Posts in Budgeting

Women and Investing: Facts, Myths, and Financial Self-Care

August 11th, 2016 Posted by Budgeting, Family Finances, Investment Strategy, Investor Behavior, Life Planning, Marriage and Finances, Retirement Planning 0 thoughts on “Women and Investing: Facts, Myths, and Financial Self-Care”

Women control $5 trillion in investable assets in the United States, and the potential for future growth is enormous. Today, women represent more than 51 percent of the workforce and are starting businesses at twice the rate of men. On the flip side, men’s retirement account balances average more than 50 percent higher than women’s. The gender retirement gap is further compounded by the fact that women tend to live an estimated five to six years longer than men.

The data shows that, on their own, many older women have less money saved to draw from, as well as higher expenses. All too often, this dangerous combination results in financial insecurity. It’s imperative to understand why this gender retirement gap exists, and what can be done about it.

  • The Gender Pay Gap: Statistically, for every dollar men take home, women earn 79¢. That means women will make an estimated $530,000 less over their lifetimes, thus also reducing the amount of money they have to invest. We need to address this inequity as a society, but in the meantime, women in the workforce should not shy away from asking for a raise.
  • Family Responsibility: Many women take more time off work than their male counterparts to raise children or care for elderly parents. Not working outside the home means more than just losing a paycheck. It also means having less disposable income to invest in the long term and may translate into lower Social Security benefits.
  • Cost of Living: Life as a woman actually costs more. For starters, think wardrobe and personal care. And while there may be little we can do to reduce some of these costs, there are still ways to combat this problem. For instance, women often end up paying more for items such as mortgages and cars. By vigilantly researching the best loan rates available, women can negotiate from a stronger position and potentially reduce excessive costs over a lifetime.
  • The Gender Investment Gap: Although women actually save more of their disposable income than men, they tend to invest less of it, leaving a lot of their money in cash or low-yield savings accounts. But when women put together personal plans to bridge the gender investment gap, it can have dramatic, positive consequences for their financial lives. Before we explore ways to move forward in a positive direction, let’s talk about why women often show hesitancy when investing. It’s likely that they’re buying into one or more of the many myths about women and money.

Negative stereotypes and myths about women and finance:

  • Men are better investors than women. Not so. Research shows that when women invest, they tend to be highly successful, outperforming men. Not to mention that funds managed by women consistently outperform their alternatives.
  • Women are too risk averse to invest successfully. True, many women are risk averse. But wait. Can’t caution in investing actually be a virtue that helps you better weigh your options and avoid making poor or rash decisions? Yes – so long as you keep in mind that some risk must be taken in order to realize the returns needed to grow your wealth. This shouldn’t present a problem for women, or any investors, when the connection between their values, goals, financial plan and investments is clear and all are in alignment.
  • Women don’t have enough financial education to make a financial plan. Although this myth represents a gross generalization, there’s no denying that everyone could benefit from getting a better financial education. Not having one, however, has never stopped men from investing.

Moving ahead with saving and investing as a form of self-care:

  • Budget: Try to think of budgeting as less about numbers and more about personal awareness. It’s a check-in to see whether you are spending on the things that matter to you most. Set boundaries that ultimately will set you free to create and pursue the life you desire.
  • Save: Putting aside money is actually a way of caring for your future self. The rule of thumb is to save 15-20 percent of your income, but if you can’t do that, save as much as you realistically think you can. Just as you go in for regular health check-ups, do frequent check-ins on your financial well-being. Ask yourself if there isn’t more you can do to protect your financial welfare.
  • Invest: The need to invest can be compared to our need for exercise. We exercise to fight the corrosive power of aging and maintain our health. We invest to fight the corrosive power of inflation and maintain our financial health. Your savings should be invested, rather than kept in a money market fund with low interest rates. Otherwise, inflation will erode the value of your assets.
  • Insure Yourself: It’s a little-known but important statistic that 80 percent of men die married while 80 percent of women die single. Life insurance and long term care insurance should be seriously considered in women’s financial planning.
  • Take Responsibility: You would never cede big decisions in your life to other people, like who to vote for or how to take care of your kids or aging parents, so make sure that you are also participating in financial planning. It is highly likely that, someday, you will be the only one responsible anyway. A study performed by the National Center for Women and Retirement Research estimates that 90 percent of all women – single, divorced or widowed — will be in charge of financial matters at some point in their lives.

To create the best possible future for yourself, start planning for and investing in your future today. We would be happy to have an exploratory, no-obligation conversation with you. Feel free to give us a call at OpenCircle, 203-985-0448.

Stuck in the Sandwich Generation?

February 26th, 2016 Posted by Budgeting, College Planning, Family Finances, Investor Behavior, Saving, Youth and Finances 0 thoughts on “Stuck in the Sandwich Generation?”

Families can be such a source of comfort and love that many children dream about having families of their own when they grow up. As we age, of course, we learn that the benefits of family life also come with responsibilities. And just as we start thinking our children will be leaving the nest soon and some of the demands on our time and resources may lighten, we realize that our parents may need us in new ways.

A large segment of our population now belongs to what is known as the Sandwich Generation. They may feel stuck in the middle, caring for dependent children and aging parents.  On top of all that, they also need to plan for their own retirement years and potential long-term care needs.

Many members of the so-called Sandwich Generation believe in higher education and want to provide that opportunity for their children.  Others are called upon to share financial resources with a divorcing adult child or help raise a grandchild.  Furthermore, as average life expectancy increases, their aging parents may live well into their 90’s and put additional strain on already limited resources of money and time.

There is a growing trend for the in-between generation to shoulder the financial burden for both the younger and older generations.  The unintended result may be, unfortunately, that the needs and wants of these parent-children suffer in the process.  It is hard to see a way out.

Perhaps it is not as hopeless as it seems. It can be possible to balance financial responsibilities across generations. There are ways that people can potentially help their children and their parents without sabotaging their own long-term financial security and quality of life.

While there is no magic formula, a well-thought-out approach can enhance communication, build financial strength, and nurture resourcefulness in all family members. Here are some specific ideas that can help:

Plan Ahead

If you plan ahead, you may be able to lighten the load. Expenses like college tuition for your children and long-term care for your parents can be overwhelming. With the guidance of a trusted financial advisor, you can research your options and make preparations well in advance of important life events.

Request and Welcome Participation

Include your family members in the planning and preparation for their future needs and wants.  Ask them to contribute what they can, and follow up to make sure they do.

Your children could assume responsibility for a portion of their higher education expenses. The older generation should think about their eventual needs – urge them to plan ahead both financially and emotionally for their later years and the possible side effects of aging.

Nurture and Reinforce Independence

In an effort to demonstrate your love, and perhaps because you find it easier in the moment, you may do too much for your children and for your parents. The more you do for others that they can do for themselves, the more you weaken their independence.  When you do too much for a loved one, you may be implying to them that they are less capable than they really are.  It is in your best interests and theirs to nurture a spirit of self-confidence and self-sufficiency in those you love. The result could be a better life for all of you.

[Photo credit: Flickr user Kevin Cramer]

Family Wealth Planning Conversations

February 22nd, 2016 Posted by Budgeting, College Planning, Estate Planning, Family Finances, Homes and Mortgages, Life Planning, Loans and Debt, Marriage and Finances, Retirement Planning, Saving 0 thoughts on “Family Wealth Planning Conversations”

What Are Family Wealth Planning Conversations (And Why Have Them)?

Whether gathering for annual reunions, sharing childhood memories, or simply being there for one another during difficult times, family traditions nourish our most satisfying relationships. An important tradition that we at OpenCircle foster with our clients focuses on family wealth planning. We facilitate conversations that engage every family member, each of them contributing their talents and interests to achieving their collective and personal lifetime goals.

That does not mean that everyone must participate equally. As we work with families, one individual often emerges as the spokesperson or steward for the group. That’s fine … if the role is based on a mutual and deliberately planned arrangement. If it is instead based on unspoken assumptions or force of habit, a family’s wealth planning may benefit from a fresh conversation.

Even if a family is in full agreement on who is best suited to champion its interests, there’s always life’s many “what ifs.” Are others in the family adequately prepared to assume the stewardship role when and if it is required of them? Might they have unexpressed questions or concerns that are best addressed well before that day may arrive? Carving out time to hold candid conversations is where it all begins.

How We Guide Our Clients in Family Conversations

To launch a family wealth planning conversation with a client, we invite them and their family to meet with us at their convenience. (A face-to-face meeting is optimal, but we can harness technology to hold a meeting online if necessary.) We guide them in exploring key considerations such as:

  • How would each of them define their roles in their family’s wealth planning?
  • Are all of them satisfied with their current roles?
  • Do all family members have the essential information, should they be required to increase their participation? (For example, do they know how to reach us?)
  • Are there other questions, suggestions or family wealth dynamics they would like to explore, either immediately or over time?
  • How can we best assist each of them in these and other areas?

We help families find broader and deeper perspective in this area of their lives. Even though specific family members may never have joined us in prior meetings, we encourage them to be included at this time. They may well discover insights about one another that could strengthen both their financial conversations as well as their overall family dynamics.

Regardless of who may be “in charge” of a family’s wealth, every individual is equally dependent on the outcome of the efforts. Enabling a forum for everyone’s voice to be heard is another way OpenCircle helps our clients achieve their greatest life goals, keeping their family’s wealth fresh and meaningful over time. If you would like more information, please give us a call at 203-985-0448.

[Photo credit: Flickr user Luke Lehrfeld]

Spend a minute with Alex Madlener

January 21st, 2016 Posted by Budgeting, Investor Behavior, Retirement Planning, Saving 0 thoughts on “Spend a minute with Alex Madlener”

Alex Madlener is the founder and managing principal of OpenCircle Wealth Partners. In this video he shares some of his life story, and why he chooses to empower families by helping them make sound financial decisions with comprehensive solutions.

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Making Sense of “0%” Credit Card Offers

December 17th, 2015 Posted by Budgeting, Economics, Family Finances, Loans and Debt, Saving 0 thoughts on “Making Sense of “0%” Credit Card Offers”

Are you unhappy with your credit cards? Does the “grass look greener” at other credit card companies? Are you maxed out on one or more credit cards and paying too much interest? Are you concerned about higher interest rates due to the rate increase that the Federal Reserve put into effect on December 16th? Whatever your motivation, you may be thinking about applying for a new “0%” card.

As we near the end of 2015, a number of credit card companies are still offering new customers 0% APR on purchases through 2016 and even into 2017. Many of them encourage applicants to transfer balances from their existing cards by extending the 0% offer to these transfers. This could look like the best of both worlds – wipe the slate clean on your old card and make a fresh start. After all, who can pass up an interest-free loan?

The beneficial features of these credit card offers are quite clear up front. The promotional material is designed to encourage your signing up, so the “perks” are highlighted. But as the proverb says, if it looks too good to be true, it probably is. It is essential to read the fine print. Here are some potential hazards to watch for:

  1. Annual fees

Some cards don’t have an annual fee, but many do. The cards that do have annual fees may waive them in the first year. Be sure you are aware of what the fee is or will be in the future.

  1. Other costs

There are lots of other charges that credit card companies may add on. These can include fees for late or returned (bounced) payment, which can be as high as $38 for each infraction. There may be a surcharge on foreign transactions. The interest rate on cash advances may be higher than on purchases. You could incur a fee for going over your approved credit limit. If you carry any balance at all, after the initial period, you may be charged a minimum interest fee. Make sure you know up front.

  1. Limitations

As stated above, the 0% rate may be applied to new purchases and balance transfers or only to one of those. The interest-free time period may be as long as 18 months or as short as 9 months. Even with a 0% offer on balance transfers, there may still be a transfer fee which could negate your potential savings. If you change card companies, you want it to be worth your while.

  1. Rewards programs

It is common for credit cards to offer rewards to their customers, in return for purchases on their cards. It is important to know that these cards may charge a higher interest rate in order to underwrite the rewards program. Some companies require a minimum spending amount before you are eligible for your earnings. Other companies may put a cap on your earnings. If the specifics of the program are not clear, insist on clarification.

Variable APR (Annual Percentage Rate)

The APR that a card company charges may be variable. Once the 0% period ends, you could be charged interest amounts that vary over time, with some APRs currently as high as 22.99% or more. Be advised that the rate on regular purchases could be different from the rate on balance transfers. And a late payment could cause your APR to rise, perhaps to as high as 29.99% or more.

  1. Fraud

When you sign up for a new card, make sure YOU are the initiator. Never accept a credit card offer over the phone unless YOU made the call. And never click on a link inside an email – if you apply online, do it through the company’s official and secure website.

A word to the wise:

Whatever credit cards you have, do your best to avoid carrying a balance. If you have an unpaid balance, chip away at it each month, because the interest you are paying is a negative investment. In other words, if you pay down your balance each month, the interest you save is money in your pocket.

[Photo credit: Flickr user Mighty Travels]

Top Tips for the Well Advised Investor Part IV

November 24th, 2015 Posted by Budgeting, Investment Strategy, Investment Vehicles, Investor Behavior, NAPFA, Stock Options 0 thoughts on “Top Tips for the Well Advised Investor Part IV”

Good advice for investors does not need to be complicated. In that spirit, we offer this four-part series on sound investment principles. Including these guidelines in your investment strategy could help you reach your financial goals.

Part IV. – Thoughts on Life and Investing

  1. It is important to understand the difference between “highly improbable” and “impossible”, as well as the difference between “highly likely” and “certain”.

Over almost all periods of 20 years or longer in the United States, stocks have provided higher returns than bonds. So it’s no surprise that investors assume, if their horizon is long enough, stocks will certainly continue to provide higher returns than bonds. Unfortunately, this assumption can lead them to take more risk than they should. It is essential to remember that stocks, like any risky asset, are risky no matter how long the investment horizon is.

  1. The only thing worse than having to pay taxes is not having to pay them.

Taxes are a fact of life – they are not going away anytime soon. Whether we agree with where our tax dollars are, or are not, being spent, we still have to pay our fair share. For many people, not having to pay taxes is a reflection of not having enough income to live on. So in that respect, having to pay taxes is a good thing. But that does not mean we should pay more than we need to.

All of this leads people to try and avoid paying unnecessary taxes. There are smart and not-so-smart ways of approaching the issue. Investors who hold a large amount of stock with a low cost basis often refuse to sell because of the tax bill on capital gains. Sadly, large fortunes have been lost because of this error.

There is a wiser way to make the decision to sell or not to sell. Investors should weigh the present asset allocation of their current holdings against the desired asset allocation that they have defined within a carefully designed investment policy. Then, factors such as tax implications can be considered.

  1. The four most dangerous words are, “This time is different.”

Believing that “this time is different” has caused the investment plans of many individuals to end up in the proverbial trash heap. It is tempting to succumb to the lure, and potential mania, of the “new thing.” This behavior reinforces a time-worn phrase: “The surest way to create a small fortune is to start with a large one.” When the lure beckons, stick to your plan, as described in Part I of this series.

  1. Good advice does not have to be expensive, but bad advice can cost dearly.

Most of us wouldn’t choose the cheapest doctor, the cheapest attorney or the cheapest accountant. Although we should consider the expense against what we can afford, we also know that the value we receive is what ultimately matters.


The principles outlined in this series can provide investors with resolve to stay the course regardless of market events. For investors, creating and sticking to an investment strategy that addresses their long-term financial goals along with their overall ability, need and willingness to take risk, is an advisable approach that can serve them well through bad times as well as good.

[Photo credit: LendingMemo]

Top Tips for the Well Advised Investor Parts II & III

November 16th, 2015 Posted by Budgeting, Investment Strategy, Investment Vehicles, Investor Behavior, NAPFA, Stock Options 0 thoughts on “Top Tips for the Well Advised Investor Parts II & III”

Good advice for investors does not need to be complicated. In that spirit, we offer this four-part series on sound investment principles. Including these guidelines in your investment strategy could help you reach your financial goals. (You may want to refer back to Part I – Investing – The Benefits of a Disciplined Plan.)

Part II – Individual Stocks – Reasons to Avoid Trying to “Beat the Market”

  1. Owning individual stocks and sector funds can be unnecessarily risky.

Owning one large-cap growth stock has the same expected return as owning an index fund of large-cap growth stocks, but it entails far greater risk. (Large-cap refers to companies with a market capitalization of more than about $10 billion, which is calculated by multiplying the number of a company’s shares outstanding by its stock price per share.)

The market compensates investors for risks that cannot be diversified away – such as the risk of investing in stock versus bonds, or corporate bonds versus Treasury bonds. Investors should not expect the market to compensate them for risk that can easily be diversified away – that is, the unique risks related to owning just one stock or one sector fund. Prudent investors understand that it makes sense to only accept the kind of risk which compensates them in the form of higher expected returns.

  1. Each strategy has an associated cost.

To outperform the market, an investor must first identify a mispriced security and then, after the expenses of the effort, be able to exploit the mispricing. Strategies by themselves have no costs, but implementing them does. Many investors have tried to exploit what they believed were (and perhaps really were) mispricings, but found that that the trading and other costs of implementing their strategies exceeded the potential benefits.

  1. It is prudent to avoid investment products with “elite” appeal.

We feel that hedge funds and private equity, including venture capital, appeal to investors by offering them the possibility of achieving superior returns while appearing to extend invitations to an elite group of investors. Recently, however, the hedge fund and private equity industries have lowered their minimums significantly. Furthermore, many of these vehicles turn out to be more expensive than they are expansive for an investor’s portfolio.

Generally, investors should not invest in a security without fully understanding the nature of all of its risks. And they should avoid investing in an investment product purely for the sake of its inherent complexity or exclusive nature. Such products are designed to be sold, not bought; the complexity is likely to be designed in favor of the issuer/seller, not the buyer.

Part III. – Diversification – An Essential in Portfolio Construction

  1. The safest port in a sea of uncertainty is diversification across many asset classes.

It is not possible to properly diversify using only the S&P 500 Index. While there would be a large number of holdings, there would not be enough diversification by asset class. An investor would receive ownership in 500 companies, but many of them belong to the same asset class. Investors need to look further than a single index to achieve appropriate diversification.

  1. Diversification is always working.

Sometimes investors like the results of diversification in their portfolios and sometimes they don’t. Most investors are familiar with the benefits of diversification. Done properly, diversification reduces risk without reducing expected returns.

However, once investors diversify beyond popular indices such as the S&P 500, they must accept the likelihood of being faced with periods of time (even long ones) when a popular benchmark index, reported by the media on a daily basis, outperforms their portfolio.

The media “noise” may test their ability to stick to their investment strategy. Nothing will have changed (diversification will still be the right strategy), yet many investors will make the mistake of confusing strategy with outcome, and abandon their plan. This is a good time to remember the stick-to-it-iveness that we discussed in Part I.

Stay tuned for the fourth and final part of this series: Thoughts on Life and Investing

[Photo credit: Lendingmemo]

Top Tips for the Well Advised Investor

November 10th, 2015 Posted by Budgeting, Investment Strategy, Investment Vehicles, Investor Behavior, NAPFA, Stock Options 0 thoughts on “Top Tips for the Well Advised Investor”

Good advice for investors does not need to be complicated. In that spirit, we offer this four-part series on sound investment principles. Including these guidelines in your investment strategy could help you reach your financial goals.

Part I – Investing – The Benefits of a Disciplined Plan

  1. Have an investment plan and stick with it.

Your plan should be well-developed and comprehensive. Your plan should be the foundation of all the financial decisions you make, especially when the market is fluctuating. A solid strategy will help you keep your head when your emotions threaten to take over.

  1. Determine the appropriate level of risk tolerance.

Be prepared for the unexpected, so that if it occurs, you will be less likely to panic and abandon your plan altogether. When considering risk factors in specific asset allocations, keep in mind whether your investment time frame is short-term or long-term. Also weigh the stability of your income, your ability to deal emotionally with market fluctuations, and the rate of return you are seeking.

  1. Know how to interpret the value of information.

Consider the source. If you learn something through the media or from a broker, it is likely that the market will have incorporated the same information into the current stock price. In other words, much of the information you may be privy to has a good chance of being obsolete. In any case, there are many intelligent and motivated people researching the same stock, so the information is unlikely to give you a competitive advantage.

  1. Don’t ignore the impact that expenses have on your portfolio.

Investing always has associated costs. On paper, a stock may look like it has outperformed the market, but when considered against fees and other expenses, the net result could equate with underperforming the market. And remember, for one investor to outperform the market, another (this could be you) must underperform. You would be well-advised to seek earnings at the market’s rate of return, while incurring lower costs with an evidence-based investment strategy.

  1. Work with an advisor who meets the fiduciary (rather than a mere suitability) standard.

Brokerage firms and their employees are held to a rule of suitability. The service they provide and the products they sell are only required to be suitable for an investor, not necessarily in the investor’s best interests. And a brokerage firm may sell suitable funds with relatively high fees, earning themselves bigger commissions or satisfying particular sales quotas.

Registered Investment Advisors, on the other hand, have a fiduciary obligation that goes above and beyond the basic suitability standard. They must act with the utmost good faith in their clients’ best interests. In fact, the fiduciary standard is generally considered the highest legal duty that one party can have to another.

Furthermore, an advisor can play an important role in ensuring that investors adhere to their well-developed plans when markets fluctuate. This stick-to-it-iveness helps investors avoid the potential financial consequences of reacting to the “noise” of the market. This approach also averts attempts to profit from “bubbles” in the market, which do occur, but are unfortunately quite likely to burst at unpredictable moments.

Stay tuned for the remaining three parts of this series:

II. Individual Stocks

III. Diversification

IV. Thoughts on Life and Investing

[Photo credit: Lendingmemo]

Don’t Be Afraid to Stand Apart From the Herd

October 29th, 2015 Posted by Budgeting, Investor Behavior 0 thoughts on “Don’t Be Afraid to Stand Apart From the Herd”

Carl Richards, my colleague and our Director of Investor Education through The BAM ALLIANCE discusses how, in today’s world, what feels safe is often risky, and what feels risky is often safe. 

What feels safe is often risky, and what feels risky is often safe. This statement contradicts just about every evolutionary instinct we possess. We tend to seek out safety and avoid risk whenever possible. A classic example has to be the instinct that (still) tells us we are safer staying with the group.

If members of the herd stray, they are easier for predators to pick off. Staying with the group has proved the best way to survive. For generations, this principle was true at work, too. Many of our grandparents had one job for many years, retired with a pension and lived happily ever after.

In the span of only one generation, it seems that’s changed. While it used to be safe being “a company man,” that is now often risky. People are fired often. We’re now more familiar with the rise of what the author Daniel Pink described as a free-agent nation. It’s incredibly hard for our brains to accept this change, but the group no longer offers us the same assurance of safety. Sticking with the herd at work may, in fact, be the riskier choice.

For instance, what used to be safe — betting on someone else to guarantee us a job — may be much riskier than we realized. Things are changing so fast that we can’t always afford to keep our heads down at work. We are required to be aware of, and understand, the need to adapt quickly as changes come. We need to learn how to draw attention to ourselves in a good way. It feels scary, but we’ll end up safer in the long run.

Something similar happens with spending money. We look around, see what everyone else is buying, and confuse the herd with safety. For example, simply because everyone else is using credit to buy the latest iPhone, or even bigger things like boats and cars, doesn’t mean it’s risk free. But we start to tell ourselves the story that because everyone else is doing it, it must be O.K.

Also, we don’t want to stick out by being frugal. No one wants to be the person who says, “I can’t afford it,” when everyone else is buying. In reality, safety comes from focusing on what we can actually afford versus what our neighbors think they can afford.

Finally, we get to perhaps the biggest safety-versus-risk conundrum: investing. Few decisions will feel riskier than making an investing choice that appears to contradict what everyone else is doing. Remember 2006 and 2007?

The herd was so confident that housing prices would only keep going up, it seemed crazy not to buy that dream home. Ironically, the very moment when it felt the safest, when everyone else was buying right at the top, was when it turned out to be the most dangerous. It demonstrates the fear and greed cycle perfectly.

Remember how Warren Buffett once advised us to be greedy when others are fearful and fearful when others are greedy? Doing so requires ignoring the herd and sticking out in a way that may feel wildly uncomfortable — at first. But then the market adjusts, and suddenly all the people who chased each other into it are chasing each other back out. Suddenly, sticking out doesn’t seem like such a bad idea.

We can learn a lot by watching the people around us. It’s how we evolved and reached the top of the food chain. But just maybe we should think very carefully about doing the same thing as everyone else. Does it really keep us safer to stick with the herd, or are we risking everything by continuing to look at the world through an outdated lens?

This commentary originally appeared February 2 on

[Photo credit: Flickr user Ian Sane]

An Easy Trick to Improve Your Daily Experience of Money

September 25th, 2015 Posted by Budgeting, Investor Behavior, Saving 0 thoughts on “An Easy Trick to Improve Your Daily Experience of Money”

The gas tank analogy.

How much money do you like to keep in your wallet? Have you ever thought about cash the way you think about gasoline in your car? You can always tell when either your gas tank or your billfold is empty. And it is quite obvious when your gas tank is full or even partially full. But do ever have a clear sense of how close to full your wallet is?

Before you answer that question, think about the differences between monitoring fuel consumption and cash-flow. The amount of fuel you use is directly related to the miles you drive and the prevailing traffic conditions. The gauge on your dashboard conveniently tells you when you need more gas. Your tank’s capacity puts a limit on what is required to fill it.

Cash anxiety.

When it comes to your wallet, you may not have a gauge-perfect view of how much is actually in there. Taking cash out and putting it in requires being hands-on, but chances are you are not doing the accompanying subtraction or addition, nor even a simple count of the balance, each time. If you are like many people, you live in a constant state of low-level anxiety about opening your wallet at a crucial moment only to discover that you are out of cash.

A simple exercise.

Try this exercise for a month. Put a $100 bill in your wallet that you promise not to touch. Keep other cash on hand for regular use. Spend as you normally do, but never allow yourself to break the $100.  Each time you get close to that $100, make sure to replenish your other cash. At the end of the month, assess the impact this exercise had on your anxiety level. And see if you haven’t become more conscious of your daily habits. It may be that protecting the $100 is less stressful than worrying about coming up empty, and therefore makes it easier to monitor your spending.

The bigger picture.

When you have committed some time to being more conscious about, and becoming more comfortable with, how you deal with cash on a daily basis, you may decide you are ready to look at the money picture beyond your wallet. Once again, you will want to take an honest look at your financial habits. Over the course of a month notice how you deal with the process of paying bills. Study your patterns around investing and saving. Examine the role of money in your relationships and other areas of your life. With your new level of awareness, you may discover that how you deal with money can transform how you feel about it, and transforming how you feel about it can change how you deal with it.

[Photo credit: Flickr user Mav]