A Purse of Your Own by Deborah Owens.
The following excerpt is from Deborah Owens' A Purse of Your Own . Ms. Owens is a wealth coach on MyGeneration TV, and the lead on AOL.com's MoneyTalks blog.
One: Getting to the Bottom of Your Purse Before You Invest
Wealthy Habit # 1: Outlook
When 40-year-old Lee, a mother of three was asked what she carries in her purse, she was too busy to answer. She'd taken her two youngest children to the playground. Her nine-year-old was on the slide, refusing to budge and blocking his five-year old sister, who was trying to beat him down with a Beanie Baby. After breaking up the melee Lee returned to the bench to reflect on the question.
"If you'd asked me in the past what was in my purse, I'd have said soiled diapers and chewing tobacco, anything to deflect the question and hide my embarrassment." Lee understood that whenever I ask women what they carry in their purses, I'm not asking about the contents, but the state of their finances.
As a stay-at-home mom from New Jersey, Lee, who used to carry a purse running on empty, is unlike many women I've advised in the past or even those who participate in my workshops and seminars. To a large extent I'm in contact with professionals who work outside their homes. But I'm opening this chapter with Lee's story because at one point she was feeling so powerless and out of control, that I thought her story could serve as an incentive to women who want to change financial futures. I hope you'll see that if Lee could make it, there's reason to believe that you can too. You may be skeptical about whether investing is a practical way to fill your purse, or if this subject will ever be made easily comprehensible. And of course you may be afraid of losing your money. I hope this work will boost your confidence and level of financial literacy, which I call Pursonality Quotient or just PQ.
The question of what Lee was carrying in her purse is significant because this chapter focuses on a symbolic kind of purse cleaning. It's not about throwing away wadded up tissues or old tubes of lipstick. It is about creating a more fertile environment that encourages growth, because once you get clear on what you do have you will want to nurture and expand your inner vision. What I'm aiming is to help you experience the kind of comfort you feel when your purse is so well organized that you can just stick a hand inside and grab what you need. Lee wasn't anyplace near that state of financial comfort. And if you aren't feeling comfortable with your purse, you aren't ready to invest.
She'd worked for 10 years as a graphic artist and half of that time had managed a staff of designers. She quit that job, joining the ranks of six million stay-at-home moms, after giving birth to a disabled son. His medical needs made it difficult for her to return to the office, and her husband wasn't around to help fill in for her. His schedule as a fire fighter required him to work in 24-hour shifts..
Not being able to work outside her home cost Lee and her husband big-time. By 1990, the couple had saved $12,000. Eight years later, they were down to $2,000, "We were going backwards," says Lee. Unable to afford childcare that would allow her to work at a job, or pay tuition to update her job skills, Lee felt trapped financially.
During a dinner with a former coworker, Lee began sobbing so loudly that they had to leave the restaurant. She told her friend that she was pregnant again, "I was so scared I couldn't breathe." When her friend pressed her for details on her finances, Lee didn't have any answers. Her coworker reminded Lee that she would never have run the art department that way. "She was right," Lee says. "I'd always run a tight ship. When I got home that night, I pulled out all out our bills and faced the truth."
How about you? Are you too feeling that your finances are moving in reverse? As Lee says of the state of her purse, "I was racing toward the bottom, but at least down there, there's no way to go but up." The Purse Solution offers an alternate route. Change your worldview and you can not only look up, but outward, toward a better life.
Wealthy Habit # 1: Developing a Wealthy Outlook
This habit can help pull you out of the financial doldrums and encourage you to dream big by developing a macro or "big picture" view. Picture wealth, like drops of molten gold. You may feel as if you've been living in scarcity, but because you are learning to attract wealth you're now opening all your purses to catch those golden drops.
Ready, Set, Go-Start Your Purse Cleaning!
GET ORGANIZED
Purse cleaning may require you to get organized, if you're not already. This may entail making room for your financial documents in the drawers of a file cabinet or purchasing a cardboard filing box. If you need two drawers fill one with account papers representing income, everything from pay stubs to alimony; and fill the second with account paperwork representing expenses, from credit card statements to mortgages to child care. Fold a page in half and on one side list money that goes out, and money that comes in. If you don't have more coming in than going out, you will want to figure out how to cut expenses and bring in more money, which was what Lee had to do.
After you've put your documents in order, write "Assets" at the top of another sheet of paper, and "Liabilities" on the other side. Under liabilities, list your debts, and under assets, list what you own, along with the estimated market value of these items. For instance, if you own a car, record the resale value under assets, and under liabilities, the amount that you might still owe on the vehicle. The accumulation of this information will help you create a net worth statement, an accounting of what you own and what you owe. Net worth statements are financial snapshots that let you gauge where you are so you can figure out where you want to go. The equation for a net worth statement works out to the following formula: Your assets - (minus) your liabilities = net worth.
The summation of your "assets," might include the estimated value of bank accounts, real estate, cars, retirement accounts, stocks, bonds; anything you own that can be measured by a dollar amount. Next, list your "liabilities," money owed on a mortgage, car, credit cards, bills, loans, taxes, etc. After adding assets and then liabilities, and subtracting the liability total from the asset total, you will know your net worth. A free net worth worksheet can be found on my website at www.deborahowens.com.
This project may elicit powerful emotions. If you're living from one paycheck to the next, organizing documents can be akin to undergoing shock therapy-or not-depending on where you are financially. Women often say they feel shame about having so little or having "wasted" so much. If these feelings come up for you, take pride in the fact that you're working to change. If you're feeling anxious or angry, envision yourself hurling a Counterfeit Purse, one that looks good outside, but has nothing of value within.
Putting together a net worth statement can motivate you to take action, because creating wealth is about adding to the purse. You will see at the bottom of your net worth statement in clear numbers whether or not you have been living a wealthy lifestyle, and whether you need to add to your purse. In Lee's case, the bottom line was worse than she'd expected. She and her husband were worth little more than $1,200.
This realization made her feel more defeated. Maybe that explains why she grew livid one afternoon when she was trying to vacuum before taking her son to the park. Her husband's feet were propped on the sofa as he complained about not being able to hear a televised football game over their son's noise and the vacuum. Furious and feeling overburdened, she ignored her husband's shouts and turned off the TV, insisting that they needed to talk. She suggested that if he pitched in, she'd be able to find part-time work. She says he asked, `Wadda gonna do, rob banks while I'm home changing diapers?"
Lee was so angry that she turned the vacuum up loud, and left it running when she slammed out of the house, and took her son on a drive. Although she tried to think of a retort to her husband's sarcastic question, she didn't have an answer. "I felt like Alice in Wonderland after she fell down the hole. I didn't think I'd ever get out.
Many women are caught in this kind of triple-edged dilemma: They need more money but they can't find high-paying jobs with flexible or part-time hours. Once they begin raising children many of the most highly educated women have to settle for dead-end positions. According to Dr. Joan C. Williams, Director of the Center for Worklife Law at the University of California's Hastings College of Law, women who work part-time earn twenty-one percent less per hour than those who work full time. Dr. Williams explains that this U.S. part-time penalty is seven times higher than in Sweden and two times higher than in the United Kingdom.
Out of sheer desperation, Lee began cutting back on her family's expenditures. " She squeezed money out of her grocery purchases, and served beans, rice and salad twice a week, rather than more expensive meals. To save on gas, she drove less and walked more. In these ways and others, she saved $5.00 a day, which she kept in a jar initially.
She paid off a high interest credit card, and designed fliers, some of which she posted in the windows of local businesses, advertising as a freelance graphic artist. "I worked when my son was asleep. I never earned more than $1000 a month, but I saved most of what I had left after expenses and taxes." For more details on how to cut back on ordinary expenses, increase your income and reduce debt, see the Pursessentials section at the end of this book.
She split her savings between two accounts, one to build a nest egg and another for investing. "I was reading financial magazines and so many of the articles said that investing offered the only opportunity to really make money grow. I wanted to learn."
Her husband told her she was crazy to even think about investing. She was about to give birth to their second child, and this was during 1999-2000, when the newspapers were pumping out fear-inducing headlines about investment losses. A lot of new dot-com enterprises were going bust, and venture capitalists that had plowed millions into companies with unproven business models were losing money by the bucketfuls. From the outside looking in, this may have seemed like the worst time to invest. But Lee said she went ahead with her plans because she was only earning about $5 an hour after taxes. Investing was "the only work I'd heard of that would allow me to turn a decent profit during a child's naptime."
AVOID THE GAP
Like the majority of women interviewed in a Prudential Financial study released in 2008, Lee was struggling with what researchers call "a confidence gap." She understood what she needed to do to take hold of her purse, but she was afraid that she would fail miserably.
Fear can destroy your ability to create wealth. I'll always remember interviewing Robert Kiyosaki on my radio show, and the wisdom he shared with my listeners. Kiyosaki's Rich Dad, Poor Dad books contrast people who focus purely on paying the bills each week and retire poor to risk takers who use money to invest and eventually create financial wealth. As an adult, Kiyosaki changed his own attitudes about money by as he became financially literate. As one of the country's best-known financial authors he preaches the importance of owning income-generating assets, such as real estate and stocks and bonds.
As much as I enjoyed talking with him, I was disappointed after one of my audience members phoned to say that she finally had dredged up the courage to buy stocks, but was still a little shaky because she didn't have that much, and Kiyosaki discouraged her from investing.
He said, "When you feel like you only have a little, you can't invest. You can't succeed at investing if you're scared." I thought he was a too hard on this woman, but now I know better. He wasn't talking about her not having enough money, but the fact that fear dampened any faith she might have that she could create a successful outcome. She hadn't realized that the world is filled with abundant riches and that she could have everything she wanted. When you start thinking this way, you can charge forward as if you are acquiring what is rightfully yours. Keep poet Robert Browning's message in mind and make sure that your reach exceeds your grasp. In other words, reach for more than meets the eyes, reach for the stars.
I can certainly understand that many people are frightened about investing. That's why it's so important to only invest money that you don't need to put your hands for for five years or. That way, despite downturns, you have a far better chance to earn a hefty profit. According to New York University's Stern School of Business, from 1928 to 2006, stock returns averaged 11.77 percent over the long run. Despite the almost inevitable economic downturns, long-term investing is generally the best way to beat inflation and build wealth.
As Money magazine's veteran stock picker, Michael Sivy writes, "Over time, quality stocks will return more than almost any other investment easily available to individuals." The Stock Market is like a club sponsored by businesses that will continue to grow into the future by earning profits. The good news is that you have a chance to join the club: no matter your race, age or gender. No one can keep you out. Pick the right companies to invest in and you will essentially be hitching your purse to the stars.
Sometimes I run across an opportunity to invest in products that I recall from childhood. For instance, my mother has used Tide detergent for decades, while I usually buy what's on sale. She has often asked me, "Why do you bother buying cheap detergent? You end up using twice as much to get the same results as the more expensive one." My mother is not alone in her sentiment. Millions of other women feel the same way and they have made the manufacturers of Tide, Procter and Gamble, a profitable investment over the years. How different my mother's life would be if she had bought individual shares in Proctor and Gamble.
I'm not telling you this to recommend that you buy this company's shares, which are units of ownership in a corporation. But let's take a look at why it might have been a good individual investment for my mother. Procter and Gamble went public in 1890 and over the years has developed more than 300 brands, including Tampax, Pringles, Folgers coffee, Dawn and Bounty. Procter and Gamble knows how to develop and market successful products, and its rise in value as a company proves that. If my mother had purchased $1,000 worth of Procter and Gamble shares in 1970 she had remained with the company, reinvesting her dividends, she could have build a nest egg of $250,000 to supplement her Social Security and small pension.
Or consider one of thousands of other success stories. When Wal-Mart came to your town, you may have noticed that the stores were big, the staff was friendly and the prices were low. Suppose you had instructed a broker to buy 100 shares of the company? In 1970 Wal-Mart offered 300,000 shares to the public for $16.50 each. You would have paid $1,650 for your 100 shares. With money raised from selling those shares, Wal-Mart built more stores across the country and around the world eventually. As Wal-Mart increased its profitability, it distributed dividends to investors and many reinvested their dividends into more shares. A thousand dollars invested in 1978 would be worth more than $599,000.
The only kinds of investments that give you the opportunity to share these types of earnings are stocks. Not all companies perform as well as Wal-Mart or Procter & Gamble, but most investors would be happy to find one that performs half that well-and many do.
A voice of doubt may be whispering to your consciousness, suggesting that bargains were around in the past but not available today. I don't believe that, but I understand your wariness, especially if you're reading this during an economic downturn, when corporate earnings are typically depressed. I hope it offers a measure assurance to know that Market bottoms usually signal that economic contractions are about to give way to exhilarating new life. That said, let me say that I believe the U.S. economy is resilient and will continue to grow over time.
WHY I'M BULLISH ON STOCKS
Despite inevitable downturns, the world will continue changing in ways that will allow you, a daughter, sister, mother or friend to create wealth through investing. Here's why I'm bullish on the future of the Market. Around the globe countries such as Australia, Brazil, Qatar and the United Arab Emirates will experience stops and starts but essentially continue to expand. Middle class populations in countries such as Turkey, Korea, Thailand, the Philippines, Malaysia, Gabon will surely follow this stop and start trend, but continue to grow nevertheless.
In 2007 India grew 86 percent in dollar terms, according to the Wall Street Journal. That same year, China's growth surged 59 percent. The country's gross domestic product was $1.3 trillion in 2001, and only seven years later had grown to an estimated $3.6 trillion. Since opening its economy in the 1970s China has lifted more people out of poverty than any nation in modern times, and it is poised to become the world's third largest economy. By 2008 the Chinese had opened about 577 million mobile phone accounts, a number that was growing an estimated five million new accounts per month, according to Nielson research. By 2009, that growth had stalled dramatically, but I don't doubt for a moment that their economy will come roaring back.
Think of what all this means for an investing woman. Like their consumer counterparts around the world, members of China's emerging middle class will make lists before checking them twice, and will embark on a massive shopping trip. Demand will rise for toilets, towels, shower curtains, soaps and toothpaste, as well as bedroom drapes, matching coverlets, rugs and clothing, backpacks and books-the list is inexhaustible.
No one could be better equipped at figuring out what items those shoppers will want.. Surveys suggest that women consumers in the U.S. buy or influence the buying of more than 75 percent of all goods. We dominate the marketplace, influencing purchases in everything from food to clothing, cars to health care and home improvement.
Lee understood this line of reasoning, and her saving and investment accounts were growing, but she was still feeling timorous about losing her money. That's why she dressed up, took the train to lower Manhattan, and signed up for a tour of Wall Street, or "The Street,' a Manhattan thoroughfare, and the heart of the financial district and investment community that has grown around it. The Street is home to many major banks, brokerage houses and stock exchanges, which are marketplaces for investments. The U.S. has the world's largest economy, so tremors felt on Wall Street rattle markets throughout the world. For the time being, the Street remains the global epicenter of financial transactions.
Before the tour ended, Lee asked her guide to snap a photo of her standing before the bronze statue of the charging bull, which is a symbol of Wall Street. A bull symbolizes an active market. On the other hand, the figure of a bear, an animal known for its ability to hibernate, represents a somnolent market, when prices plunge. For Lee, the photo represented that she was stepping into a global community of investors
"I placed it on my refrigerator," Lee says. "I looked at it when I was frightened, but I figured I didn't have to do it alone."
Here's what else she did.
• She formed an investment group with four other stay-at-home mothers, so they could learn together. Lee planned the dates around days when her husband was home, but members were welcome to bring children. They decided to learn together and invest separately. For the first few months, members challenged themselves to save $100 a month for stock purchases.
• Contacted the non-profit National Association of Investors Corporation (NAIC) for free and helpful information and support on starting an investors group. You can contact NAIC) online at: www.betterinvesting.org or by calling toll free at (877) 275-6242.
• After attending investment club meetings for six months, Lee decided to supplement what she learned with an online investor's education series. If you'd like to register for an online course, contact the National Association of Online Investors (NAOI). Founded in 1997 and based in Washington, D.C., this organization can be found online at: http://www.naoi.org/.
Even during what appeared to be a precarious time to begin investing, Lee was able to use her investing skills to improve her family's net worth. Working an average of three hours a week to research companies and purchase stocks online in five years, Lee turned $25,600 into $77,000, after taxes. This translates into $10,000 a year for an equivalent of working three-and-a-half fulltime weeks.
Lee plans to devote more time to investing when her youngest child is in school. She sure won't need a new professional wardrobe. She does most of her buying and trading when she's wearing a nightgown and bunny slippers..
Lee is hardly the first woman to use grocery money to fund investments. As a Detroit autoworker and her husband prepared for retirement she shared news of a surprise she'd been preparing for quite some time. In 25 years she'd earned $1-million in investments with money saved from household expenses.
But that autoworker wouldn't be considered unusual in a country such as Japan, where tens of thousands of homemakers engage in online currency trading, playing the markets, buying and selling stakes worth millions through margin trading, a potentially lucrative but far more risky course of investing than I recommend in this work. Although my approach may differ from theirs, they are operating on the same
Whether you have a little or a lot, you'll want to look at investing as if you were starting a new business, which means among other things, keeping good records, minimizing costs and coming up with seed money.
Lee began by investing $50 a month into her club funds. Once she felt more comfortable in the Stock Market and had saved $1,500, she began purchasing shares on her own from Starbucks coffee company. She chose that stock because when she started cutting back on expenditures and missed drinking lattes most off all, she reasoned that if she was "addicted" to Starbucks so were millions of others. (While there's no room to detail every transaction in this book, I've used information from sharebuilder.com to give you a general profit range on certain stocks.) If you had invested $13,900 in Starbucks in 2000, you would have made a profit of $6,100 in seven years. Lee earned over $10,000 in dividends purchasing Starbucks. She has since made many other investments.
If you have relatively little, figure out how to generate more with your innate talents. Lee and her husband's net worth has once been $1,200. Today they are worth $323,397.
Lee's husband hasn't gotten any better about pitching in with the housework, but she does report that he's not laughing at her any more. Lee moved through her fear by developing a Wealthy Vision, and you can too. If you're unhappy with your net worth, turn your dreams into goals that reflect your desire to fulfill unmet needs, and plan for something better. Creating wealth is about adding to the quality of your life. When you value something and approach it with integrity, the universe will conspire to help you. What do you need to feel fulfilled? Many women I've asked included: Loving relationships, financial and physical security, a spiritual connection, good health, and Intellectual satisfaction
If your list differs, or you have more to add, please record responses below:
1. __________________________________
2. __________________________________
3. ___________________________________
4. ___________________________________
5. ___________________________________
Once you've listed your unmet needs in broad terms come up with concrete, measurable aspects of what you need to reach your goals, such enrolling in a seminar..
1. _____________________________________________________________________
2. _____________________________________________________________________
3.______________________________________________________________________
4.______________________________________________________________________
5._____________________________________________________________________
Now prioritize. Which goal should you accomplish first? Which ones after that? Record your prioritized list below, making sure to completion dates beside goals and include costs estimates.
How does it feel to see the sum of your dreams on paper? If you're frightened, use an inner soothing voice to reassure yourself that you have what you need to get where you want to go. Keep listening to this positive, loving message until your fears subside. Fear will rob you of the energy you need to create wealth. Remember the sound and tone of that soothing voice. Perhaps it reminds you of someone you trust.
You too have reached a point in this work when you can reconnect with your dreams, change directions and add new rhythms to your life. Taking a wider perspective also makes it easier to see where you fit into this world. As the world mirrors back your unlimited potential you can see yourself as the extraordinary individual that you are.
A Wealthy Tip:
Speaking of moving forward, if you want to remind yourself of the importance of maintaining a wealthy outlook, start paying attention to the way you walk through this world. Your gait communicates to others and yourself your level of confidence. Super model Jessica Stam knows how to stride toward success. This 21-year-old struts down runways around the world and has so impressed fashionistas that designer Marc Jacobs named my favorite accessory-a purse-after her. The Stam Bag gives a new meaning to "a purse of my own."
Stam told the Wall Street Journal that she conveys confidence by walking with (1) her shoulders pressed down, (2) holding her head high and straight, and (3) focusing on a point in the distance, while (4) taking long strides. It sounds as if wherever this young lady rests her feet she views the terra firma beneath them as her very own. Now that's a Wealthy Outlook.
Striking a Balance
The male/female strengths of courage and humility were illustrated in this chapter. If the spirit moves you, write about how you envision utilizing these or similar traits to create a wealthy life.
You may want to use some of the following questions as guidelines:
• What frightens me most about the prospect of changing my life?
• How has fear affected my financial life?
• What will it take for me to develop the confidence I need?
• How might my life change if I allowed myself to act courageously to acquire wealth?
• If it's true that pride goes before a fall, how might humility help me become wealthy?
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Used by permission. Fireside. A Division of Simon and Schuster. Copyright 2010 Deborah Owens and Brenda Richardson