which helps everybody.
Maryann: Yes. I know, that’s so wonderful, isn’t it?
Kara: And we now don’t have financial literacy education in school. You know, when I was growing up, you had to at least take a semester of accounting, which was pretty…
Maryann: Oh, you’re kidding? Wow. That’s great.
Kara: Well, I had to take counseling and I also had to take typing. So that’ll tell you how old I am.
Maryann: I took typing. We had home ec, which was…We actually did household budgeting, which was helpful.
Kara: That’s great. I also had to take a semester of woodshop and metal shop, which has not been as useful.
Maryann: Yeah, me too. We’re not using that very often, are we? I haven’t soldered anything these days.
Kara: Exactly, exactly. I haven’t needed to build a birdhouse in a long time. But that kind of education has come out of the school system. And so now there’s a gap. If you have learning at home and families that talk about that, then the kids know what they’re doing. But in a lot of families, money isn’t talked about. And so the generations that have followed, they’ve had to learn on their own and access more, whether they learn about it through online learning classes, or they’re finding it in financial literacy associations on college campuses. That’s becoming a real hunger and wanting to change with the younger generations. And more financial literacy education is better for all of us. It’s a lifelong learning topic for all of us.
Maryann: Yeah, and you bring up a good point about the households that aren’t really talking about money. If you’re a woman out there and you’re a mom, and you are listening to this thinking, maybe I don’t talk enough about money with my kids…Where’s a good place to start at home?
Kara: So it certainly depends on how old your kids are. So there’s, you know, kind of the age appropriate things—you think about, you know, an allowance, and how you can even buy these great piggy banks, even with very young children, where they’re divided into the “save”, the “invest”, the “spend”, the “give”.
Maryann: We had one of those for our kids.
Kara: Yes. And it’s a great exercise to be able to go through that and have your kids think about how those are four different things, and learn even from a young age about that. As your kids get older, where maybe they’re starting to work, that’s a great time to go through and talk about how you get your first paycheck and you see, oh my gosh, now there’s the line for this tax and their line in front employment tax. And then you think where is all of this money going that I thought I was going to have? To go through that with your kids and like, let’s look at your paycheck and see what this is and what they mean. And then what are you going to save, invest and spend? But just because you think you work this many hours at this much rate doesn’t mean you’re gonna get all of that money.
Maryann: That’s a shock the first time you see that, right? I remember I was working in the city during college for a law firm. And you know, it’s back in the day where someone came around and handed you your check and then you’d go to the bank and you’d cash your check. I remember looking at that, going where is all the money going?
Kara: Absolutely. Well, and now you can pay for stuff with your phone. And so you know, you don’t use very much cash anymore, and it just doesn’t even seem like real money to a lot of kids.
Maryann: Right, it’s Monolopoly money, yeah.
Kara: Well can’t you just move your phone over something and just have it be paid for? So it’s important, as your kids get older, to start sharing. Think about, you know, turn on the electric, how much do you think electricity costs in our house? And really talk about sort of those life lessons as you go. And a lot of times we feel like, well, this would be stressful for our kids, to know this or not, or what they’re going to need. But most of the time, they’re just thrilled to know, okay, well, here’s what’s gonna happen when I go to college. So now I know what I need to do. So that you can share those goals.
Maryann: You brought up allowance. You know, there seems to be two schools of thought on allowance. I’ve read that, on one hand, allowance is great. On the other hand, you should not tie allowance to family chores. Like it should be something separate, it shouldn’t be a reward for doing things that you should be doing in your household anyway, because you should be helping your mom clear the table and do your laundry, you know? So what’s your take on that?
Kara: So I love the idea of, you are expected to be a contributing family member. Doesn’t necessarily mean you have to unload the dishwasher. But you do need to work really hard at school, and you need to be kind to your siblings or, you know, helpful to the neighbor, whatever it is. So I think the best of both worlds is, you get an allowance, because you’re contributing, not contributing with a specific task. But you’ve been a contributing part of our family. And that’s what it is. And you guys can decide what that is. Whether it means that you’ve, you know, done some kind of service for people in your community that week, or you’ve, you know, made special projects at school or something like that. Every family is different. But I love the idea of, it’s about a contribution, not a task.
Maryann: Right, right. You know, my son came home one day from school telling me, everybody at school’s got stocks, and I’m like, oh, really, let’s talk about that.
Kara: Oh, boy.
Maryann: I mean, we live in San Francisco. There are a lot of sophisticated kids and families here. But you know, I do remember when I was in high school, a lot of kids were gifted stocks by their grandparents, even just small amounts, and they start playing around with it. And they learn, right. Like, what’s the smallest amount you could start with? And how would you recommend giving your kids a taste of that?
Kara: So now you can even buy with some of the brokerages, slices of stocks where you’re not even buying a whole share of it. And some companies even let you buy it directly from them. So I worked for Disney way prior to being a financial advisor. That was my first job in high school and college. And you could buy company stock as part of that. But later on, when I worked for them directly, you could buy stock directly from them. So you could buy as much as one share. And it was a very common gift because then you get the stock certificate. And it was really pretty. But it’s a great gift, especially for, like, parents and grandparents to give. I usually tell people, pick something your kid’s interested in. So whether it’s Disney or Apple or Mattel, or, you know, one of the video game companies, because then they use the product. And then they think about, oh, is this a good business? And what would I do differently? And you start to turn those gears in their heads. With that, and how business works.
Maryann: Do you still have your Disney stock? I have Disney stock.
Kara: I do.
Maryann: I was working for a publishing firm called Fairchild and they were bought by ABC. And then Disney bought ABC, remember, and so I had Disney stock, and then they sold the company to Conde Nast. So now I have Disney stock. It’s interesting.
Kara: And it’s kind of fun now that you like…It makes you think about all of those transitions, weird things that happen, but you still have that. I think it’s a great way to get kids interested in finance and thinking about, it’s more than, you know, the Heinz ketchup that’s in my fridge that I like to put on my french fries. There’s a business that makes this and what does that mean? Are they a part of a larger company? Great way to get kids learning about finance in a not “it’s your homework” kind of way.
Maryann: Wow, we’ve learned a lot today. Is there anything else that you want to talk about?
Kara: I will say the best thing that I think women can do to become good investors is just to own that discussion. Don’t think money is a taboo. You know enough, and what you don’t know, you will find people who will help you do that. Trust yourself that you can do this and don’t be afraid of it.
Maryann: Does that mean we should, at our next girls night out, start telling people how much money we have?
Kara: Well, sometimes people have started doing that. We’ve had that conversation, they’re like, OK, I’m tired of skipping around all of this. Where are we? And it’s made a lot of relationships deeper because then you’re understanding like, OK, well obviously now we’re gonna do this differently because of what your priorities are. We’re going to choose a trip to do this, or instead of giving whatever birthday present, would you like us to donate to your favorite charity, or all of those things.
Maryann: That is so cool. I love that.
Kara; It makes relationships richer when women are their real, authentic selves, even about money.
Maryann: I love the idea of that, of being kind of open. I kind of wish women were more open, too, about salaries, because that’s something that I think holds women back in business. Not knowing where they stand.
Kara: Absolutely. And even if you’re at the same salary levels, but just talking about, did you negotiate your salary, how did you do it? What did you use as reference points? All of those things to give each other tips. You can also talk about tips of, oftentimes, people or especially women in our age group are in the dark about what their parents’ finances are. And how did you talk about that with your parents? How did you bring it up? What are you finding? So that you can help support each other as you go through that.
Maryann: Yeah, getting answers from parents is so important. My mother has Alzheimer’s, and so my sister and I had to get power of attorney and move her into assisted living. And, you know, that’s a very emotional time, too. I wish we had had these discussions with her prior to her getting sick. So I would tell anybody to just have those discussions.
Kara: Yeah. So you were already dealing with the emotions of it, now to have to add the financial layer on top of it just makes it even harder to deal with.
Maryann: It’s so stressful, yeah. If you do have an aging parent, what’s the best way to have that conversation with them?
Kara: It sometimes feels like such a delicate topic to raise. So the thing that I have found works the best is, I can be transparent about, you know, I’ve just finished my own estate planning and now I have a will and a trust. And it made me think you know, Mom and Dad, do you have one of those? You know, I just went through what I spent in the year and I was really surprised that I spent more money on health care than I thought that I did. Do you know how much you spend on this? You know, how are you covering those things? It helps sometimes if you ask, so I can learn from you. I can see how you’re…
Maryann: Right, spin it so you’re starting with yourself.
Kara: Absolutely. So you’re still taking the role of, I’d like you, as my parent, to share with me and give me some best practices, but then you get great information from them. And sometimes you may not get all the way through that conversation, but you at least have a starting point. OK. They told me that most of their sources of income or this and this, maybe the next time I see them, I’ll say, so, I know you’re getting a pension from this city. I saw in the news that they have changed their benefits. Are you still getting what you thought you did? You at least have a universe that they operate in financially to start from in those conversations.
Maryann: What if you have a parent who refuses to talk about it, refuses to make a plan, is kind of living in denial that they’re ever going to get old and die? What do you do?
Kara: Yeah, it happens. So in that case, I usually make it about me: I am so stressed about thinking about this. Can you help me be better and more secure by telling me about this? Because then it’s not about them. Because sometimes we’re thinking, well, gosh, you know, Maryann, I don’t want to tell you that I didn’t do a very good job saving for retirement, and I’m worried at the end of every month. But I care about you and you’re my daughter. And if this is a big source of stress for you, then maybe I can…At least then you’re not stressed, even if the news isn’t great.
Maryann: Well I don’t know about that! If you were stressed then, imagine how stressed you’re going to be when you find out there is no money!
Kara: Yeah, you’re right. Or at least then you know what you’re dealing with, so you can be like, OK, add line item to my savings for…
Maryann: I can see parents clamming up even more.
Kara: Yes. Yes, and sometimes that does happen, but at least you can try that as an alternate way. To take the pressure off of them, maybe necessarily.
Maryann: Okay, well, hopefully you’ve saved some parent child relationships out there.
Kara: Or as the holidays come along, maybe we can at least start some of those conversations and make some progress over time.
Maryann: Over Thanksgiving. So, we’re not fighting about politics necessarily anymore. We can fight about money now.
Kara: Exactly. I’ll bring up all the other things I’m now more stressed out about.
Maryann: Just when we’re getting back to family gatherings.
Kara: Absolutely, absolutely.
Maryann: Well, Kara, thank you so much. You’re amazing. I wish we could talk every week about something because of your plethora of information.
Kara: Oh, you’re so kind, Maryann. I’ve thoroughly enjoyed our conversation, and thank you so much for the invite.
