When Tina Pennington's husband was fired, her sister, Mandy Williams, was amazed to discover how little Pennington knew about personal finance. Williams, who has an MBA, became her "in-house counsel," and together they wrote a book, What I Learned About Life When My Husband Got Fired. They lecture and teach a course on financial literacy at Houston schools. Here, what we women need to know about money – and often don't.
#1 Spend mindfully instead of mindlessly. We are all guilty of making purchases without thinking – and definitely without considering the total amount spent over time. Those Starbucks lattes and candy bars grabbed at the gas station can add up. Curb mindless purchases by writing down everything you spend money on for a week. Seeing is believing, Williams says. For their high school students, they developed Green Sheets to keep track of where the money goes.
#2 Ignorance is not bliss – ignorance is expensive. People, particularly women, are often intimidated by financial topics. Knowledge is power, and it doesn't need to be scary. When Williams tried to explain financial statements to her sister, Pennington protested that she was a theater major, not an MBA. When Williams said they'd start with what she owned and what she owed, Pennington relaxed. It's the terminology not the underlying concepts that create the barriers, so lighten up the language and dig in.
#3 Long-term planning is backwards thinking. Most people start with today and work forward when they plan. You should start with your goal — where you want to be — then works backward. Call it reverse engineering. In their finance class, Pennington and Williams ask the students whether they want to retire one day. Do they want to have a house and kids? Do they want furniture in the house? "We keep working backward until they see that college is not a goal, but a step along the way," Williams says. This approach, which can apply to anybody at any stage of life, helps you make sound decisions about what to spend today.
#4 Think of your credit cards as charge cards instead. The original cards – charge cards – were created as a convenience, so you wouldn't have to carry around a lot of cash or write a lot of checks. They weren't intended to buy today what you couldn't pay for until tomorrow. Regarding your cards as a convenience instead of a line of credit can save you from a boatload of interest charges and debt.