Finance guru David Bach, co-Founder of AE Wealth Management, talks women and money with Moneyish — including the 17 questions everyone must ask themselves about their money
Smart women finish rich.
That’s the mantra finance guru David Bach has been preaching for decades now. No, really, he wrote “Smart Women Finish Rich” roughly 20 years ago, and the best-selling book has now sold more than a million copies with an updated edition out this year, and he’s appeared on everything from The Oprah Winfrey Show to to CNBC. (Full disclosure: Bach was one of the inspirations for my first book, “Shoo, Jimmy Choo! The Modern Girl’s Guide to Spending Less & Saving More,” which published in 2010.)
The inspiration for his book was a woman close to his heart. “I learned about money from a woman, and that woman was my grandma Rose Bach,” he says. “My grandmother didn’t have a college education, was from Milwaukee, Wisconsin … and at 30 she had this moment where she realized what [she and her husband] were doing was not working,” he says. “She was afraid she would be poor all her life.”
So she took over the family finances. At the time, she and her husband were making just $10 a week, but she began putting away $1 a week, which gave her the money to start investing. And though she made “lots of mistakes in the beginning,” she quickly got the hang of it: “Over her lifetime, she became a self-made millionaire,” Bach says. (Even today only about half of women manage the family finances.)
To every woman aspiring to be like Rose Bach, and in honor of the 20th anniversary year of “Smart Women Finish Rich,” Moneyish sat down with Bach to talk about what’s pressing, and what’s changed, for women’s financials in the past two decades.
Now may be the best time in history for a women to ask for a raise.
“There has been so much discrimination against women throughout the corporate world,” Bach says, noting that his wife faced this when she got pregnant. But current events like discussions of equal pay and the treatment of women in the workplace have shone a light on that.
And that “gives women a very unique time in history to more forcefully ask for more money. And I would take advantage of it,” he says — because the pendulum could swing a bit back before it gets better again. The current climate “puts women in a stronger position — probably now than ever — to ask for more money.”
That means that women can’t be afraid to ask for the cash: “My grandmother raised me that everything is a negotiation … She taught me that when somebody offers you something, you say ‘how much?! You never take the first offer,’” he adds.
Bottom line: “You don’t earn what you deserve, you earn what you ask for. It is a pyramid effect, because if you ask for more money when you’re young, it leads into the next opportunity,” he says. “You have a limited lifespan to work, so when you trade your time for money, it’s important that you get the most amount of money for your time.”
Women are facing a “major financial obstacle” — but they can overcome it.
“The message loud and clear for women is this: There is a major financial obstacle women face when it comes to their money and retirement,” he says — and it’s this: “[Many] men don’t run out of money because they die before it’s gone.” But women often do, he says — thanks to a piling on of factors like women living longer than men; earning less both in terms of wages and because they are more likely to take time off to be caregivers; having less retirement savings; and earning less Social Security.
Data backs this up. Average life expectancy for a women is 83.5 years and for a man 79.5 years; in the U.S. women make 80% of what men do and represent ⅔ of all caregivers; while 19% of men have upwards of $300,000 in retirement, just 13% of women do and men earn about $4,000 more per year in Social Security.
But he says — and he’s seen thousands of women do this — you can prevent yourself from running out of money, even if you don’t yet consider yourself financially savvy. “The best defense is a super strong offense,” he says. “As a woman you want to be in charge of your money, be in control of your finances. And women are better at doing this than men,” he says, thanks to them being more organized, good at juggling tasks, and often being better investors because they tend to invest long-term and leave it alone, rather than trade often as men do, which helps them outperform.
The first step to taking control of your money is knowing what’s going on with your money, he writes in his book. A good way to start: Answering this 17-point questionnaire about your finances.
There are 17 questions every woman should know about her money.
So how do you get started preventing yourself from running out of money? Bach says his 17-question checklist can help. Here are the 17 questions every woman must answer about her money; this is an adapted excerpt from “Smart Women Finish Rich” (20 Year Anniversary Edition). Answer each with a true or a false (scoring is below):
- I know the current value of my home, including the mortgage amount and equity I’ve built.
- I know the length of the mortgage payment schedule and how much extra it would cost me each month to pay down the mortgage in half the time. I also know the interest rate we are paying on the mortgage and if it’s competitive.
- I know how much life insurance I [and my spouse, if applicable] carry.
- I know the details (including amount of coverage, cost and payments) of all insurance policies I [and spouse if applicable] carry.
- I have reviewed my life insurance policy in the past 12 to 24 months to see if the price I am paying for it is still competitive.
- If I own my home, I know what kind of homeowner’s coverage I have and what the deductibles are. If I rent, I know the amount of renter’s insurance I have and what its deductible is. In either case, in the event of a fire or other catastrophic loss, I know whether my insurance will reimburse me for the actual cash value of my property of the cost of replacing it at today’s current values.
- I have attempted to protect my family’s nest egg with an “umbrella” insurance policy that includes liability coverage.
- I either prepared my own tax return this year or reviewed my tax situation with the person who prepared my return.
- I know the location and amounts of all my or my families investments.
- I know the annualized return generated by each of these investments.
- If I or my family owns a business, I know the current valuation of the business, including how much debt it currently carries and the value of its liquid assets.
- I know the value, location and performance of all my retirement accounts and company pension plans.
- I know the percentage of income I am putting away for retirement and what it’s invested in [and if applicable, how much my spouse if putting away and what he is investing in].
- I know if I [and my spouse, if applicable] am making the maximum allowable contribution to my retirement plan at work, whether my employer is making matching contributions, and what the vesting schedule is.
- I know how much money I [and my spouse, if applicable] will be getting from Social Security and what my [and if applicable his] pension benefits will be.
- I know whether my [and my spouse, if applicable] income is protected should I [or my spouse] become disabled because I own disability insurance. In addition, I know what the exact coverage is, when the benefits would start, and whether the benefits would be taxable.
- I [or my family] maintain a safety deposit box, know how to gain access to it, and have reviewed its contents within the past 12 months.
14-17 points: Excellent! You have a good grasp of where you money is.
9-13 points: You’re not totally in the dark, but there are some areas in which your knowledge is less than adequate.
Under 9 points: Your chances of being hurt financially because of insufficient knowledge are enormous.
This interview has been edited for space and clarity. David Bach is also the co-founder AE Wealth Management.
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