Smart Women Finish Rich: 9 Steps to Achieving Financial Security and Funding Your Dreams

Introduction

Introduction: Why Smart Women Are Taking Control of Their Financial Futures

I'll never forget the moment I asked my mom, "What really makes the world go round--money or love?" I was only about five at the time. She looked me straight in the eyes and said, "David, love is what makes life special . . . but without money you are in deep trouble!"

Actually, "deep trouble" are my words. What my mom really said can't be repeated. I had never heard my mom use an "adult" swear word before, so even at age five I knew then and there that not having money could be really painful. The obvious next question that came to my five-year-old mind was "Are we rich, Mom?" That question took a little longer for her to answer (I think she eventually made me go play with my toys), but the thought of money has stayed with me ever since. If not having money is so bad, why don't more people figure out how to get and keep it? It can't be that hard. Or can it?

More than 25 years later, I'm privileged to make my living teaching thousands of people--mostly women--how to invest and manage their money. And I'm happy to report that when you strip away all the baloney, learning how to handle your own finances turns out to be relatively easy. I've already helped thousands of women travel the same road to financial independence you are going to take in this book. They have learned--as you will--the three keys to smart money management that enable a woman to gain control over her own financial destiny . . . and, yes, finish rich:

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• How to use both your head and your heart in making financial decisions.
  
• How what I call "the latté factor" can transform even the most modest wage earner into a significant investor.
  
• How my "three-basket" approach to financial planning can assure you not only long-term security but the ability to realize your lifelong dreams.
  

As you will discover, my approach to personal money management involves some powerful and exciting techniques. Before we get started, however, it might be a good idea for me to address a question that often comes up at this point--namely...

Who Am I to Help You Finish Rich?

One way to answer this question is to tell you that I am a Senior Vice President and financial advisor for a major New York Stock Exchange-based firm, and work in Orinda, California, where I am a partner of The Bach Group, which manages over half a billion dollars of people's money. Most of my hundreds of clients are women who have come to me after attending one of my investment seminars or through referrals from other women.

But what you probably really want to know is why a man is so driven to teach and empower women to take control of their finances.

Well, the answer has mainly to do with my grandmother. Her name was Rose Bach, and she was unlike any other grandmother I ever met.

My Grandma, the Investor

The head buyer for wigs at Gimbel's (back when Gimbel's was one of America's leading department stores), Grandma Bach was a working woman at a time when most women weren't. Now, my grandparents were never wealthy; in fact, they never even owned their own home. Nonetheless, my grandmother decided at a very early age that she wanted to be an investor. Acting on her own, she took her earnings and put as much as she could afford into stocks and bonds. Over time, and without any advice from her husband, she built up a high-quality portfolio. When she passed away recently, at the age of 86, her investments were worth close to $1 million--this, from a woman whose first job paid only $10 a week!

There were many things my Grandma Bach taught me, but for our purposes, there's one lesson that deserves to be singled out:

You don't have to be rich to be an investor!

Of course, by becoming an investor, if you do it wisely like my Grandma Bach, you will almost certainly get rich!

It was Grandma Bach who helped me make my first stock purchase. I was seven years old, and my favorite restaurant in the world was McDonald's. So whenever I spent time with my grandmother, she would take me there for lunch. One day, at her prompting, instead of asking for catsup for my fries when I marched up to the counter, I looked at the woman on the other side and asked, "Is this company public?"

The counter lady looked back at me as if I were nuts, then called over the manager. Yes, he told me, McDonald's was a publicly traded company. After a little persuasion from Grandma Bach (and a lot of vacuuming and dishwashing), I saved my allowance for three months and managed to accumulate enough money to buy three shares of McDonald's Inc.

That was 23 years ago. Since then McDonald's stock has gone up in value and split so many times that those original three shares of mine have multiplied into close to 200 shares. If I'd had enough money to purchase 100 shares of the company back then (an investment of around $10,000 at the time), my McDonald's holdings would today be worth close to $500,000! (I often give my parents a hard time for not having loaned me the additional money.) And all I had done was go out to lunch with my grandmother when I was a little kid and put my allowance into a company whose hamburgers I liked.

Every Woman Can Be Wealthy

Because Grandma Bach was my biggest inspiration as a child, I grew up thinking every woman was like her--aware of the importance of investing and pretty darn good at it too. So it came as something of a shock to me, when I followed my father into the investment business, to discover that, if anything, the opposite was true. Most women never receive even a basic education in finance until it's too late--which is to say, after they get divorced or widowed and suddenly find themselves forced to deal with everything at the worst possible moment. The result, all too often, is financial devastation.

I wanted to help. I wanted every woman to have the information, the education, and the tools to take care of herself financially no matter what the circumstances. So I designed an investment seminar called "Smart Women Finish Rich!" in which I did two important things. One, I addressed the heart as well as the head, recognizing that financial planning is as much an emotional issue as it is an intellectual one. And two, I laid out a simple but effective pathway that any woman could follow to achieve financial security and freedom.

The response was immediate and incredible. First dozens, then hundreds of women signed up for my classes, and over the last few years I've conducted this seminar for thousands of women throughout the country. Why the huge response? In a word, necessity. As one student told me, "Growing up, no one taught me about money, not my father, not my mother, not my school--so I realized it was time to teach myself." Explained another student: "Nobody is going to take care of me. I have to take the responsibility myself." Added a third: "We'd be in deep trouble if we left everything up to our husbands. We need to know about our finances so we can be independent and take care of ourselves."

What I've learned from my seminars is that women want to be responsible for their financial futures. The problem is, most of them just don't know how to get started. Or if they've taken steps in certain areas, they've neglected others. I can't tell you how gratifying it's been for me to see the thousands of women who've been through my seminars taking control of their financial destiny, making better decisions about their financial future, and feeling great about their financial well-being as a result.

Welcome to the Club!

And now you are going to join their ranks.

Congratulations are in order, for you've just taken a very important step to achieving financial security and independence. The fact that you're reading this shows that you've decided to take control of your financial future. You may not believe it, but you've just completed the hardest part of the process.

Congratulations too because your timing couldn't have been better. The fact is, there's never been a better time in the entire history of the planet for women to be taking control of their financial futures. Working women currently earn more than $1 trillion a year and account for upwards of 52 percent of all earned household income in this country. There are currently nearly 8 million female-owned businesses in America, generating more than $2.3 trillion in annual revenues. What's more, according to the National Foundation for Women Business Owners, women are starting new companies at twice the rate of men. Women employ more people than the 500 largest industrial firms in America combined, and within the next few years they will own a majority of the nation's small businesses.

Something Men May Not Want to Hear...

Having worked as a financial planner and advisor with literally thousands of women over the past few years, there's something else I can tell you: As a rule, women make better investors than men. They generally devise a plan, and then they stick to it. In a word, they "commit." Men, on the other hand...well, we've all heard that dreaded phrase "fear of commitment," haven't we? Rather than stay with a great, solid investment, men often get bored and start looking around for the next "hot thing."

The statistics bear me out. In 1996 women's investment clubs outperformed their male counterparts by a wide margin, earning an average return of more than 21 percent, vs. just 15 percent for the men. Just a fluke, you say? Well, according to National Association of Investors Corporation, women's investment clubs have outperformed men's in 9 out of the last 12 years!

Do you find that surprising? Many of us do. That's because we've unthinkingly accepted the stereotype that money management is a man's "game". Why? It may have something to do with the fact that most of us grew up watching our fathers manage the family money. Certainly, many women have told me that was the reason it never dawned on them to take an active role in shaping their own financial futures. Whatever the cause, however, far too many women decide early on that when it comes to money, they'd prefer to stay on the sidelines. They say things like "Well, I'm not good with money," or "I'm not driven by money," or "I'm not materialistic," or "Money doesn't make you happy," or "Why bother--the more you make, the more the government will take," and on and on, trying to justify their fear of dealing with their financial situation.

A "Game" You Can't Sit Out

I think that is a mistake. As a woman today, you've got to stop watching and start participating. You've got to start calling the shots for yourself. This so-called money game (a misnomer if ever there was one) has very real, very serious consequences for all of us. People who say they've decided not to play the money game are only fooling themselves. After all, how we handle our money colors every aspect of our lives--the education of our children, the sort of home we provide our families, the type of contribution we make to our communities (not to mention all those mundane things like the kind of food we eat, the clothing we wear, and the vacations we take).

The fact is, none of us really has a choice: We are all playing the money game whether we want to or not. The only question is: Are we winning?

Most people, unfortunately, are not. Why? Because no one ever taught them the rules. Think about it. How could you possibly ever win a game--or even do well at it--if you didn't know the rules? You couldn't. Maybe every once in a while you'd luck out--but that's all it would be: luck. You couldn't depend on it; you certainly wouldn't want to risk your bank account, your retirement income, or your dream of a brand-new house on it.

So what we need in order to take control of our financial destiny is a copy of the rules. A road map.

More Good News for Women

That's what this book is: It's a financial road map that will show you how to get from where you are right now to where you want to be. The good news here is that women tend to be pretty good about using road maps. Men generally prefer to drive around aimlessly, hoping to spot a familiar landmark, rather than admit they're lost and ask someone for directions. You know what I'm talking about. The conversation probably went something like this.

YOU: Honey, I think we're lost. Maybe we should stop in a gas station or something . . .

HIM: No, we're fine. I know exactly where we are.

YOU: But . . .

HIM: I said we're fine. It's just a ways up here--I'm sure of it.

Of course, what each of you was thinking at the time was something else again.

YOU: He doesn't have a clue where we are. If he'd just pull over and get some directions, we could figure this out and get there!

HIM: I can't believe we're lost! I thought I knew the way. Jeez, where are we? I probably should stop and ask for directions, but if I do that, she'll know I don't know where we are, and so will some stranger. How much of a loser would that make me!

The same thing tends to happen with our money. As a rule, men feel they are supposed to know what they're doing when it comes to personal finance, so even when they don't, they often pretend that they do and resist asking for help.

Women, on the other hand, have relatively few hangups about admitting it when they don't know something. That's why they can make better investors than men. Women are comfortable not only learning and studying but also asking questions--and by asking questions, of course, they learn more.

It's Time For You to Take Charge

The basic premise of this book is simple. I believe in my heart and soul that no matter what your age, status, or situation--whether you're in your 20s or your 80s; whether you're single, married, divorced, or widowed; whether you're a career woman or a homemaker--you as a woman are more than capable of taking charge of your finances and your financial future. All that's required is that you be given the right tools--which is where this book comes in.