Why Women Should Think More Like Men When it Comes to Our Finances

I know. Not the most feminist sounding title for an article that’s coming from a women’s personal finance blog, but hear me out.

Last year, I realized I could help other women by spreading my financial knowledge, so I decided to start a finance blog and some social media accounts to go along with it. My goal was, and still is, to provide women with the tools needed to make informed financial decisions, grow their wealth, and bridge the gender income gap. The first thing I did after setting up my blog and social accounts, was to try to find other likeminded women to follow. My financial education started with getting my BS in finance and an MBA and continued by listening to podcasts and reading books. I hadn’t used social media as a tool for financial teaching, so I wasn’t sure what to expect in my search for these likeminded women. I found no shortage of personal finance accounts, but most of them were hyper-focused on budgeting and becoming debt-free, which wasn’t what I planned to focus on. My focus was going to be on how to use debt properly, and how to grow your wealth through investing.

After following many finance accounts by women, I shifted my search to finding other accounts to follow that provided good financial information, no matter who ran them. These included accounts run by men and businesses like Yahoo! Finance.

After several months of following accounts run by women, men, and businesses, I’ve noticed a trend. Most of the information from #womeninfinance comes from a scarcity mentality. That means that the actions they promote stem from the idea that there is a limited amount of money and you need to hang on to anything you’ve got. Men’s finance accounts are much different. The information they provide comes from an abundance mentality. That means they focus on how abundant money is and what techniques you can use to bring more of it to your bank account.

While it’s important to make sure you aren’t spending outside of your means, extreme budgeting from a scarcity mentality won’t get you very far on your journey to becoming a rich bitch. If you’re paying all of your bills without running up credit card debt, it’s time to make the shift to an abundance mentality and find ways to grow your money. Below are the two most popular money “tips” I’ve seen on women’s finance accounts, why you should avoid them, and what you should do with your money instead.

No Spend Days

This is one of the most popular budgeting “tricks” I’ve been seeing. What people do is aim to only spend money on necessities, and when they buy something that doesn’t fit into that category, they mark their calendars with an X to show that it was a “bad” day.

Understanding your spending is eye-opening for many people. There’s usually at least one thing that you realize you’re spending way more money on than you thought you were. But as long as you’re spending less money than you make, you do not need to start shaming yourself into penny-pinching. Going from spending money on whatever you want to demonizing spending altogether, is like going from never working out to going to the gym every day. You’re never going to stick to it, you’re going to feel guilty when you don’t, and you’re not going to make any progress. So figuring out how you’re spending your money is great, but you don’t need to stop spending money on anything that isn’t a means to your survival.

Another “tip” that comes along with no spend days is to take the money you didn’t spend and to pay down debt. This tool is deemed a wealth-building tool but actually builds no wealth for you. Wealth building is the process of generating long-term income through investments and income-generating assets. Paying your debt off sooner will save you some money on interest, but it will not make you wealthy.

Since we’re talking about making money, let’s take a look at some real numbers. Let’s say you start saving $100/month with No Spend Days. After 30 years, you’ll have saved $36K. Below, you’ll see how much you’ll save in interest by paying off debt with the money you’ve saved vs what you could earn from investing it.

Paying an extra $100/month toward debt

  • If you take out a mortgage for $250K with a 3% interest rate, you will end up paying $129,443 in interest over 30 years. If you use the $100 you save from your no spend days and apply that to your mortgage every month, you will save $18,946 in interest.  

Investing $100/month

  • If you invest $100 into the stock market every month and receive the average annual return on the market of 10%, you could earn $226K in 30 years.

The choice is clear. You’re going to invest the $36k because you’ll earn $190k from it. Investing the money you save is what builds wealth, not paying off debt. 

Now you’re probably thinking, “but I still have to track no spend days to get the $100 I’m going to invest every month.” Don’t worry. I have a better way. Instead of tracking each day you don’t spend money and making yourself feel guilty every time you do, set up automatic payments into an investment account as part of your monthly spending. Just like your rent and student loan payments, it will come out of your account every month as a budgeted item. Now that your investments are factored into your spending, any money you have leftover that month can be spent on whatever you want. No guilt required!

If You Aren’t Trying to be Debt Free, You’re Doing it Wrong

There are certain things that you shouldn’t use debt for, but lumping all debt together in one basket and calling it bad is wrong. When debt is used to pay for appreciating assets like a college degree or an investment property, it can be instrumental in building wealth. If you use debt to make discretionary purchases, like shopping with your credit card or paying for your wedding with a personal loan, that’s definitely a bad idea.   

Trying to pay down all of your debt as fast as possible only needs to be your priority if you have high-interest rate debt like credit card debt, or you have too much debt and a high debt to income ratio. If you have a healthy debt to income ratio and no expensive debt, you do not need to make paying off debt ASAP your top priority. In fact, I would advise against it.

The opportunity cost of deciding to put all of your extra money toward paying off debt is the lost earnings you could have received from investing it. Opportunity cost is just what it sounds like, the loss of a potential gain from another opportunity when a different opportunity is chosen. If you choose to put your extra money toward paying off your debt faster, you miss out on the opportunity of the earnings you could have received by investing it. If you decide to invest the money, you miss out on the opportunity of saving money on interest by paying off your debt sooner.

As we saw in the earlier example, there is much more money to be made from investing than there is from becoming debt-free as early as possible. Since the opportunity cost of not investing is higher, I would recommend shifting from wanting to be debt-free ASAP to wanting to be a rich bitch ASAP. Make sure you have a healthy debt to income ratio, no expensive debt, and you’re making all of your minimum debt payments on time, and then invest the rest!

While men are out there trying to take more pieces of the pie, women are trying to keep our piece from getting moldy. You can save some money by penny-pinching and guilting yourself into never buying the things you want, but by focusing on these small wins you’re missing out on larger opportunities. To start really building our wealth, we need to shift our thinking from the scarcity mentality to the abundance mentality. Money is power and if we want #girlpower to be the norm, we’ve got to go out there and eat bigger slices of the pie.

Check out our step-by-step guide to taking control of your finances and growing your wealth!

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