What Handbag-Shopping Can Tell You About Building Wealth
Of course you’ll answer financial security. If not, you’re definitely on the wrong site.
But you might be surprised to learn that most of us probably spend more time deciding what handbag to buy or where to go out for a special dinner than we spend managing our money for the long term—meaning, not just checkbook balancing but creating financial stability.
A study cited in the Wall Street Journal reported that about four in 10 women ages 18 to 34 “started thinking about their most recent handbag purchase more than a month in advance.” (That likely extends to women beyond age 34 as well). Meanwhile another study by financial services provider, TIAA-CREF, found that Americans spent more time choosing a restaurant, flat screen TV or tablet than they did planning for an IRA investment. While a quarter of them spent two or more hours researching restaurants for a special occasion dinner, only 15% spent two or more hours investigating IRA investments. (Thanks to Sarah Fallaw, daughter of the late The Millionaire Next Door author Thomas Stanley, for pointing this out on her blog. She added that the average millionaire next door allocates about 10 hours per month to studying and planning investments).
Now granted, nothing wrong with scoring a great handbag that makes you feel fabulous or finding a superb restaurant. And researching them is more fun than evaluating finances. But there’s no contest which one will raise the quality of your life significantly. Fix your money problems and your stress level drops, which in turn leads to better health and relationships and the ability to build the life and business you want (and afford those cool handbags and restaurants stress-free).
But you already know this. So the real question is: Do you actually spend more time choosing a handbag than creating financial stability for yourself?
First, if you answered ‘yes,’ you’re in good company with Americans from all walks of life. Second, one reason for this is that we have internal money biases that work against us daily. They make it harder to pursue the things we really want for the long term. The good news is that awareness can help you make different choices moving forward.
Here are 4 simple steps to help you log more time growing your wealth (with time to spare for handbag research):
- Think of yourself as a wealth manager.
First things first: Get in the mindset. How you see yourself can determine the actions you take. If you see yourself as a wealth manager, you’ll be more inclined to be one (even if it means you need to learn about it at the same time—read on). It may sound silly, but try repeating to yourself often, ‘I am a great money manager. I grow my wealth every day and I am creating financial freedom.’ This helps get your brain on board as your ally because you’re focusing attention on what you want. It also reminds you of your goal, which can help you make more purposeful choices.
- Differentiate between time you spend managing day-to-day finances and time you spend building wealth.
The reality, backed by research, is that women are great at managing the household money day-to-day but not so much at building for the long term. While the two are interconnected—doing the former well can mean extra money for saving, if you’re not focused on also building wealth (separate activity), you might blow that extra cash on in-the-moment purchases. Which puts your goals farther out of reach.
- Set money dates for building your nest egg.
Actually block out time on your calendar each month for wealth-building. For example, set it up so that every Sunday or the first Friday of every month you have at least an hour of uninterrupted time. Some people like to manage their money weekly, some prefer monthly. Best not to go beyond monthly though.
- Have a wealth-building agenda for your money dates.
To be an empowered money manager, put three things on your money-date agenda:
- One, know your numbers. As a financially savvy person, you should know your spending budget, savings rate and net worth, and consistently work at growing your net worth.
- Two, read up. Keep learning about building wealth. Read articles and books by respected sources, or take a course. One of my favorite books for the basics is All Your Worth: The Ultimate Lifetime Money Plan by Elizabeth Warren and Amelia Tyagi. MotleyFool.com also has some great articles. Allot time to learn about investing so you can put your money to work for you.
- Take consistent actions (even small ones) that help you make tangible gains.
Finally, next time you find yourself spending an hour or even weeks or months looking for the perfect tote or other fashion must-have, remind yourself to also make some time for your financial freedom plan. Once you start seeing results, you won’t regret it.
We’d love to hear about your experience, tips or feedback in the comments below.
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