If you’re uncomfortable at the thought of talking about money, investing, debt or credit, then this podcast is for you. Find out why that conversation is so difficult and how you can get started on controlling your finances
In this episode of Charged Up!, Daily Worth founder Amanda Steinberg talks about what women need to know about finance and how women can better educate themselves on taking control of their financial lives.
Whether it’s budgeting, investing, building credit or erasing debt, Steinberg believes all of us should feel comfortable having money conversations – whether we have a career or not. Steinberg believes we should understand our net worth in order to feel empowered by our money instead of being scared of thinking about it.
So, let’s get Charged Up! because you’re worth it!
Jenny Hoff: Amanda, thank you so much for joining me today.
Amanda Steinberg: It’s my pleasure to be here.
Hoff: So let’s get started with your background. When I read the very first paragraph of your book I really felt like you were documenting my life path. You got the education, the career, the kids, the both full time career, full time parenting, co-sleeping, you name it. It’s exhausting, it can wear somebody down, and sometimes you can feel like your life is spinning out of control.And it also takes a toll on you. Doing everything, at some point, you kind of lose control of the wheel. So if I can relate I’m very sure many other women and people in general can relate. So what I want to first do is briefly delve into your money story.
Steinberg: Absolutely. My money story was full of contradiction, because I’ve always been ambitious; I think I just came out of the womb that way, very interested in achievement, building your own wealth, etcetera. But of course as a younger woman very impressionable as far as the life I was supposed to live and what I thought I should be doing.
And so my money story was really the contradiction of those two things, where I wanted to build wealth but there was so much pressure to spend not just on clothes and obviously things, not on creating the life that you want.
And I lived under the assumption that all I needed to do was earn more and I would have more. Well, clearly that is not the case as we all age and realize that is not at all the case. And my money story was ultimately because I thought earning would therefore lead to saving, I was out of control, and I just felt completely out of control.
Hoff: Yeah, it’s definitely one of those situations where you can feel that way, especially if you have a really good income coming in and you’re somebody who’s always done well in school, and you kind of always had everything together, it’s a situation where you just feel like naturally I’m not going to spend all of this money. And then all of a sudden you see yourself not saving.
Steinberg: Yeah, exactly. Because that’s what grown-ups do.
Hoff: Yeah, you’re not investing, not saving and you wonder – how on earth, where did I spend all that money? How on earth did I do that? And so you started your website The Daily Worth, and you’ve written this book called “Worth It.” Why is worth a really important word to you when it comes to talking about finances and talking about money?
Steinberg: So as an entrepreneur, I was a computer programmer for 10 years prior, and I love starting businesses. And I was always interested in what is the business that can have the greatest financial impact as well as the greatest social impact.
And the problem really just arose around me everywhere, among my women friends and in myself, was this strange disconnect between one’s self worth and one’s net worth. And so worth really became a symbol of the connection between how is it we feel about ourselves, how is it that we take care of ourselves, and how do we prioritize ourselves, money being one example of that.
Hoff: And so what have you found with your site? And I love it because it really hits a lot of the different topics that I think people are uncomfortable asking about, but at the same time they need to know about. For example I was with a group of entrepreneurial women the other day, all very successful.
And I talked about this podcast I have on finances, and they just started saying, “I don’t really have any idea how to really invest or I don’t know what to do about my 401(k) or I don’t know how to plan for retirement or bring my business to the next level.” And you kind of touch on all those topics on your site with a lot of advice and blogs and all of that.
So what have you found when it comes to women and their relationship with money and why do you think it is this way?
Steinberg: Well, that’s exactly why I wrote “Worth It,” because it took a book to explain, but to summarize, to give you a synopsis. It has to do with a combination of cultural factors related to gender, as well as just the history of how money was handled.
And because women have traditionally been socialized to be the nurturers whether we’re born that way or not, and men have been socialized to be the providers whether they end up being that or not. It’s so deeply ingrained in women’s identity and our core personal narrative that money should not be our job.
At the same time our parents’ generation, etcetera, they had pensions, they didn’t have to think about saving for retirement the way we do and there were different economic conditions. So there’s this perfect storm of not only do I feel like this isn’t my job, it’s also really cryptic for most people, and so there’s a double whammy of emotional dissonance and then just tactical resistance to deal with what’s otherwise inaccessible topic.
Hoff: And so what do we do about that? What do you think? How do we change the way that we interact with money? If it’s so ingrained in our upbringing and in society, how do we change it within ourselves?
Steinberg: Well, I’ve come to know women really living across three different categories, and it’s different for each of these women. And I always have exceptions, people are like, “Actually I’m two of those and I’m none of those.” But anyway, in general what I have found is that either women were raised to be in the more traditional wife role, and genuinely aren’t interested in money. I personally have not taken up the initiative to try and convince them that they should be. It doesn’t really work.
The second group are those like me who were raised by a single mom, who always knew money was going to be our job or just became interested in it. And therefore even if we weren’t very good at it or aren’t very good at it we’re still interested. And for this category it’s really just about teaching the practicalities of what it takes to manage money.
The third group are those who started out in the first category but then ended up in the second category either through divorce, widowhood, never getting married, becoming the breadwinner or just suddenly waking up one day and going, “You know what? I need to pay attention to this stuff.”
I’m fascinated by that group, because they are the ones battling with the most dissonance. And so the answer is really to recognize that just because you have a law degree or just because you were a straight-A student doesn’t mean that you haven’t ignored your finances and you may be 50 years old and you may be carrying an enormous amount of guilt and shame, and so it’s about learning how to transform your mindset as well as learn the practicality of dealing with the day to day life.
Hoff: Absolutely, and I feel like it can sound really daunting when people talk about investing in the market and your 401(k)s and stuff. But when you really break it down which I’m going to do in this podcast with you, the concepts are not that complex and it’s just knowing kind of the basic information. And then delving into it just a little bit more when it comes to your own money that can save you a lot of hassle down the road and empower you. And I think that’s the real goal here.
When I talk to these women it was just the spiel of not having power over their money, not knowing how to get there, not knowing how to really invest or to save for retirement.
Steinberg: Yeah, and there’s also just layers of shame as well, it’s not even just not knowing or it’s, “Oh, my God. How did I get in this position? And I don’t know how I’m going to get out of it.”
Hoff: Right, even people making great money. I mean, these were people I was shocked to hear that they had any money problems to be honest because they have great businesses, and yet at the same time if that shame stops you from asking the questions and getting the help that you need it can spiral out of control.
And so your site gives advice to women and all people who are interested on budgeting, retirement, 401(k)s, investments, if someone is listening to this right now and feels a little bit nervous when I say those words because they’re not sure what to do in those categories, what should they do first?
Steinberg: The first thing that they should do is they should actually go to a website called Money Type, it’s www.moneytype.me. That is one of our properties. And it’s a 40-question personality quiz that tells you what your gifts are around money and what your sabotage patterns are around money.
The mistake most financial advice websites make as well as people make is they think that it’s all one size fits all. But what we have found in our research in the development of this personality assessment there’s actually five different energy types or personality types that lend toward certain natural gifts and certain significant blind spot.
And when you take the money type personality quiz you will see you’ll have a better awareness of the things about money that make sense to you and those that don’t, so that the things that live in your blind spot don’t end up sabotaging your best intentions.
Hoff: OK, absolutely. So it’s first getting to know what is your real issue with money.
Steinberg: And your gifts.
Hoff: And your gifts, exactly. Your gifts and your issues. So what are the most important financial tools we need to learn about? And let’s briefly go over the terms I just mentioned, and we’ll talk about them about what we should be doing kind of quickly. But starting with creating a budget, what do you suggest if somebody’s never done this before?
Steinberg: I’m actually not going to start out talking about a budget. That’s what everybody does. I’m not blaming you; this is what we’ve all been trained to do. And that is what gets people really frustrated because budgets can be so difficult for most people.
The first thing to do is to understand the concept of net worth. Net worth is the critical item, and the reason network matters is it really has to do with how much you own. Because you can’t earn income forever, and if you’re not building net worth you will have to work forever. So understanding your net worth is the answer to one day not having to depend entirely or so much on income.
So what net worth is it’s the combination of everything you own, it’s your retirement accounts, your cash, and a home if you own it. Minus everything you owe – credit card debt, mortgage and any other types of loans. And what you’re left with is a single number.
Now this can be really emotional for some people. That single number is not a measure of your worth. It is a measure of your net worth, not a measure of your self-worth. But what that tells you is – is it negative or is it positive? And how do you start to move that net worth in a positive direction. Everything comes back to that.
Hoff: OK, so you have to first start thinking about your net worth and understand what you have after you take away all of your expenses and what you’re earning. Now what about next? Now let’s talk about retirement, if somebody doesn’t have a retirement plan in place or doesn’t have a 401K matching offer from their job or they’re an entrepreneur, where do they start with that? What do they look at?
Steinberg: So yeah, I’m going to put that in context for you as well. And part of what I’ve done in my book is I’ve taken all of these ideas like budgeting and retirement, which have a lot of baggage for people, it’s where people start to tune out and get sweaty and nervous and sad, especially given how broken the retirement system is in the country right now.
But the point of retirement is a piece of your net worth which I have coined the term, I coined a term as it applies to finances, you’ve heard it in other areas. It’s called Roots and Wings. And this is how my whole book is structured. Roots are your assets and wings are your income and cash flow.
Retirement is one form of root; it’s an asset that you are building that is going to grow in value over time so that when you get older you don’t have to worry as much about money. So a retirement account, really it’s an investing account like any other investing account. Ideally in most cases it has a portfolio of mutual funds or ETFs or underlying stocks or things that are over time going to grow more than they cost you to have them when they’re set up properly.
But the real point of a retirement account on top of just having an investment account is that you get certain tax advantages and they make it really hard for you to access that money until you’re older, because oftentimes you’re like, “Oh, I wish I could get to that money,” but you can’t.
Hoff: OK, and so if somebody wanted to get started in this and they don’t have kind of a 401(k) set up for them through work, where should they be looking?
Steinberg: What they openly want to do, and this is for those in the United States, and abroad it’s different. What you want to look for to get started is an individual retirement account. I recommend that if you want to start an IRA and you don’t know anything about IRAs I will give you the names of three companies where they make it quite simple for you to do so. The first is come Betterment, the second is called Wealthfront and the third is called Ellevest.
Hoff: OK, so these are the places that people should go look to start setting up a retirement account. And how quickly should they do that? How important is it to get that started early?
Steinberg: It’s very important to get it started early. However, it’s not as important as paying down expensive credit card debt. Because if you are putting money into a retirement account but you’re paying 15 percent, 20 percent or more on your credit card debt, you actually should be focused first on your liquid savings and paying down that debt before you start saving for retirement.
Hoff: Let’s talk about credit card debt, do you have a strategy for people who find themselves here and there carrying balances on their cards, maybe it’s not tons, maybe it is, how to really approach that debt?
Steinberg: Yeah, essentially let’s just say for example that your minimum payment, and I’m just going to make this really simple for folks. So let’s say your minimum payment is a hundred dollars, and the reason why you have credit card debt is because you don’t have savings. So, let’s say you have an extra $400 if you’re lucky at the end of the month, and you’re like, “Should I put all that toward my $10,000 in credit card debt?” What I say is, I’m going to review these numbers with you one more time so everyone has them.
Let’s say the minimum payment due on your credit card debt is a hundred dollars, you don’t have an emergency fund, and you have $400 extra. What I recommend you do is you split that down in the middle. You put $200 into your emergency fund and you put $200 toward your credit card.
The reason is credit cards mostly charge you that interest that you owe, not much of the principal. You significantly cut down on how long it takes you to pay it off if you just double the minimum that is owed. At the same time you have to split that extra cash toward your emergency fund, because what’s keeping you in credit card debt is not having savings.
Hoff: Yeah, absolutely. And do you have as far as like from your own personal experience of what you’ve written about how to use credit cards properly so that you don’t find yourself in a situation where you have a lot of consumer debt?
Steinberg: Yeah, I mean, the reality is if you have trouble with credit cards you’ve got to stop using them. It’s just what it is. End of story. They’re great if you’re good at them for the rewards. If you’re using them for the rewards or the ease of use but you’re still on the up in credit card debt, you got to just keep one, cut up all of them, put one in a drawer and try not to take it out with you.
Hoff: OK, yes, exactly. So most people don’t realize or maybe they do realize you get maybe 2 percent when you get rewards, so if you are carrying any kind of a balance and you’re paying interest on that you’re negating your rewards many times over. So it’s not worth it to have it if you can’t pay off that balance every month.
Let’s talk about investments – how should somebody with almost no real knowledge of investments get started? There’s a lot of advice out there that’s often conflicting. From my knowledge and experience I lean toward index funds, basically investing in the entire stock market instead of trying to pick stocks and just leaving it there for the long haul. What should someone know about investing before they make those decisions?
Steinberg: Investing; there are ways to invest conservatively and have slower growth over the long term. And then there are ways to invest more aggressively where you’re trying to have more returns over a long term, but you also might end up losing money as a result of that.
So most folks think of investing as – I may lose all my money. I’ll just give you an example, there’s bonds which are almost fully a guarantee that you will get something of a return even though it’s not a lot. And then there’s stocks which fluctuate between gains and losses, gains and losses.
For someone who really just wants to get started there’s two apps for you to try. One is called Acorns and one is called Stash. And I recommend them because they give you indexed portfolios. All you need is like $5. I think they charge like $1 a month or $2 a month. If you’re not putting more than $5 in you’re not going to make money because the fees are going to eat that. But if you put a hundred dollars in, it should grow.
And what you’ll start to see is the dynamics of the market, understanding what a portfolio looks like, what’s in a portfolio, what’s the difference between a stock and an ETF. All this stuff if you’re not familiar with that it’s probably giving you a massive headache. All I’m saying is a really simple way to start learning is to open up an Acorns account or a Stash account just to study the underlying mechanism – what’s going on there.
Hoff: How important is it for somebody to get into investments like stocks and bonds versus maybe putting their money toward real estate in your opinion? I mean, obviously it’s pretty subjective, but in your opinion.
Steinberg: It all comes back to net worth. It really has to do with how is it are you going to grow your net worth over the long term. And the way you grow your net worth is by investing in things that are going to grow, which is critical because of inflation. If you put money in a savings account it’s going to be worth so much less by the time. It needs to grow at least at 3 percent per year, ideally more.
And then from there if you live, I have friends in New York City where their real estate is their retirement plan and it’s grown so much they’ve become millionaires because of their real estate, and they’ve done the math and don’t need a retirement account, and they don’t want to lock their money up.
I live in an area of Philadelphia with pretty slow growth. I rent because I get so much more. I own a house for many years and it was a negative ROI at the end of the day because of the interest on my mortgage.
So it has to do with where are you going to get the most growth with the least expenses in a way that you learn how to calculate that?
Hoff: Very interesting, and I want to delve into that a little bit more, because this is a conversation that always seems to come up where people who are renting feel immediately they need to buy because they’re throwing their money down the drain with rent. But the things to take into consideration, I also live in a state where there’s really high property taxes, is you are paying taxes on your property that can be very high, very steep, and you don’t get that money back.
So how do you really make that decision whether you should be going from renting to buying? And I guess it’s doing the math, but is there a simple way to kind of think about that?
Steinberg: Yeah, there’s an awesome rent versus buy calculator on The New York Times that you can look up that does all that for you. But the thing to remember is really it has to do with your mortgage is the thing that I think is most important.
If you get a 30-year mortgage you’re going to be paying way more interest on that mortgage than you are principal. So, you think every time you write a check to the mortgage you’re owning more of your house, you’re not necessarily. So in the case of a 30-year mortgage the rule of thumb is it’s going to take you seven to 10 years to turn a profit on your house, where if you were to sell it you would get more back than you put into it. And so the rule of thumb is if you’re not going to live in that house for at least seven years don’t buy the house.
Hoff: OK, that’s good to know. That’s good to keep in mind, because I think this is always a conversation people have. They feel so guilty renting but in some cases it does make sense if you don’t plan to stay there for a long time or if there’s a slope market like you were mentioning.
So what are three things that somebody listening to this right now can do to start controlling their financial future and changing the way they interact with money?
Steinberg: First of all congratulate yourself for listening to us this far. A lot of people won’t do that, because this is such an emotional subject. So be very proud of yourself. You cannot underappreciate anyone who decides, “You know what? I’m going to face this mess, this chaos.” So that’s the first thing, self-appreciation.
The second is calculating your net worth is important, and being with it’s OK, there’s plenty of people who are negative net worth but set themselves up to grow, but just understanding that number, making that your North star.
And the third is making sure that you have a separate emergency fund, and that you are prioritizing cash into that fund even when you have credit card debt that is screaming for that money.
Hoff: And so how much should an emergency fund, what should that look like?
Steinberg: It depends. It’s really different for everyone. I would say start by getting to $1,000, then aim to get to $5,000, then aim to get to three months, then aim to get to six months.
Hoff: Six months of living expenses?
Steinberg: Of net living expenses, like if you lost your job tomorrow you knew that you wouldn’t miss a bill. The reason why I go in that order is because $1,000 is attainable, and if you get to a $1,000 then $5,000 should be attainable and then you can graduate from there. If you just set out trying to get to six months most people get demoralized and give up.
Hoff: Absolutely. And I want to go back a little bit to your book, because you talk a lot of the book about the emotional relationship with money and about obviously society and how we were raised, but also that emotional relationship. What have you when it comes to many women versus men and the emotions that money invokes in them?
Steinberg: Yeah, I think it’s just this is a very strange time for gender as a whole where everyone’s really confused about, “If I’m female, am I this way? If I’m male, am I that way?” And then that’s compound if you’re in a relationship or if you’re married and what they tell you you should be or should think or should do. A lot of women are in the earning and saving role, and a lot of men are with women who are in that earning and saving role.
And so it’s really emotional because we’re confused. We don’t know who we’re supposed to be. And the nature versus nurture question is almost unanswerable. I’ve actually been dedicating a lot of my personal time to reading about this of late, because I read over and over again in the investment industry that women are risk averse.
I don’t see any connection between estrogen in the brain when it develops and suddenly being afraid of stock relative to anything else in your life. And so I think it’s really emotional because people don’t know how they think they’re supposed to be.
Hoff: Right, they’re kind of being told one thing, but at the same time they may not feel that way or they may not be that way.
Hoff: So what kind of conversations do you think people need to start having to get over that and to start thinking of it differently?
Steinberg: This is just incredible; this is what I was wishing for when Daily Worth started nine years ago. I think the conversation is it’s an opportunity for both men and women to let go of expectations that we have of ourselves that were like fact when it was our parents’ generation. But now it’s OK for women to be ambitious, it’s OK for men to the want to be less so. And it’s much more about our individual strengths and passions and working together as opposed to predefined roles of who should be good at what and why.
Hoff: And if the woman is the breadwinner in the relationship and she’s either the only one making money or making significantly more than her significant other, does she need to know about the finances more than him or how should that work you think that dynamic?
Steinberg: It goes back to those three categories. There are three categories of people that I found mostly, and there is simply one category of both men and women who feel very safe and secure in their lives and have no interest in money.
Sure, of course everyone should think about money, everyone should think about anything that contributes to giving them choices in their lives. And I’ve had a really hard time convincing people who aren’t interested to be interested in it. So it is what it is.
Hoff: So you’re basically saying at this point it’s up to you. It’s up to you to make that decision that you want to learn about finances, and then those resources like your website, our website, this podcast, they’re out there for people to listen to or to read and consume that information and get great knowledge pretty quickly.
Finally our show is called Charged Up, what gets you charged up about helping women gain control of their financial lives?
Steinberg: What gets me charged up? I mean, every day I get emails from people who’s like taken our classes and been a part of our work for many years. And I got one yesterday where a woman wrote to me, she said, “Amanda …” She took one of our online classes. She said, “Amanda, my husband lost his job a few weeks ago. But we had the emergency fund. I knew how to talk to my accountant. And I feel like everything is OK. Thank you so much.”
And that to me is what this is all about. It’s not about money. It’s about making sure that people have choices in their lives and they feel like they can handle anything that comes at them. And if I can contribute to helping anyone, male or female, feel that way I feel like my life is worthwhile.
Hoff: Fantastic. And your site is great. I really recommend people taking a look at it, read your book, Worth It, you document your own experience with money and how you went through that journey and you also give great advice in there. And I really appreciate you taking the time to join us today, Amanda.
Steinberg: My absolute pleasure. Thanks for having me.