One of the things I love about helping people with their finances is that I get to observe money habits in a way that most people don’t. And one of the things I find most interesting when it comes to money habits, are the differences between men and women.
While I typically see men assume the role of family financial manager, it’s usually my female clients who are better at it. Now, granted I could be leaning quite heavily on stereotypes here. However, in my experience as a financial professional — further backed by my tenure as a husband to a superstar boss lady–, I’ve found that women are more organized, better at planning for things, and more thoughtful about what happens in the future.
Now, don’t get me wrong, gentlemen. We obviously don’t stink when it comes to all things finances. But, there is definitely room for improvement. And there’s no better way to learn than from our past financial mistakes. Here’s where I see men coming up short.
Believing we can keep it all in our head
Maybe we can pull it off when we’re just starting our adult lives, but when the responsibilities start accumulating (i.e., marriage, kids, mortgage, insurance), you’re going to have a hard time keeping all the information in that brain of yours.
Forgetting payments, losing track of your accounts and making reactionary financial decisions is downright costly. Worst of all, it is something that could have been avoided in the first place. It pays to be organized and to get these things out of our heads and written down.
There’s plenty of evidence out there to suggest that those who write things down are more likely to achieve their goals than those who don’t. Coincidentally, my entire business revolves around how a written plan, which provides observations and recommendations on financial topics such as cash management, insurance, investments, retirement taxes and estate, helps create informed financial decisions, which might help individuals to reach their goals quicker.
Forgetting to have specific and measurable goals
Let me be clear on something, making “bank” is not a goal. Getting rich is a fine thing to aspire to, but merely stating it as a goal is not, and here’s why. Financial goals not only need to be identified, but they also need to be quantified by both time and value. In other words, how much will a certain goal cost and when does it need to be achieved?
Lastly, goals need to be prioritized. The reality is that many of us have multiple financial goals such as building an emergency fund, paying off debt, or saving for a home, but also have limited savings each month to fund them. This means that we need to know which goals are the most important, so we know where to allocate our first and last dollar of savings. Some goals might get pushed out further to allow for the more important goals to be achieved sooner.
Thinking we’re invincible
I just had my annual physical, and my doctor told me that the number one risk to a 33-year-old male is making poor decisions (i.e., drinking and driving, not buckling up, etc.). If you think that bad things can’t happen to your, still, youthful body, think again.
It’s a sobering thought, but proactive, forward thinking is a vital part of any well-rounded financial plan. Take me at my word and protect yourself and the people who are most important to you. This means having adequate life insurance and having completed some basic estate planning.
Life insurance is an affordable way to reduce the risk of leaving your loved ones in a financially difficult position should you die. It’s bad enough to have to cope with the loss of a loved one, and the last thing anyone should have to think about is how they’re going to pay their bills or send their child to daycare. You’ll want to buy enough insurance to replace one’s lost earnings over a certain period of time. A good rule of thumb is coverage equal to 5-10 times your yearly income.
For us younger folks, life insurance can be super affordable. For example, a healthy 33-year-old man can purchase a 20-year, $500,000 Haven Term policy issued by MassMutual starting at $21 per month. Plus, you will sleep well at night knowing you’ve taken steps to financially protect those you love.
Drafting estate planning documents like last wills, powers of attorney and health care proxies is imperative for new families, especially those with children. These documents will handle where your stuff goes when you die (including your kids) and who can make financial and medical decisions for you, should you be unable to make them for yourself. You don’t want to rely on the laws of your home state for these types of things, even if the law is what you’d what done in the first place. You will need to hunt down a qualified trust and estates attorney in your area to get started. Do yourself a favor, and just get it over with.
Investing too soon
I get it. I am a self-aware financial advisor. Some of this stuff can be pretty dull and dry. But, investments, that’s where the action is! In a world of dull and dry topics in personal finance, there’s simply that thrill factor when it comes to putting your money in the market, taking on risk and having the opportunity to generate a return, right? Men tend to be drawn to this thrill more than our female counterparts, who are generally more risk-averse.
However, time and time again I see men let their FOMO get the best of them when it comes to investing. I find that we tend to want to chase investment returns more than the other, necessary items found on the checklist for establishing a strong financial foundation, like mastering cash flow or building a 3-6 month cash reserve. Not only is this backward, but doing so could delay or prevent achieving our goals in the long run.
So, before you invest, get your goals squared (see mistake number two above) and then dive into mastering your cash flow. Doing so will help you understand what you’re spending your money on, how much you can save each month and build financial discipline for years to come.
Okay, gentlemen. Now that we’ve identified the most common mistakes we make with our money, do yourself a favor and don’t make them.
But, seriously, missteps are bound to happen. It’s how we react to them and course-correct that’s important. Lean on your partner (money-matters are a team-sport) and, remember, a strong financial foundation helps you make more informed financial decisions. It’s never too early or late to start.
Douglas A Boneparth, CFP® is New York City’s Financial Advisor for Millennials and co-author of The Millennial Money Fix. His recent accolades include CNBC’s Digital Financial Advisor Council and CFP Board Ambassador for New York. He frequently appears on CNBC, ABC and Cheddar as a leading financial expert and his expertise has been featured in The New York Times, The Wall Street Journal, CNNMoney and more. Opinions are his own.
The information provided is not written or intended as specific tax or legal advice. Haven Life is not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.