8 Surprising Money Tips from 'Worth It,' the New Book from DailyWorth’s CEO
“Surprise” is not a word I like to associate with personal finance. For one, financial surprises are generally not the fun kind—they’re more likely the “I got into a car accident after I lost my job, and now I have car repair and medical bills to pay” kind of surprises. And in terms of financial advice, “surprising” tips and tricks rarely live up to their promise.
But Worth It, by DailyWorth and WorthFM founder Amanda Steinberg, is a book full of surprises for women who want to better manage their money. Leveraging her near-decade of experience running DailyWorth, a personal finance site geared toward women, Steinberg uses her own life story to walk women through why they need to prioritize their financial health and how to use money to lead the lives they want. In short, Steinberg wants women to wake up from societally induced “money comas,” get confident about their finances, and be realistic about what’s going to help create a more financially secure life—and what will hold them back.
I caught up with Steinberg to ask her about Worth It’s most surprising tips to help manage the damage of all those other financial surprises.
1) If You Can’t Accept Your Money Story, You Can’t Change It
Callie: One of the things we talk a lot about at Make Change—and that's getting more coverage in general—is the idea of a money story or money mindset, and using that as the starting point to figure out what's going on in your financial life. How did you arrive at this as one of the central concepts of Worth It?
Amanda: This book has really come out of eight years of running DailyWorth and watching what millions of women must take on in order to go from feeling out of control, to finally having clarity around their finances, and then to a place where they feel like it's within their grasp and they understand it. For me, the pivotal point was I went to a seminar (which I talk about in chapter two) on money and I realized that my mindset was keeping me from saving. I was literally telling myself I wasn't a saver, and obviously, you're not going to be able to save anything if you don't consider yourself a saver. So, it doesn't matter if you know you should set up an IRA and automate a certain payment into it every month. If you have beliefs that are adverse to your ability to take action and do things that are going to make a difference, then you're not going to actually do [those things].
2) Don’t Try to Get Rich for the Sake of Being Rich
C: The other thing that comes up early in the book is how women have so much pressure to be the perfect employee, the perfect mom, the perfect wife. At the end of the day, if we aren't coming at it from a place where we think we're going to be successful, do we even have it in us to take necessary steps to get to a place where we can do strategic, long-term [financial planning]?
A: And where we're not going to sabotage ourselves.
C: What are strategies to get over that mental hurdle?
A: I think your relationship to your finances has to change, because any task is always going to be a “task.” For me, my motivation has always been social impact. I'm not trying to build a big venture-backed company and sell it to make a hundred million dollars so I can buy a bigger house—it's because I want to be a philanthropist one day and have an impact on other people's lives. That's what's exciting to me. When it comes to paying bills or doing all this stuff, it's because I'm making myself stronger so I can have more of the life I want to have. So, it doesn't feel like a task, it feels like a pathway to getting what's important. When money starts to feel like a burden or too much to do, remind yourself of why you're doing it in the first place and then it becomes fun.
3) Don’t Let Your Kids Get in the Way of Your Financial Goals
C: For me, one of the most difficult things about my finances is figuring out how to make sure I'm taking care of myself and my financial future, but also giving my kid everything he needs. I'm sure this is something most parents deal with. How can women get into trouble just by having that mindset, of trying to be the best provider you can be for your kids? What strategies might people employ to get over that?
A: I've got two kids and like, you know, tennis lessons, piano lessons... I think that it's really important to know that your strength and stability is just as important to them as what you buy them. If you're martyring yourself, you're actually not serving [your child] because you're making yourself less stable. ... And you may then become dependent on him one day if you're unable to create that security for yourself.
Remember that we live in a society where we think our kids have to do all these things in order to be successful. But you can also teach your kids by saying no to some of those things… There's plenty of kids who develop a lot of good qualities just as much because of what they're denied as what they're given… That's probably one of my worst areas though, how much I spend on my kids. It's still a problem I need help with.
4) Your House Might Be a Terrible Investment
C: You have some suggestions [in the book] that might counter what readers are already planning for. One of these things is deciding if you should buy a home or not. Especially if you have kids, there's this notion of needing to be stable. And stability means buying a house, so the number one goal is the house with the yard and enough space. You have personal experience with this [kind of thinking and its aftermath] too. Was it difficult to let the American dream of homeownership go?
A: No, not when you lived through the hell that I lived through with my old house… The point of the book is that there's a lot of ways to build long-term financial success through investing and building equity. Because [women] haven't really understood how to do that, we think we're supposed to invest in our retirement accounts just because that's what you're supposed to do. We think we’re supposed to buy a house because that's your investment, or start a business because we assume that eventually it will be worth money one day. The teaching that's so vital there is that all of these assets you think you're supposed to build can also be liabilities. They can cause you to incur more debt. They can also have a negative impact on your net worth. So, the fundamental lesson I've learned over the last eight years is to figure out what assets are right for you to build and make sure you're actually turning them into assets. ...
If you look at how long it even takes you to pay off the [mortgage] interest so that you're gaining equity in the house, you don't own the house, the bank does. Add a market crash into that and all the [maintenance] you need to do. It's not an investment, you're making yourself less stable. That doesn't mean you can't make your house an investment, or that you may not choose to buy a house even if it's not going to improve your net worth. Just make sure you're not falsely buying a house to be an investment.
Of course it was upsetting to let go of this idea to have a house, but that dream was rooted in something that wasn't real. So, now I've gone through the trauma of everything that goes wrong with buying a house and I have no problem letting it go. I'd much rather have cash flow freedom than anything because then I'm not trapped in this world of debt. It's a much better feeling.
5) Freelancing Does Not Equal Freedom
C: Another point in the book that struck me is your take on freelancers, and the difference between starting your own business and going freelance. That's something that—especially for people of our generation and younger people—seems like the dream: "Who cares if it's a gig economy, I can work freelance." But there's a few things that are less than ideal about jumping into a freelance career just to have the "freedom." Can you talk about some of those?
A: Yeah, I mean it's not freedom at all. It's so much harder than having a full-time job and it's a shame, the fact that it's sold as freedom is a total scam. Because it's just simply not going to be true for most people. And you have to understand the incredible amount of risk and cashflow pain that you're going to experience as a result of doing it. Again, it's just like buying a house, it's not to say that it can't work for you, just be ready for the financial consequences if you don't understand the dynamics before you get into it.
6) But Your Dead-end Job Might Be a Bridge to Something Great
C: One of the things I learned in Worth It was the concept of a bridge job [a low-stress 9-5 desk job].
A: I've always had one of those.
C: I think a lot of people who are dreaming of going freelance are [doing so] because they're stuck in these jobs that have qualities of a bridge job, but they just don't know what to do with that. Thinking of it as a bridge to somewhere else is a very different mindset than "I'm in a dead-end job and I'm going to get out of it all together and go out on my own."
A: [Starting with a bridge job] is really important because until you've been freelance or started your own business, you have no idea how hard sales is. Even if you do make sales, which take years, it takes even longer to get people to pay you, just waiting for the checks to come in. So, all of your consistency and your ability to manage your bills and everything goes out the window. You have to be able to create some cushion for yourself and have the ability to make mistakes and take vacation around Christmas and August (which I still haven't managed to do). Because every month payroll comes around, and rent's due, and you've gotta make sure you've got money there because the world stops sometimes but your bills don't.
7) Income Independence Is a Super-Recent Phenomenon for Many Women
C: You cite surveys showing that women are fairly confident when it comes to managing a household budget. We probably all know women who are awesome coupon clippers or who are phenomenal at meal planning, always looking for ways to save money in for their household. But when you look at women as a whole getting into strategies that would help them in the long term—retirement planning, emergency funds, and savings accounts—that doesn't really match up. Why do you think it is that women feel more comfortable in one realm and have objectively good habits, but then aren't making that leap?
A: If you look at the post-war era, there's really a strong delineation of gender roles, but that wasn't always the case. Gender roles previously had been like mom and dad running the family store or the family farm, but it became really, really socially normative that the realm of being female was domestic and the realm of masculinity was work. And as a result of that, budgeting really pertained to the day-to-day running of the household, but it doesn't pertain as much to what happens to the vast majority of your income when it comes in, which was a man's domain. … It's just simply a new domain for us. That's only really happened in the last couple of decades--and change is slow.
8) Automation Is Not Your Best Friend, But Neither Is Active Investing
C: For women who are thinking about retirement and investing, I hear a lot of "I just want to set it and forget it," or "I want to park my money with a financial advisor and they can just deal with it for me." Your book has a more layered approach, passive investing is not terrible, but at the same time there are ways to do it that aren't just set it and forget it and collect your cash at the end of the term.
A: I'm coining a new phrase right now which is "conscious automation." To a certain extent they're right, you shouldn't be checking your accounts every day unless you're a true active investor and I doubt most people reading this book are. It doesn't help to track it every day, but you have to understand what it's invested in and whether or not that's the right fee structure for you or the right asset allocation. So, conscious automation is fine, but not delegating it because you're "not interested." You're just exposing yourself to a huge amount of risk that you are not going to be happy about when it's too late.