Women and Wealth: Three Approaches to Managing Money by Barbara Stewart

Barbara StewartWhat is your money management strategy? I’m not talking about how your money manager manages your money…that’s tactics, not strategy. I’m talking about how you have decided to manage your finances, and why.

This topic is worth examining because how you choose to manage your money is effectively a decision on how you want to live. Are you managing your money in a way that is in sync with your life philosophy? The decisions we make about how to approach our finances are extremely powerful because these decisions shape our lives.

Let’s take the time to reflect on this important question. “How do you manage your money?”

As always, I’ll draw on the collective wisdom of the women I’ve interviewed. In 2017 I asked 50 accomplished women around the world this exact question. I found out that the word “managing” means different things to different women but regardless of their age, profession, city or cultural background, all 50 women were dealing with their money in one way or another. Some women were more structured and disciplined in their approach to their finances, some were highly knowledgeable and strategic about investing, and others were perfectly willing to focus on their personal interests and passions, so they deliberately sought out trusted advisors for their money management.

Three Approaches To Managing Money:

#1 The Structured Approach

This approach allows you to reach your financial objectives methodically. What are your short, medium and long-term financial goals? What are your wants versus your needs? How much do you earn, how much do you want to save and how much do you want to invest? Put a plan in place.

Taking a structured approach to saving and investing works very well for some personality types.

Joanne De Laurentiis is the Vice-Chair of the National News Council and a member of the Toronto Transit Commission (TTC) Board:

“Despite the fact that I have spent most of my career working in financial markets, I cannot predict them! I have learned the importance of relying on my ability to consistently save rather than hoping for ‘the magic bean.’ I suppose one could get lucky and win the lottery, but the odds are against you. I manage my money conservatively and I’m a big believer in real estate. In my view, the cash flow funded by rent is more understandable and reliable than hoping for cash flow from market investments.”

Many women use their own personal “mental accounting” tricks to make sure that they stick to their plans.

Elin Helander is a Cognitive Scientist at Dreams Stockholm in Sweden:

“I know myself. I knew that I would have to set up some sort of a structure to separate my spending from my savings. This mental accounting is critical because otherwise if I have the opportunity to do something, I will always choose to take it. My brain has a way of rationalising reasons to spend money: “Don’t I need a new bag? Yes, I do need a new bag. It’s a good deal. My old one is too small…” I set up a structure in which I save the same amount every month. It doesn’t matter if it is Christmas or any other time of year, I save the same amount and I put it away immediately. I need to make sure that my savings are completely separate from my spending money—I mean in a separate bank account and in a separate bank. It has to take a lot of time to transfer the money back from my savings if I ever think I need to do this. I don’t want it to be an easy process.”

#2 The Strategic Approach

Financial knowledge is powerful. And whether you become knowledgeable via the “school of hard knocks” or from a degree in finance, being informed helps you to feel in control and manage risk. Informed women are more likely to strategically use leverage, make early stage investments, and invest in stocks.

Ariane Bucaille is a Partner at Deloitte France in Paris:

“Well, I would say that first of all I don’t manage my money… I only have debt! My goal is always to try and have a ‘leverage effect,’ where the whole idea is to always be thinking about how I can leverage the financial opportunity associated with my real estate holdings. And secondly, I only invest in private companies–where I clearly understand the business model. I assess the personalities of the founders of the businesses and I make sure that I understand what I am doing and why. I think my less traditional approach to money management is a result of my lack of trust in the stock market. Focusing on private businesses allows me to invest smartly, and also, help entrepreneurs. For example, I recently invested in an affordable luxury perfume business that will soon open their first two stores in Paris. I helped them to find new investors, and in this way, it allows me to stay close to the story and be a player in my own investment. I’m far more comfortable with this approach than giving money to the bankers.”

Strategic spending can be wise spending when it is about reinvesting in your career, building your brand, or travelling to pursue professional opportunities.

Avery Blank is a consultant in Philadelphia:

“I am resourceful, and I always try to figure out ways I can get more bang for my buck. Although I save as much as I can, I also spend strategically in two ways: on professional opportunities and on travel. For example, I will invest in attending an event if I think it will help me to elevate my work, my brand, and myself. And I might decide to speak somewhere that involves travel because to me travel is a chance to learn about people and culture and it helps me to empathize, be more strategic, and also be a better professional.”

#3 The Free-Spirited Approach

The artists, the dreamers, the creatives…their intense passion often takes priority over financial matters. Women with more free-spirited personalities tend to be extremely honest about their feelings around money.

Chi-chi Nwanoku is the Artistic & Executive Director of Chineke! in London:

“When people talk about their budgets and financial plans it makes my heart sink. My mind is never preoccupied with those issues…that sort of thing is for grown-ups.”

Elinor Frey is a Cellist in Montreal:

“I try not to let money dominate my experience as an artist. I don’t want to fall prey to our culture in which a certain amount of money equals success or happiness. Instead, I will keep the faith that investing in the art is likely to be the real payoff. The investment that I am making is not about the money. My interest is in making a lasting contribution to my field. This motivates me more than anything else.”

This financial self-awareness is useful! These free-spirited personality types are quick to acknowledge that finance isn’t their main interest, and accordingly, they are more likely to seek out professional advisors to get the job done.

So…how are you managing your money?

All the women I interviewed had a clear understanding about what they want, what they need and why they behave the way that they do with their money.

To maximize your life potential, make deliberate choices how you manage your money. Make money management decisions that are in sync with your life philosophy.

Barbara Stewart, CFA is one of the world’s leading researchers on women and finance, focusing on real life financial behaviours and providing global insights into how smart women think and communicate. Barbara is an advocate for women, for diversity, and for financial education. In addition to her Rich Thinking® research, Barbara uses her proprietary research skills to work as an Executive Interviewer on a project basis for global financial institutions seeking to gain a deeper understanding of their key stakeholders, both women and men. Barbara is a frequent interview guest on TV, radio and print, both financial and general interest. She is a contributor to the CFA Institute’s Enterprising Investor website. For more information about Barbara’s research, please see www.barbarastewart.ca.