Beginning with this episode, I’ll be posting transcripts of BizReads here on my blog in addition to the podcast. If you prefer to listen to the audio version, you can find it here:
You’ll also find all of the resources and links to websites that I mention in the show posted below.
Worth It: Your Life, Your Money, Your Terms by Amanda Steinberg
Since Steinberg is a smart, successful woman who runs a company focused on women’s financial health, I assumed I would absolutely LOVE this book.
Worth It focuses on women and their money stories, but it’s applicable to anyone who needs to up their financial literacy.
She begins with some stats:
- Women hold “52% of management, professional, and related jobs in the US” and are “the primary breadwinners in more than 40% of American households.”
- Women also “own 30% of private businesses, employing more than nearly eight million Americans.”
- “Women currently control 51%, or $14 trillion, of personal wealth in the US and are expected to control $22 trillion by 2020.”
Sounds pretty good, right?
However, she points out that “women still lag behind men in the amount of earning power, savings and wealth.”
According to the US Bureau of Labor Statistics, “Women now only earn 83% of what their male peers get paid.”
To put this in perspective, “the average full-time working woman will lose more than $460,000 over a forty-year period due only to the pay gap.”
Apart from the basic equality issue here, this creates a gender-gap in long-term security.
After all, even though the women who do invest in their retirement funds often tend to save more than men, they aren’t able to keep up based on their income. Additionally, only “44% [of women] invest in their employers’ retirement plan.”
Steinberg looks at how cultural norms contribute to this problem:
- Men are supposed to be independent, aggressive and competitive.
- Women are supposed to be nurturing, nice, and altruistic.
- Studies show that women are penalized for initiating salary negotiation or even accepting company offers of higher compensation because it isn’t “nice.”
I would summarize the book with three key takeaways:
- Know your numbers.
- Know your plan.
- Take steps to put your plan into action.
As Amanda says, “More money means more choices.”
To me, this means more freedom.
Your Money Story
We all have “money stories” based on our past experiences, culture, religion, and upbringing, but the good news is that we can change them at any time.
Our lives play out by the stories we use to define ourselves.
Amanda and I have similar stories — we were both around six-figures in debt in our early 30s, launched a variety of business startups that flopped, and made some mistakes with real estate. The difference for me was that I wasn’t married at the time and didn’t have kids. All things considered, that made my situation WAY easier even though it was an absolute nightmare.
She encourages us to consider, and then rewrite, our money stories. Some examples of old, not-so-helpful money stories are:
“I let others take care of my money.”
“Capitalism is evil.”
“Money is evil.”
And most gaggy, in my opinion: “Someday, my prince will come.”
To get some clarity on your money story, make two lists:
List 1: What I used to believe – and do – BEFORE
E.g. “I’m a spender” or “No man will ever take care of me, so I have to do whatever it takes to succeed, even if that means spending money I don’t have on my business to make it grow.” Yeah, that one rang true!
List 2: What I believe – and do – NOW
E.g. “I’m a saver.” “When money troubles hit, I can handle it.” And my personal favorite:
“Money is a force for good.”
Roots and Wings
One of the most helpful components of Worth It is Steinberg’s metaphor of roots and wings.
She stresses that the key factor in your financial wellbeing isn’t your budget or your income — it’s your net worth. This is what “your entire financial security depends on.”
Roots are foundational, principal assets and long-term investments. Things like retirement accounts, real estate, stocks, bonds, or a successful business you own. Roots grow slowly and don’t convert quickly to cash.
Wings, on the other hand, represent your income and access to cash. Your wingspan is measured by the amount and regularity of your income stream, your financial habits, and how you use credit. Wings can both protect and nurture your roots.
She cautions that many Americans believe that buying a home is an investment, but that’s only accurate if the value goes up and you own a majority of the mortgage.
If you bought a home in Michigan in the early 2000’s like I did, you found out in 2008 just how much of a liability (not an asset) it was when that part of the country was hit hardest by the housing crisis. My house was suddenly worth less than half of what it had originally sold for.
If this is new to you, here’s how to figure out your net worth:
Take your total assets (real estate, bank accounts, retirement accounts or investments) and subtract your liabilities (mortgage, credit cards or other loans).
Your assets minus your liabilities equal your net worth.
I use Mint.com to easily keep track of this — it connects to all of your accounts, investments, and loans, and calculates your net worth.
As Steinberg writes, “Net worth is the only real measure of financial security.”
I appreciated that she clarifies, “being rich doesn’t solve anything.” Even if you have a big income, you might not have liquidity or equity. I know many business owners who are so strapped for cash that one bad month could completely bankrupt them. They are pulling in six-figures per month, but they have zero in savings and a massive monthly overhead.
So when thinking about net worth, the first question is often, “How much do I need?”
Amanda suggests aiming for the amount of one year’s gross pay.
She makes a point to women who are often taking care of everyone else: “When you take care of yourself financially, you are taking care of everyone around you.” In other words, put the oxygen mask on yourself first.
Referencing Thomas Stanley’s book, Millionaire Women Next Door, Steinberg writes that millionaire women are much more generous than their male counterparts. I see this playing into the Dalai Lama’s assertion at the 2009 Vancouver Peace Summit that, “The world will be saved by the Western woman.”
While you might assume that your wings will fund your roots, Steinberg flips the script and says that roots need to come first. “If you don’t know what you are going for, ultimately, then you won’t be inspired to sharpen the focus on your day-to-day money habits.”
It’s a Numbers Game
Steinberg recommends putting your retirement savings on hold if you have a large balance on a credit card at over 5% interest. When I was crawling out of the financial hole I had dug for myself, I felt I was being responsible to invest in my IRA and buy stocks.
But the numbers didn’t add up. I still had debt with a much higher interest rate than what I was receiving in returns. I should have been putting that money toward paying off my debt first.
Another time she suggests putting the brakes on your investments is if your emergency fund drops below one month’s worth of savings.
That would have been helpful. I didn’t even have an emergency fund.
Steinberg and Dr. Jennifer Leigh Selig, a depth psychologist, put together a simple way to find out which roots might work best for you based on your resilience and your risk tolerance.
Take the simple quiz at www.moneytype.me. It’s free; you just need to opt in.
The five “MoneyTypes” are:
- the visionary
- the epicure
- the nurturer
- the independent
- the producer
You might be able to guess what type you are. Take the quiz and see. (Just to be clear, I have no affiliation with Amanda Steinberg or the MoneyTypes test.)
You’ll get a percentage of how much you align with each type so you can see where your strengths are. They also offer a bunch of great suggestions and advice, based on your type.
My highest score was The Visionary and it was pretty right on. Let me know if your score resonates with you in the comments below.
Here’s a troubling statistic: “One in three Americans have saved NOTHING for retirement.” Steinberg encourages you to learn about the funds that make up your 401K or IRA. If you don’t know, ask! Don’t allow yourself to slip into a money coma when people talk about investments.
I also found this interesting: “less than a third of those counting on an inheritance have actually received one.” I don’t know a lot of people like this – my friends are more in the “self-made” category – but if you’re just hoping that your check will come in from an inheritance, you probably need to start planning for some alternative income.
Steinberg clearly delineates the information you need to know, or need to ask about, regarding retirement accounts and other investments. She also offers examples of diversified portfolios for various ages which can be helpful benchmarks.
Here’s the order of saving she suggests:
- Emergency fund
Regarding real estate, she has a couple good pieces of advice: “Don’t buy a house until you have half of the home purchase price in liquid cash.” And, when planning renovations, don’t start until you have the “budget to handle twice what you project renovations will cost.” As she says, “homes eat money.” So true!
In terms of business, she reminds us that it’s usually at least two years of hard work “before you reach a magic sweet spot where opportunities start to pop.”
For me, it took about 6 years, so apparently, I was a bit slow on the uptake.
Here’s what I got wrong: Steinberg writes, “Money doesn’t flock to great ideas. It accumulates around a great execution… Just because you have a great idea doesn’t mean people are going to buy what you are selling… Running a business is 10% creating and 90% sales and marketing.”
Yep. I was trying to do it the other way around.
It’s always interesting when a story you hear so closely mirrors your own experience.
Steinberg talks about a brand developer named Kristen Domingue.
[Kristen] left her full-time job to become a health coach. Eager to make her dreams a reality, she quit her job in Boston, and moved to San Francisco, and started looking for clients. She thought that because she was so jazzed about coaching, and rent in San Francisco at that time was lower than rents in Boston, she had all she needed to succeed. What Kristen didn’t have was financial ground underneath her to cover her basic life expenses. She had no wiggle room. And she also had nothing to help her develop her business. It was a direct line to debt and difficulty.
That’s basically my story if you just fill in the blanks differently: I left my Fortune100 career to become a life coach. I moved from Michigan to Portland, OR, all jazzed up on this new career path, and assumed that since I had a severance and savings, I’d be good to go.
Not so much.
Lesson learned: Get a bridge job to cover your basic expenses and be able to invest in your business.
Later in the book, she adds a helpful section on credit cards and credit scores. A couple of her suggestions are, “Never charge more than you can pay off in four months” and “pay at least double your minimum payment every month.”
She simplifies the whole spending/saving thing by narrowing it down to “money in” (income) and “money out” which she splits between saving, spending, and sustaining.
I appreciated her tip to set up a separate “curveball fund” for unexpected events. She suggests to “keep a maximum of $500 in a curveball account, expecting to wipe it out every three months or so.”
My Take On It
As I mentioned, I expected to love this book. Like me, Amanda Steinberg is motivated by both social impact and financial success, and I’m always eager to engage with people like her.
I don’t necessarily agree with her call to “live as far below your means as you can.” For me, that has led to feeling like I can’t spend anything without feeling guilty.
What’s worked best for me is to find the right balance of saving, investing and spending so I actually enjoy the fruits of my labor.
Overall, she provided a lot of helpful resources, which would have been super valuable to me earlier in my career and money journey.
Toward the end of the book, she briefly mentions that she “reinvented the revenue model for DailyWorth,” her company that focuses on educating women about money and business. Now THAT is the kind of thing I wanted to know more about!
Apart from the resources, something about the writing (or possibly the recording – I read the paperback and listened to it at the same time on Audible), and, as I alluded to earlier, I didn’t love this book.
I rated it 3 out of 5 stars. ⭐️⭐️⭐️
However, I would recommend it to you if you’re a woman looking for a book on basic financial literacy, something to get you started. But if you’re already familiar with this, there are many other resources out there.
I do appreciate Steinberg’s call to action: “The biggest danger of all — the biggest risk to you by far — is doing nothing. Because inaction is risk. Never engaging, never getting in the game, never seeing what’s possible means risking our own financial well-being.”
Earlier this year, I read that Amanda Steinberg sold the company Daily Worth, so best wishes to her and good luck in whatever the next endeavor will be. ❤️