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Smart Mom Rich Mom
How to Build Wealth While Raising a Family
By KIMBERLY PALMER
AMACOMCopyright © 2016 Kimberly Palmer
All rights reserved.
SAVE (AND SPEND) LIKE A MOTHER
I have a friend on Facebook who routinely posts photos of her hauls at the grocery store, along with how shockingly little all those bags of chips and paper towels cost. While impressive — she usually brings home a full trunk load of items for less than $50 — I can't help but wonder if her effort is worth those savings. She spends hours clipping paper coupons (a habit she also shares with her Facebook friends) and then ends up with enough frozen pork chops to survive the apocalypse (as long as her freezer keeps running). Would her time be better spent on a more strategic financial task, like filing flex-spending receipts for health care costs or rebalancing her retirement investments? Will her family even eat all those pork chops before they go bad? Will they want to?
Our culture celebrates penny-pinching moms on television shows like TLC's Extreme Couponing. The Great Recession made frugality cool again, and that's a good thing — there's no reason to spend more than we need to on running our households. As the editor of the popular U.S. News blog "The Frugal Shopper," I enjoyed spreading the word about how to snag the best deals and cut expenses. I take great pleasure myself in typing in a coupon code when shopping online that automatically takes $20 or more off my bill.
But there's a dark side of penny-pinching, too, especially when it falls to moms to track coupons and hunt down discounts. It keeps us focused on small, short-term savings instead of working on the far more significant financial strategies that can really build our family's wealth over time. We get a rush from saving $5 at checkout while leaving $500 on the table because we didn't sign up for a flex-spending account at work to pay for child care expenses or we left our long-term savings in an account with zero return.
I was struck by this paradox while watching an episode of The Real Housewives of Beverly Hills, where one of the stars, Brandi Glanville, tells the camera that she wants to make a lot of money to create stability for her children and ensure she never depends on a man for money again. (Her ex-husband, the actor Eddie Cibrian, cheated on her and then married LeAnn Rimes, a frequent plot point on the show.) I wanted to give her a high-five for her financial ambition.
But then, later in the episode, when she cashes in a six-figure check from her bestselling book, she uses it to splurge on a six-figure custom car, instead of investing her windfall for her (and her children's) future. This is the same woman who tweets about her own successful couponing binges; according to her Twitter feed, she saved more than $70 with coupons on one trip to the grocery store. Impressive, like my Facebook friends, but she would do better to buy a much cheaper car and not worry so much about the dollars and cents saved on food.
That's why we have to break out of this restrictive couponing mind-set and think bigger — much bigger. Think about how to be a skilled shopper every day and not just a discount chaser on the weekends. Think about negotiating ongoing bills and monthly expenses, instead of getting distracted by onetime purchases that aren't that expensive anyway. We should think about investing the savings that we do generate in a way that grows that money instead of spending it on some other forgettable purchase that will soon turn into house clutter.
Moms, it turns out, have a hugely important role to play when it comes to family spending, mostly because we're doing so much of it. We make the vast majority of consumer purchases ourselves, and those choices are much bigger than just which laundry detergent to put in the cart. A 2014 Wells Fargo survey found that among women with at least $250,000 in assets, 82 percent are in charge of their family's day-to-day finances, including budgeting and spending decisions. That's a lot of pressure on our shoulders. Luckily, we can handle it, and certain strategies can help ease the burden of constantly searching out the best deal while also handling the more long-term aspects of our family finances, too.
Approaching our spending with an attitude of frugal luxury, whether it's a weeknight dinner or annual vacation, means finding the best that we can afford for our family while getting the lowest price for it. In the movie The Hundred-Foot Journey, starring Helen Mirren as a grumpy French restaurant owner in hot pursuit of a second Michelin star, Mirren's character accuses an older gentleman of being cheap, and therefore poor, because he negotiated the rate on his hotel room. He replies that asking for a discount just means that he is thrifty, not poor. That's a truth moms know, too. And they feel comfortable asking for those discounts when it matters, because they know they (and their families) deserve them, along with the wealth that those discounts generate over time.
Every year around the winter holidays, I call Kit Yarrow, a consumer psychologist and an expert on shopping, to get her advice on how to handle the annual shopping frenzy and still come out ahead. As a smart shopper herself, she always teaches me something new about getting the most out of retailers, and as a mother herself (her two children are now grown), she developed her own routines and strategies that work for family life.
One of the first things she taught me is that you have to step away from all the enticements that retailers send in your direction. It sounds counterintuitive, since it feels like walking into that half-off sale will reap big discounts, or that getting daily emails about sales will direct you toward savings, but all that noise actually makes you spend more, because you feel pressure to buy things that you really don't need. Anytime you see a "half-off" sign or a "one-day only" sale, Yarrow suggests walking away, unless the item was already on your shopping list.
Those kind of sales, Yarrow says, "churn up emotions like competitiveness, the fear of missing out, or a sense of urgency. Those emotions cloud thinking and you want to be sharp when you're spending money." Since so much of this temptation comes in the form of emails today, consider unsubscribing from all those retailer emails guaranteed to make sure you never miss a sale. Missing sales can actually be a good thing for your bank account.
That's also why scrolling through shopping apps on your smartphone is not the best relaxation activity after you get the kids to bed. "People use trolling for bargains as a hobby. It's what knitting would have been forty years ago — a mindless activity to allow your mind to relax," Yarrow says, noting that people often shop on their phones or online during lunch hours at work or in the evenings. As she knows from her own behavior as well as her research, "the more bargain-focused you are, the more money you spend." Bargains, she says, give us a false sense of control over our chaotic lives.
To regain control without spending, the first line of defense is to maintain an ongoing shopping list of all the items you actually need to buy. That way, if you know you need a new coffeemaker, you can be on the lookout for deals on the kind of coffeemaker you want and anticipate the upcoming expense. You can take your time, comparing the pros and cons of different models, and end up with the best quality product for your money. (If you have a partner, you both can be involved in the process, and then neither person will be surprised by the bill when it comes.)
Another smart strategy is to go to the discounts, instead of letting them come to you. Rather than being the passive recipient of retailers' emails and smartphone push notifications that let you know about daily deals, you can seek out the best price when you are ready to purchase one of the items off your list. Popular coupon tools and price comparison apps like RetailMeNot, PriceGrabber, RedLaser, and Brad's Deals make it easy to search for discount codes and other deals once you are ready to buy, as opposed to directing you to buy when you might not be ready. For online shopping, browser add-ons like PriceBlink or InvisibleHand let you know if another site has a lower price for an item you are about to buy. The difference is that you are the one in control of the timing and not adapting your schedule to the retailers' calendars. That's why I also like to use Unroll.Me, an email unsubscribe tool that automatically pulls all mass emails, including ads from retailers, into a single "rollup" email each day, to prevent you from getting constantly pinged all day long. (When I first signed up, I was shocked to see that I had unknowingly subscribed to over 150 mass email lists!)
Deciding what belongs on that list can be tricky. Do you really need a new handbag, or is your current one, despite its worn appearance, still doing the job? Do your children need new clothes or would hand-me-downs work as well? What messages do our choices tell our children about value and worth? In one of my favorite country songs, "American Middle Class," Angaleena Presley sings about remembering her mom gluing Keds logos on the back of her white shoes so they looked like real Keds. Now, decades later and a mom herself, she feels almost nostalgic about those days and proud of her mom's creativity, which didn't stop with shoes. "She would cut the Guess patch off a pair of jeans and sew it onto a pair that she got from a yard sale," she recalls.
While the singer is no longer pressed for cash — in addition to her solo career, she is part of the successful trio Pistol Annies with superstar Miranda Lambert — she still copies her mom's strategy in her own home. "What my mom taught me, and what I still do, is, if you don't have it, you can make it," Angaleena says. In fact, she told her husband that for Christmas one year, instead of gifts, she wanted to fix up the old items around their house.
UP FOR GRABS
An equally important shopping technique comes into play after you have purchased a product or service that doesn't live up to your standards in some way. It's one that a lot of moms struggle with, because it can require awkward and potentially time-consuming conversations. But it saves me a couple thousand dollars each year, mostly related to health insurance, flex spending, and retail purchases, like defective clothing. The fact is big companies, from insurers to clothing stores, make mistakes, and most of them probably go uncontested. It's only the customers who speak up who get their money back.
One of my favorite ongoing expenses is Stitch Fix, an online personal shopping service that sends you a custom box of clothes each month, tailored to your own preferences and size. Since I don't have time to shop on the weekends and the service offers high quality at a reasonable price, it's what keeps me feeling presentable at the office. One month, though, two buttons fell off the tops that I bought through the service. At first, I just let it go and planned to try to sew the buttons on myself later. But the more I thought about it, the more I realized that I should let the company know. After all, I'm a loyal customer, and they should know the buttons are falling off their tops after minimal wear. So I sent a note and got a $16 refund. Quick emails to retailers like this almost always result in some kind of refund or future discount. I sent a similar email to Tide detergent after the company unexpectedly changed the scent on me. Tide quickly sent me a $20 coupon for a new jug of detergent. These amounts are too small to spend too much time on them, but worth a quick email or two.
Similarly, I never complete an online purchase without first doing a quick web search for the retailer's name and the words "coupon" or "promo code." At least half the time, this search leads me to a code that gets me $5 off or more. That's money I would have otherwise paid without even realizing I could have kept it, and it takes less than a minute.
My most significant savings usually come from health insurance claims that are improperly processed. Recently, my insurer rejected the expenses of a routine physical because it falsely thought I had already had a physical that year. It took multiple phone calls, but I eventually got the charges dropped. Following up with customer service is a pain, but the savings can be worth the effort. Reviewing your credit card statement, as well as any statements from insurers, for potential errors can help alert you to problems. When you call or email to follow up, be sure to take notes; be persistent; and, if necessary, complain about the problem publicly on social media, like Twitter or Facebook, taking care to "tag" the company to maximize the public impact. I don't like publicly shaming companies in front of their customers, but if they're not fixing an error, following up in a public forum can be the only way to get them motivated to help you out. (Just be mindful to avoid libelous statements that could leave you vulnerable to a lawsuit.) This social media approach has helped me get refunds on my Comcast cable bill and a quicker update from my electric company on when my power was coming back on after a storm. For extra help alerting you to potential fraud or errors on your credit card, you can also download BillGuard, an app that relies on crowdsourcing among its one million–plus members to flag potential problems and resolve disputes between customers and companies.
As a last resort, if the company is failing to resolve the dispute with you, even after public shaming on social media, then I recommend filing an official complaint with the federal government (the Consumer Financial Protection Bureau has an online complaint tracking system for troubles related to the financial services industry) or through the Better Business Bureau, an industry group. After exhausting all other available resources when trying to get a new and corrected birth certificate for my newborn son (issued through the private company that contracts with the District of Columbia government), I filed a complaint with the Better Business Bureau. The problem, which had gone on for months and taken multiple phone calls and letters in my sleep-deprived state, was resolved almost immediately. (By the way, the same strategy applies to getting paid, if you take on any kind of freelance or contract work that doesn't come with a steady direct deposit. You often have to track down payments with the same focused determination that you have to put toward getting your money from retailers. The payoff is worth it, though, because it literally puts money in your bank account.)
For the most part, this strategy comes down to speaking up at the right moment and not wasting any time or energy feeling self-conscious about it. I once watched a thirtysomething guy in a business suit negotiate the price of his cappuccino with the barista at my favorite coffee shop. He had brought in his own mug, which he thought entitled him to a discount. He didn't get the discount, but no one minded that he asked. We ladies need more of that sense of entitlement in our own lives, the kind that leads us to ask for a better deal on everything, from coffee to cars. Otherwise, we're leaving money that belongs to our families on the table.
Several years ago, I met a young woman — let's call her Emily — who was a recovering shopaholic. She confided this information casually, while we were at a work-sponsored baseball game, as if she were sharing that she preferred hot chocolate to lattes. As we talked more, though, it soon became clear that this experience still weighed heavily on her daily life and had even threatened to undo her closest relationships.
Her shopping addiction, she explained, stemmed from a lack of self-worth and really took root during a bad relationship. Buying a new outfit gave her a temporary confidence boost and made her feel more beautiful, she explained. But even after leaving that relationship and marrying a supportive husband, her shopping addiction stuck with her. She found herself sneaking shopping bags into her closet, so her husband wouldn't see all that she had spent, and racking up massive credit card bills that she couldn't afford. Eventually, with her husband's help after she came clean to him, she stopped relying on shopping as a way to feel good and adopted a healthier relationship with money.
Excerpted from Smart Mom Rich Mom by KIMBERLY PALMER. Copyright © 2016 Kimberly Palmer. Excerpted by permission of AMACOM.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
Introduction: Into Motherhood 1
1 Save (and Spend) Like a Mother 11
2 Owning It 31
3 Timing is Everything 51
4 Like a Boss 63
5 Investing Mamas 87
6 Playing Defense 109
7 Stuck in the Middle 131
8 Model Moms 145
9 Back to You 169
10 Returning to the Nest 189
Epilogue: More than Money 199
The Smart Mom, Rich Mom Handbook 205
About the Author 246