Melissa Kirsch - Its Your Money, Honey!

Practically Painless Finance from The Girls Guide to Absolutely Everything

BY MELISSA KIRSCH

Copyright 2011 by Melissa Kirsch

All rights reserved. No portion of this book may be reproducedmechanically, electronically, or by any other means, including photocopyingwithout written permission of the publisher. Published simultaneously in Canada by Thomas Allen & Son Limited.

Its Your Money, Honey! is a condensation of material previously published in The Girls Guide to Absolutely Everything by Melissa Kirsch

eISBN 978-0-7611-6565-1

Illustrations copyright 2006 by Juliette Borda

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I used to think that money wasnt a gendered issue. I found it both sexist and absurd to assume that men and women should be educated differently about financesthe stock market, the banks, the interest rates are all gender-neutral territory, after all. A million bucks is the same for me as it is for a guy, right? Why the assumption that women just dont get it?

Most girls arent encouraged to be financially responsible or to think about investments. Men I spoke with remembered talks about money with their fathers that sounded akin to birds and bees confabs. Girls whose parents instilled in them good financial sense still feel indebted to them but acknowledge they are in a small minority among their female friends. My mom tells me she regrets not teaching me and my sister more about money, and if she had it to do over again, shed have done things differently. (My brothers an investment banker: Coincidence? You decide.)

Im not here to blame anyone for the stereotypes attributed to womens financial know-how or lack thereof. But its important that we educate ourselves now and refuse to turn a blind eye to money matters, retiring into dreams of white knight rescue or blissful ignorance because society doesnt expect any more of us. If this sounds like a You go, girl-type of rallying cry, I guess it is. You dont have to wear a power suit or act like Donald Trump in order to have good credit, a decent-sized savings account, or, if its your thing, be on your way to society-page wealth and retirement by the time youre 40. You just have to adopt some responsible habits and avoid online poker tournaments. You go, girl, wherever you like, just as long as its not into debt.

Lets review a popular misconception about not having enough money. That misconception is that you dont have options. You always have options. You have a wide array of choices, and, in most cases, you can make changes right now to improve your fiscal circumstances.

Here are some things you could do to alter your monetary situation:

Take a roommate (or another roommate) to cut down on rent.

Take a second job waiting tables, bartending or babysitting.

Move to another neighborhood or geographical region where the cost of living is cheaper and the quality of life is higher.

Sell your car and ride your bike instead.

Stop taking taxis and use public transportation.

Apply for jobs that might be less fulfilling but would pay more money.

These choices dont make your financial stress any easier, I know that. But it helps to keep in mind that no matter whats going on in your bank account, you can do something about it. We all have different financial histories and circumstances, but we can all work with what we havebaby steps, baby steps. Right now is the time to lay the groundwork for a comfortable financial life.

A Call to Arms

I would like to propose that every college across the globe institute a mandatory course on personal finance. Immediately. Nearly 100 percent of the women interviewed for my book, THE GIRLS GUIDE TO ABSOLUTELY EVERYTHING , when asked what would have made their 20s easier, said that they wish someone had told them about credit cards, credit reports, debt and other aspects of handling money. The trend of paying for your 20s in your 30s could be avoided if we were alerted to the consequences of serious debt the moment we receive our first credit cards. Who wants to picket the registrars office with me?

The Ostrich has her head buried in the sand. She throws away her bank statements and ATM receipts without looking at them. She coasts on the tenuous faith that there will always be enough there when she needs to pay the rent. She has no investments and dismisses the idea of retirement; shes pushing 30 but cant be bothered with her companys 401(k) program. Shes not a crazy spender, but she does buy things when they strike her fancy and hasnt run into any problems yet. When she thinks about the future, she has a vague notion that things will be okay financially, but she doesnt think about it too hard, because if she did, she might realize that shes completely clueless about her financial life.

Prescription for the Ostrich:

Learn how to balance that checkbook or keep track of your account on your banks website.

Keep a Spending Diary of where your money goes.

Meet with a bank representative to learn about IRAs and savings options.

Read Suze Ormans The 9 Steps to Financial Freedom .

The Paychecks-Away-From-the-Street (PAFS) Index

No matter how much money you make, the playing field is leveled with a simple question: How many paychecks are you away from the street? Ideally, the answer is more than 0 or 1. No matter how much money people make, their lifestyles tend to catch up with their income levels, so its difficult to raise your PAFS Index. But, the higher the index, the safer youll feel: The wisest girl will have three months of expenses socked away in case of layoff, firing, flood or act of God.

P.S.: No one (okay, except me) likes to play the PAFS Index game. It puts a damper on a good party and gives the whole gang agita about their outstanding debt. Best to save it for a quiet night at home with your online banking program.

The Magpie keeps accurate track of every transaction in her many accounts and funds. She balances her checkbook nightly in three different colored inks. She is on a strict budgetit doesnt necessarily cramp her style, but shes in tight control of her spending; shes accountable for her actions and knows exactly where every last penny of her salarys going. Shes got an IRA, some mutual funds, and a few CDs, all of which she monitors carefully. Shes the one who can figure out the bill in her head when the whole gang goes out to dinnerof course she rarely goes out for dinner, because shed rather save cash. Every phone bill shes ever received is kept in a fireproof box padlocked under the bedjust in case.

Prescription for the Magpie:

Go out more often as a reward for being so good with your cash.