In Shoo, Jimmy Choo!, money editor for www.nydailnews.com Catey Hill urges her readers to get on top of their finances, even if it means forgoing a really desirable pair of stilettos. While it might seem like she’s picking on women – after all, don’t men suffer from the same over-spending problems? – Hill says women deserve their own book of wisdom. I recently chatted with Hill about women, money, and designer jeans. Excerpts:
You wrote this book for women. Why do we need our own book?
Because we’re unique – with our own set of unique financial challenges. For one, women live longer than men, which means we’ll need to save more for retirement. We also tend to earn less than men, which makes saving successfully and budgeting smartly more of a challenge. Plus, who wants to read a stodgy old personal finance book when you can pick from one of the new hip and witty – but still practical and thorough – personal finance books written for us ladies?
What are the top 5 financial mistakes you see women making?
1. Plowing through life without solid financial goals. Everyone should make a list of financial goals, which are any goals that cost money – retirement, vacation, buying a home, etc. Once you’ve done that, figure out how much each goal will cost (Bankrate.com is a great place to start) and then make a step-by-step action plan so you can save enough to make those goals a reality. Without solid goals and a plan to make them happen, you’ll likely never get where you want to be financially (hello early retirement!).
2. Spending too much. Ladies, if you spend too much, you won’t have enough to pay down your debt quickly or to save for retirement, your emergency fund or other goals. So it’s time to take control of your spending! If you haven’t already, check out Mint.com – it’s an incredible budgeting site that’ll help you start learning how to budget and spend less.
3. Not having the right insurance. Imagine having to clean out your savings to pay for a car accident or having to declare bankruptcy over astronomical hospital bills. These scenarios – and so many more – can easily happen to you if you don’t have the right insurance. Everyone needs health, auto (if you have a car), homeowners’ or renters’ and disability insurance. If you have kids, you should probably also get life insurance. If you don’t have the insurance you need, it can literally bankrupt you. Not a pretty financial proposition any way you slice it!
4. Putting off paying down interest-bearing debts. I’m sure that trendy Marc Jacobs tote, that incredible new flatscreen TV, or whatever else you bought gave you a little rush when you swiped that credit card and took it home with you. But it’ll give you a new kind of rush (an oh-crap-it-costs-what?! kind of rush) when you learn how much these items will actually cost you when you factor in interest.
Here’s an example: Let’s say you put a $1,000 TV on your credit card, and never buy another thing with this card. Your card has an 18 percent interest rate and you just pay the minimum each month (2.5 percent of your balance). (This interest rate and minimum payment are pretty standard for credit cards.) How much will this TV cost you? Drumroll, please ... a whopping $2,115.41. You’ll have paid more in interest than the actual cost of the TV! And it will take you more than twelve years to pay it off (and by that time, I’m sure you’ll have gotten a new one!). In short: pay down your interest-bearing debts as quickly as you can!
5. Not saving enough So many women I know simply don’t save enough money. Women need to put away about 13 percent of their income each month for retirement, and they also need to build up an emergency fund that contains about 6 months worth of income. Bankrate.com has great calculators to figure out whether you’re saving enough for your life goals.
You admit you like shopping and you promise readers they don't have to give up their designer jeans - is it possible to be on top of your finances while still being somewhat of a shopaholic?
Yes, it is – but the keyword is “somewhat.” See, it’s all about balance – if you love those designer jeans (or designer shoes, clothes, whatever), you’ll have to spend less money on other things so you can afford them. You can’t be a total shopaholic and expect to end up rich (unless you’ve got a Paris Hilton-sized bank account), but if you make a budget and save for the things you want, you can still shop – and stay on top of your finances.
If your most debt-ridden reader were to make one lifestyle change after reading your book, what would you like it to be?
Make a doable plan to get out of debt. The simplest way to do this is to list all of your debts in order of interest rate (highest interest rate first). Pay as much as you can each month on the highest interest rate debt and the minimums on all others. Do this until all debts are paid off. If you can’t seem to free up money to pay down your debts, check out Mint.com to help you create a budget.
You write about being aware of spending triggers so you can deal with them... what's a good example of this?
Your spending triggers are certain people, things or situations that trigger you to spend too much money. Here are a few examples: Reward spenders buy things to reward themselves for an accomplishment (i.e. finishing a project or losing weight), social spenders spend big in certain social situations, emotional spenders buy when triggered by certain emotions (i.e. happiness, boredom, anger) and impulsive spenders buy on the spur of the moment without really thinking about it.
I’m a (recovering) it’s-on-sale spender. There’s just something about a “sale” sign that I find hard to resist. Sure, I know that I simply do not need yet another pair of black heels (or that quilted clutch, that espresso end table, etc.), but when I see a beautiful pair that’s been marked down, I still hightail it right over to the rack. But, hey, at least now I know to hightail it right outta that store before I buy them!