Welcome to episode 198 of Profit Boss® Radio! Almost everybody makes mistakes with money at some point in their lives. If you’ve been listening to this show, you probably know that I’ve made almost every money mistake imaginable.
This is another timeless episode from the Profit Boss® Radio archives where I break down the five financial mistakes a woman should never make. We’re talking about what financial freedom means–and what to do if you’re not on the path to achieve it.
Some of you might be wondering why I’m sharing this episode again. It’s because I want to help you replace your money story with an empowering vision that propels you towards your ideal life. A small segment of the world’s population has the resources to support their current lifestyle, which means that the rest of us have to work our butts to earn high incomes and achieve financial freedom.
If you’re ready to take an honest look at your financial habits, get out of a cycle of stress and frustration, and set yourself on the path to achieving the goals you’ve always dreamed of, today’s episode is for you.
Here’s what you’ll find out in this week’s episode of Profit Boss® Radio:
- The five financial mistakes a woman should avoid when pursuing financial freedom.
- Effective solutions for these five common financial mistakes.
- How to break through negative beliefs that hold you back from achieving your wealth-making potential.
- How to create your ideal financial vision and plan the steps to achieve it.
- Why you should consider sound, supportive financial advice and the role it plays in empowering you to reach your financial goals.
The Money Blueprint℠ for Business Owners
The Money Blueprint℠ is profit coaching that puts you in control of your business finances for good. No more Head-in-the-Sand Syndrome. No more fear, stress, or shame. Simply total confidence. Learn more here!
Resources and Related Profit Boss® Content
- Sara Blakley, Founder of Spanx
- Jin Sook and Do Won Chang, Founders of Forever 21
- Oprah Winfrey
- How Rich People Think by Steve Siebold
- Vanguard’s Advisor Alpha study: Putting a value on your value
- My Special Brand of Financial Automation training
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Hilary Hendershott: I have got some exciting stuff for you today, profit boss. This is Hilary Hendershott, your host. Welcome to the five financial mistakes a woman should never make. This is really about taking the time to think about what is financial freedom to you. And if you’re not on your own path to achieve it, then this is the time to dream big, question old assumptions, shed the cynicism, ladies, and let’s get into action. For some people, achieving financial freedom just seems easy, and it really isn’t a function of income. It’s just a money system that some people inherit or create that really works. I work with plenty of clients who have arrived on the horizon of a very long and healthy life, with plenty of assets and income and a lifestyle that requires fewer resources than they have at their disposal. And that’s maybe 5% to 7% of the population. And truly, in my experience, most of those people are so humble they hardly know how amazing their results are. And for the rest of us, lots of people work their butts off to earn a really high income and manage to achieve that result of financial freedom but it doesn’t come easily.
It’s not a stress-free life. It’s actually pretty stressful. And then there’s the majority of human beings. In my experience, probably 60% of the population, money seems mysterious, frustrating, every dollar that comes in goes right back out. And despite really wanting to be wealthy and experience abundance, they never get to. And it is all of you to whom I speak today. I want you to put it all on the table and really assess it. Too many of your decisions and systems and plans in life stay real in your life just because they’re habits. But your habits are your results and your results are your life. So, today I have for you five financial mistakes a woman should never make. And together we can shift some of those old habits and get you on a profitable path to abundance. Mistake number one, not having a vision or having an impaired vision. Too many women underestimate how much financial success is actually possible. You’ve heard about how some inner-city children have never even had the thought that going to college is like a possibility in their lives and how empowering it can be just to have a role model who’s saying, “Hey, college is accessible. You can get in. It’s easier than you think and there are ways to get it paid for. You can break this cycle of poverty.”
And just having that message for them communicated in a credible way is the thing that really makes the difference for some kids. Why is that? It’s because we’re all guided by our internal vision for ourselves. It’s vision that leads to action and produces results. For some of you, creating a big and exciting financial vision is like that, especially for women. We often have to overcome huge internal obstacles but once you face the obstacles, they’re easy to defeat because they’re just thoughts. They’re conceptual. Somewhere, somehow you decided some things were not possible for you, and now you just live like it’s true. Whether you decided you’re not good at math or you can’t earn as much as the man you see around you or you’re afraid to ask for money or you don’t deserve the kind of life you really want, these are all just concepts that keep you limited, and you can dethrone them and create something bigger and more fulfilling. And if you have a really small vision for yourself financially, you’re not going to take the actions associated with producing big results. It’s this very first mistake that’s truly the debilitating one. It leads to all of the other mistakes, and it keeps you small.
I want to present and talk about and normalize the idea of everybody achieving our own financial freedom. I hate that people, Americans, are starting to demand that the government try to solve this problem for us through more taxation and expensive and always inefficient programs. We can solve this problem, and the government will never give you financial peace of mind. We can take charge of our own financial futures, fix our money operating systems, and empower ourselves to be responsible for the results that we want in life. Remember, wealth is infinite. This is not a zero-sum game. You earning money and building wealth is not you taking it away from someone else. Money earned is a measure of value produced for someone else, and that’s the beauty of capitalism, entrepreneurialism, and free trade. You can have all of that if you create, earn, ask for, save, and invest. And that’s what this show is all about. So, what’s your own financial vision for yourself? I want you to imagine it right now. Where are the limitations you yourself have put in place? Where is your vision small? Because at some point in the past you decided you or your skillset or your possibilities were limited.
To inspire your thinking today, I have a few examples of people who have achieved great success and started from nothing. First, there’s Sara Blakely. She’s the founder of the Spanx Empire. She was raised in Clearwater, Florida, the daughter of a trial attorney and an artist. She didn’t like her law school admissions test scores, so she worked as a stand-up comedian and she sold fax machines door-to-door. At the age of 27, Sara spent two years and $5,000 of her own savings researching and developing her hosiery idea to create a product that women could wear under our clothing to make the clothing fit and look better. And after being turned down by a buyer at Neiman Marcus, she followed the buyer into the bathroom to demonstrate the value of her product. At that point, Neiman Marcus started offering her products in seven stores. Bloomingdales, Saks, and Bergdorf Goodman soon followed. Sara is now a billionaire, and in 2012, Forbes listed her as the 93rd most powerful woman in the world.
Second example, I’m not going to say these names right, I apologize truly, Do Won Chang and Jin Sook are the husband and wife team behind the retailer, Forever 21. I did not know this. They moved to America from Korea in 1981 and Do Won worked three jobs to make ends meet. They opened their first clothing store in 1984, and Forever 21 is now an international 480-store empire that earns $3 billion in sales a year. The couple’s net worth is estimated to be over $5 billion. Third example, the inimitable Oprah Winfrey was born into a poor family in Mississippi, was molested during her childhood and early teens, won a scholarship to Tennessee State University, and became the first African-American TV correspondent in the state of Tennessee. Then moved to Chicago, where she hosted The Oprah Winfrey Show, which was syndicated from 1986 to 2011. She’s now often referred to as the queen of all media and has a net worth of over $3 billion. So, profit boss, what’s different about you?
All right. So, now that you’re sufficiently inspired and you’re noticing all the places where it’s your beliefs that limit your possibilities and not reality, and we’re deconstructing all those false limits, let’s move on to mistake number two. Mistake number two, spending more than you make. It sounds simple but this is what brings most families to their financial knees. I’ve said this before, but so many people out there think they have an earning problem, and what they actually have is a spending problem. I see overspenders in a few buckets. First, there are the kind of naive people who just aren’t thinking about their financial future. They’re just not interested in talking about what’s good for their future selves. They’re probably not listening to this podcast, but I’m betting you know someone like this or maybe you gave birth to someone who’s behaving like this. Unfortunately, there is nothing you can do until they want to change their ways, so let’s just leave it at that. Second, there are overspenders who know they’re overspending, and they’re just kind of waiting for a crisis to change their ways. They have ostrich syndrome happening. If this is you, only you can decide when today is the day to change your ways. If you’re in this bucket maybe you have really big expenditures. Most overspending occurs inside the categories of housing. People buy too much house or cars, cars that are too expensive for your budget or for your income.
I especially see overspending occurring as attached to the most important areas of life, like children and career. And what happens is people tie certain expectations to spending in that category. For example, if you have any of the following thoughts, “I have to send the kids to private school. It’s the only way they can get a good education. I have to buy brand-name fashion. It’s for my reputation. People won’t think I’m credible or successful if I don’t. I have to drive a Mercedes Benz. It is reliable transportation and makes me look credible.” You get what I’m saying. It’s not that you can’t have those things. It’s just that the justifications are what’s killing you. Lastly, there are plenty of people in this situation who really just need the systems in place to understand what they’re spending and how much they can spend today in order to be on track for their tomorrow. For these people, I strongly recommend the Profit Boss Automation system, which I talk about in the show all the time, and I’m going to continue to talk about because it works. I compare it to the irrigation system in a beautiful garden. Turn the water on and small streams of water are transported to exactly where they need to be to have the garden thrive. And that’s the power of the Profit Boss Automation System. Money goes exactly where your plan says it should go, so you can spend freely and still be on track to achieve your goals.
Mistake number three is letting someone else take the reins. Whether it’s your partner or your parents or your employer or your financial advisor, it’s a mistake not to be the chief executive officer of your financial life. Did you know that you are your own chief executive? Would you hire a chief executive to run your most important corporation who behaved the way you do? Have you taken responsibility for your financial results? Because Steve Sebold, author of the book, How Rich People Think, has interviewed more than 1,200 millionaires and you know what his conclusion is? Being rich isn’t even about money. It’s about psychology. And if you’ve got someone else in charge of your money, you’re making a huge mistake because nobody cares more about your money than you do. Once you’re in charge of something, then, of course, you can get the right people and experts in place to manage the thing right, just like you do if you were managing a technical product or a household move. You would be shocked and surprised to know how many women I speak to who continue to work with a financial advisor who hardly returns their calls, hardly looks them in the eye. And when they can manage to get an appointment scheduled, this financial advisor just talks down to them or uses technical jargon that, frankly, the advisor probably doesn’t understand but goes right over the woman’s head.
Why do we do this? If this is you, today can be the day that you turn a corner. Take a simple action. Go look at your bank account transactions for the last 30 days. Get your account statements together and add up the balances so you know how much you have. Put your credit cards on ice. Call up your utility providers and ask for a discount. Cancel the monthly memberships that you’re not using for goodness sake. Whatever small action you can take can be the beginning of a lifetime of accountability, clarity, and success. Make a promise to yourself today that you’re going to find a financial advisor who works for you, someone who takes the time to know your needs and priorities and empowers you to be the CEO of your life by being your chief financial officer. You set the strategy and your personal CFO empowers you to fulfill it. You can take back control and put yourself in the driver’s seat.
Moving on to mistake number four, not getting professional financial advice. I know, you’re probably going to think to yourself that having this in here serves me, and of course, I get it. I can’t just say this on my own without data to back it up and expect you to be a believer. So, let’s talk about some data. In 2008, two researchers named Michael Finke and Terrance Martin used data from the National Longitudinal Survey to track differences in retirement savings outcomes for four sets of people aged 43 to 50. Those four sets were people who have a comprehensive financial advisor, people who have a non-comprehensive advisor, that’s someone who just focuses on the investments and not their life, people who don’t have an advisor but did estimate their own retirement needs, and then the fourth group is people who don’t have an advisor and don’t estimate their retirement needs. Guess what? From the period between 1994 and 2008, those four groups of people grew their own investments with the following results.
Those who have no advisor and no strategic view ended with $50,000. Those who have a strategic view because they estimated their own retirement needs but had no advisor in the picture grew their money to $100,000, and those who had a financial advisor focused only on the money grew their assets to just under $150,000. And those with a comprehensive financial advisor working as their partner grew the assets to more than $200,000 on average. Not only that, but a 14-year longitudinal study by Vanguard estimated that investors working with an advisor generate an additional 3% per year in returns. Just to give you a sense of the importance of that, if you invested $100,000 for 20 years at 5%, you’d have $265,000 at the end. But if you had three additional points of return each year, that would give you more than $466,000. That’s basically a net benefit of $200,000 or 200% of the original investment from hiring a financial advisor, assuming Vanguard is right about advisor value. And I think they are, and I’ve interviewed other experts on this show who think they are.
Not only that, but sometimes the true value a good financial advisor provides is to help guide decision making, keep your financial life simple, profitable and elegant, and keep you on track to achieve your goals. I know you trust yourself and I know you might like to DIY a lot of things in your life but this is a really complex topic. Investing is a lot more complex than just buy two index funds and set it and forget it. If that’s your strategy, you are leaving a lot of money on the table. You need experts on your side, and it used to be that those experts were too expensive for the average investor but that’s really just not true anymore. You don’t formulate your own prescription medicine, you don’t fly the airplane, and you don’t perform your own surgery. You hire experts, and you really should work with an expert inside your investment portfolio. And that really is the core of my message to you and for you this month. For six months, I’ve published this podcast every single week through my pregnancy and the birth of my first daughter on my own dime because I’m on a mission. And every dollar of the production and promotion costs have come out of my pocket. I haven’t even looked for sponsors because I didn’t want any infringement on the message I intend to deliver to you, which is that you can do this and we can do it together.
So, this month, I’m taking the opportunity to invite you to raise your hand and say, “Yes. Yes, it’s time.” If you’re looking to form a relationship with a financial advisor who cares first and foremost about you, who understands the needs of women and who doesn’t speak Wall Street speak, I can work with you if you have a primary address in any state in the U.S. I have clients in several different states, including California, Washington, and Texas. But really, any state is okay if you have a portfolio size of $250,000 or more, and you should know that in all likelihood, there are no fees or penalties or specific charges for switching a financial advisor. Now, I can’t promise that your current advisor doesn’t have you in some product that is going to be expensive to get out of but why would you stick with someone who would do that to you? And of course, we’ll talk through it all and you’ll be 100% sure what you’re getting into before anything happens. You can also find a contact form on my website at HilaryHendershott.com/35. Again, it’s just a complimentary 15-minute chat that you’re agreeing to.
And the fifth and final financial mistake a woman should never make is failing to invest in the stock market. Most of us will never be financially successful without the compound returns offered by stock market investing. I mean, unless you have more money than you need, investing might seem like a black box, but it doesn’t have to be. I know it can feel intimidating. I get it. That’s why having a trusted professional advisor is so important. Look, evidence-based investing is easy and relatively inexpensive to implement, but what we know is that 70% of women keep their savings out of the stock market and in cash. And I honestly think that solving this problem is the mission of my professional life. Evidence-based investing is simply a professionally designed basket of index funds or asset class mutual funds. Remember, 96% of Wall Street or actively managed mutual funds underperform over just 10 years. Not only that but every time we’ve studied actual investor returns, what we find is that people left to their own devices will invest emotionally and end up buying high and selling low. Even people who have listened to this story, get it, and believe it still go out and do the same damn thing.
In investing, you need to know that brand names are not the thing to chase. You get what you don’t pay for because time after time, study after study, what we find is that low costs in the portfolio are what lead to higher returns. I don’t use those terms here expecting you to know how to go get that on your own. I’m not trying to alienate you. I’m empowering you. I use them so you know what to ask for. The implications of not having your own money and not having enough money are huge. When you need money to navigate life’s normal and even life’s tough circumstances, and it’s not there, you cannot stand on your own two feet. You end up financially dependent, staying in a relationship longer than is healthy, asking for help or loans, or sleeping on couches or going into debt or just frustrated and ashamed. Profit Boss Radio is mission headquarters for the movement to empower women financially, and the keystone in that program is evidence-based stock market investing, not futures or real estate or annuities or stock picking. And there are good reasons for all of that, but the core of your investments should be an evidence-based investment portfolio.
That is where you’re going to get the lowest relative cost, the highest relative long-run returns, and the best overall experience that minimizes risk and liability and maximizes your ability to plan and experience the incredible results you truly want. I want you to get this investing thing handled. So, thank you for listening to Profit Boss Radio. And if you’d like to find out how evidence-based investing can work in your life, just check out the show notes in your podcast app and you’ll find the number and a contact form there. Thank you for being a profit boss.
Hendershott Wealth Management, LLC and Profit Boss® Radio do not make specific investment recommendations on Profit Boss® Radio or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of Hilary Hendershott, CFP®, MBA.