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6 common money mistakes women make

Columnist Sally Herigstad reflects on her past two years of reader questions

By

To Her Credit
To Her Credit, Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs. See her website SallyHerigstad.com for more personal finance tips and free budgeting worksheets.
Ask Sally a question, or read her previous answers in the To Her Credit archive

I'm a practical person. I used to think virtually all money problems could be solved by finding the right savings, making more money or creating a better budget. Cut those interest charges, resolve disputes on your credit card, find ways to make more money, and you'll be fine.

Those things are important. But I've discovered after reading your letters in the past two years for this column that most money problems for women are really relationship problems.

Two years ago, one of my first reader questions was whether she should pay off bills or start an investment program. I weighed the pros and cons of either approach, recommended that she apply most of her efforts to paying off high-interest debt while starting a limited investment program. Then I sat back and waited for more readers who needed my practical, dollars-and-cents advice.

Instead, I got an inside look at what really goes wrong in women's financial lives. Divorce is a common financial catastrophe. It's difficult enough emotionally, but it can devastate a woman's finances. Widowhood can take away not just the spouse's income, but sometimes the spouse who handled the family finances. Women don't have to do anything wrong to find themselves in these horrible situations.

On the other hand, I have seen a pattern to some of the most common financial mistakes women make that can be avoided. Here are the top six most common financial mistakes women make:

1. Being overly helpful. Some of you are just too nice. I'd love to have you as my neighbors -- I'm sure you'd water my houseplants when I'm gone and bring me Christmas cookies. But you cannot -- and should not -- try to fix everyone else's financial mistakes. You can't afford it -- nobody can! That holds true whether you want to buy your cash-strapped granddaughter and her husband a house and pay off all her bills, or let your 49-year-old son borrow your credit cards. It's even true when all you want to do is co-sign on a loan to help your daughter out. Chances are, you'll be the one stuck paying the bill.

In some cases, however, I urge readers to be more helpful. When Lynn wondered how her 83-year-old mother could make payments on a $14,400 Discover bill, I suggested she and her siblings pitch in. It's one thing to be careful when helping able-bodied adult children or acquaintances too much financially, but this is her elderly mother. Mom's not going to get an evening job delivering pizzas to pay this off. Her daughter needs to help.

2. Pooling financial resources with someone you're not ready to marry. If you have reasons why you're not ready to tie the knot, you have reasons not to have a joint checking account. And while a joint checking account can only do so much damage -- don't even think about handing a boyfriend your credit card. If you do, you're likely to write me later, wondering what to do with all those bills. Or, I'll be telling you to contact the police when your then-ex starts opening more credit cards in your name. Think your sweetheart would never do that? That's what this reader's fiance thought, too. (This letter proves that you sometimes have to pay for not only your own relationship mistakes, but those of the people close to you.)

3. Making emotional money decisions. Anger, fear and low feelings of self-worth can make people do things that hurt them financially. Alexandra, a reader who says that "money is not a problem," is so mad at a credit card company representative who was rude to her years ago that she refuses to pay her bill. Neither her anger nor her balance will go away until she pays her balance and moves on. Another reader, Michelle, is so afraid of her own spending that she won't get a credit card, even though she loses many advantages by not having any credit accounts at all. 

4. Not severing financial ties after a divorce or breakup. Divorce is not always avoidable. Keeping a joint credit card with your ex for years after you go your separate ways is. Holly found this out the hard way. She forgot about one credit card that she held jointly with her ex, and four years later, he dug it out and started using it. Not only did this nice guy ring up $10,000 in purchases, but he proceeded to file for bankruptcy -- leaving her with the bill. And even if your divorce decree says your ex is responsible for joint debt, don't trust that he'll take care of it. After all, as long as your name is on an account, you will continue to be held liable for any unpaid debt. My advice? Excise yourself from all jointly held accounts as soon as possible.

5. Expecting someone else to take care of us. Few women would go to the extremes of one reader, who used her dad's credit card as an authorized user for months after he died and then hoped she wouldn't be on the hook for the bill. (I hated to tell her that the card became invalid the day her dad died, and that she could be charged with fraud.) But all too many women are surprised when they suddenly have to support themselves. Even stay-at-home moms should keep their skills up so they can make a living if they need to. It's a lot harder to figure out a career when suddenly something doesn't go according to plan, even if it's just your husband being laid off.

6. Seeing bankruptcy or debt negotiation as a fix-it-all solution. I've received more letters than I can reply to in my column asking how readers can get rid of their debts through bankruptcy or debt negotiation. I attribute this to the constant barrage of advertisements on radio and TV making either method look like the easy way out. The best way to get rid of debt is to pay it off. Even in Mitzi's heartbreaking case, in which she and her family had a string of cancer cases and her father and sister died, she should try to avoid bankruptcy -- although no one could fault her if she and her husband decided it was the best solution. When bankruptcy or debt negotiation doesn't change the underlying problem of expenses far above a person's income, it doesn't really fix anything. Ruth ran up $100,000 in debt trying to raise 10 grandchildren on a limited income. While she may very well be forced into bankruptcy, she will be disappointed if she thinks bankruptcy will solve everything. Ruth needs to find more resources -- in her case, possibly state aid -- to survive financially.

Money mistakes are not the only thing I've learned from your letters, however. I've read stories about resilience and caring and a desire to make good on debts. I am in awe of some of the difficulties my readers continue to face. Very few are shopaholics who just want to get out of paying all their debts. Most are very responsible, even in hard times. I admire those who are taking care of others despite difficulties. (Ruth, with her 10 grandchildren, wins the prize on that one!) And a surprising number of you write letters because you are concerned about someone else, be it your mom, your adult child or your friend. There is much to admire in your letters, and by writing to CreditCards.com, you have taken positive steps to finding solutions to financial problems.

Take care of yourself, your loved ones, and your credit! The more we all educate ourselves about finances, the more we'll be able to do just that.

See related: 10 grandchildren + $100,000 in card debt = bankruptcy?, heartbreaking case, Who's liable for charges on dead dad's credit card?, When collectors come after you for ex's unpaid debt, Mad at your credit card issuer? You still have to pay, Self control and credit cards, Elderly mother can't pay $14,400 in credit card debt, Adult son racks up $20,000 on mom's cards, Don't let debt delay saving for retirement, Bailing family members out of debt: Think twice

Meet CreditCards.com's reader Q&A experts
Vexed by a personal finance problem? CreditCards.com's Q&A experts answer questions from readers every weekday. Ask a question, or click on any expert to see their previous answers.
Gary Foreman, New Frugal You columnist Gary Foreman,
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"To Her Credit"
Cathleen McCarthy, Cashing In columnist Cathleen McCarthy,
"Cashing In"
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"Let's Talk Credit"
Elaine Pofeldt, Your Business Credit columnist Elaine Pofeldt,
"Your Business Credit"
Erica Sandberg, Opening Credits columnist Erica Sandberg,
"Opening Credits"

Published: January 29, 2010


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