The Big D That Can Make or Break Women's Finances

Ed Kerns |

When you think of the Big D what comes to mind is maybe divorce or Dallas, TX. But, the Big D I’m thinking of isn’t bound to a place or a difficult life transition. It’s something that’s ongoing and requires your daily attention: DECISIONS. When it comes to personal finances, such decisions can make or break your future.

Our lives are built by a series of micro-decisions. It’s easy to lapse into decision fatigue.  Snooze, coffee, or yoga?  Should I fix dinner or do we going out to eat?  What to wear to work? Finish that email or call it a day? How many episodes constitutes a binge?  We do it all day long. Yet, when it comes to certain types of – Big D’s- most of us struggle. Much of the decision-making literature available, such as Daniel Kahneman’s Thinking Fast and Slow, seems to indicate that we’re most vulnerable to making bad decisions when stakes are high and outcomes are uncertain. In these moments, we tend to take mental shortcuts that are heavily influenced by our individual biases. A classic example is when we’re faced with making good long-term financial decisions.

As a collective group, women can face circumstances that may increase the stakes higher still and may further add to the uncertainty of financial outcomes. Living longer, simultaneously caring for children and elderly parents, and at least statistically, being more likely to die single, divorced or widowed can all serve as examples of possible headwinds against future financial success if decisions are either careless or ignored.  

Here are four decisions you NEED to make NOW:

Decide to recalibrate. You must know where you are financially. Do you have accounts scattered all around from old jobs?  Do you know your household expenses? Do you know what you’ve accumulated towards your retirement?  Are you on track?  Does your career provide you with the income or potential income you desire?  Have you communicated your financial needs, wants, and wishes to the people you love? Do you know what your needs, wants, and wishes are?

Decide to collaborate. Making the decision to recalibrate can seem so daunting. Subsequently, making the decision to collaborate with a financial planner is a logical next step. Financial planning should be a collaborative process where you work together with a professional to not only help make technical decisions, but more importantly, to sort through the many nuances that arise from personal value questions. These get to the core of what matters to you and what you’re trying to accomplish. With so much at stake, when you factor in the complexities of all the initial and ongoing financial decisions one must make over a lifetime and combine those with your emotional temperament, commitment, ability to focus, time constraints, etc., working with a professional to create a financial plan to increase your odds of financial success is critical.

Decide to delegate. Here’s something to keep in mind - a portfolio is not a financial plan. Your portfolio, instead, should be managed to support the plan you’ve created. This involves such insight as to knowing your time horizon, risk and return requirements, and your emotional temperament when dealing with market fluctuations. For most people, delegating the portfolio management to a professional is one of the best financial decisions you can make.

Be mindful, however, as to the different philosophies on how best to manage a portfolio. Most approaches can quickly be separated into two categories: 1) the conventional view maintains market fluctuations can be timed and winning investments can be consistently selected or 2) an evidence-based approach which shows that it’s impossible to time markets with any consistency. Given the risks, costs, and all we now know about how markets work, the conventional approach is simply unwise. You can learn more about this philosophy as well as how to discern which professional is a good fit for you in my recent ebook for women investors, You Made It, Now Make It Last. It's essential to understand the general principles that are being relied on by the professional you’ve hired. These principles will likely have a great influence on the investment experience you have - both emotionally today, and financially tomorrow.

Decide not to wait. Think back on your life ten or even twenty years ago. I bet it seems like yesterday. Twenty years into the future will be here before you know it. Take an active role in making these financial decisions. Then you can begin taking control and influencing future outcomes without having to worry so much about time sneaking up on you. Think how glad your future self will be! 

The Big D is a big deal. If you’re an executive-woman who’s facing important personal financial decisions, don’t go it alone. Let’s collaborate on creating a plan that’s right for you.