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

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

by David Bach


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With hundreds of thousands copies in print around the world, Smart Women Finish Rich, by renowned financial advisor David Bach, has shown women of all ages and backgrounds how to take control of their financial future and finish rich. Whether you’re working with a few dollars a week or a significant inheritance, Bach’s nine-step program gives you tools for spending wisely, establishing security, and aligning money with your values. Plus, in this completely revised and updated edition, David Bach includes critical new long-term investment advice, information on teaching your kids about money, Internet resources, and new ways to attract greater wealth–personal and financial–into your life.

Product Details

ISBN-13: 9780767910293
Publisher: The Crown Publishing Group
Publication date: 01/08/2002
Edition description: Revised
Pages: 352
Product dimensions: 5.10(w) x 7.90(h) x 0.80(d)

About the Author

A senior vice president of a major New York brokerage firm, David Bach is a partner of The Bach Group, which manages over a half-billion dollars of individual investors’ money. The national bestselling author of Smart Couples Finish Rich, Bach is the host of his own PBS television special, “Smart Women Finish Rich.” His investment principles are taught nationally through his Smart Women Finish Rich and Smart Couples Finish Rich seminars, which are hosted by 5,000 financial advisors in 1,500 cities with more than 100,000 attendees annually. He lives in San Francisco, California, with his wife, Michelle. Visit his website at

Read an Excerpt



Wendy sat in my office, perched on the edge of her chair, alert, inquisitive, and a little bit embarrassed. An experienced and highly successful real estate agent, she had come to me for a financial consultation--and the facts of her situation were hardly reassuring. Although she earned well over $250,000 a year and was able to put two kids through private school at an annual cost of $15,000 each, her personal finances were a mess. A self-employed single parent, she had less than $25,000 saved for retirement, no life or disability insurance, and never bothered to write a will.

In short, this intelligent, ambitious businesswoman was completely unprotected from the unexpected and utterly unprepared for the future. When I asked Wendy why she had never done any financial planning, she shrugged and offered a response I'd heard countless times before: "I've always been too busy working to focus on what to do with the money I make."

Looking across the restaurant table, I could see the sadness in my mother's eyes. A good friend of hers had just gone through a bitter divorce. Suddenly, after more than three decades of marriage to a wealthy surgeon, the friend now found herself living in a tiny apartment, struggling to make ends meet as a $25,000-a-year secretary. Like many formerly well-off women, she had never paid much attention to her family's finances, and as a result her estranged husband was able to run rings around her in the settlement talks. It was a terrible thing--all the more so because it could have been prevented so easily--and it made me wonder if my mother was similarly in the dark. So I asked her. "Mom," I said, "do you know where the family money is?"

I thought it would be an easy question. After all, my father was a successful financial consultant and stockbroker who taught investment classes three nights a week. My mother had to be up to speed on the family finances.

At first, however, she didn't reply. Then she squirmed slightly in her chair. "Of course I know where our money is," she finally said. "Your father manages it."

"But where is it? Do you know where he's got it invested?"

"Well, no, I don't. Your father handles all that."

"But don't you have your own accounts, your own line of credit?"

My mother laughed. "David," she said, "what do I need a line of credit for? I have the best bank in the world--your father."

The reason I've started our journey with these two stories is that I know you are a very special woman--the kind of woman who believes in herself. Specifically, you believe that you possess the abilities and the intelligence to have the kind of life you feel you deserve. (If you didn't, you would have never picked up this book in the first place.) You also believe--correctly--that money is important and that you need to learn more about accumulating and protecting it. Finally, I know that you are someone who recognizes that it takes more than a single burst of enthusiasm to improve yourself and develop new skills; it also takes commitment and education.

That is why the first step of our journey is all about getting motivated to educate yourself now and on an ongoing basis about your money and the role it plays in your life. I believe that no matter what your current situation is--whether you are already wealthy or living paycheck to paycheck--a little education combined with motivated action can go a long, long way.

I also know from working with thousands of women that, sadly, neither Wendy the real estate agent nor my mother are at all unusual. Yes, women have long owned nearly half of the financial assets in this country. Yes, most women work and nearly half of them are their family's main income earner. Yes, the statistics about divorce and widowhood are appalling. Yet, despite all this, the sad fact is that shockingly few women know even a fraction of what they should about the state of their own personal and family finances.

By the same token, very few people know all of the fundamental principles about money that you are about to learn. And most important, even when they think they do, they rarely follow the principles on a consistent basis. This last point is a key one, for as you will discover in the course of our journey, it is not what we learn that makes a difference in our lives but what we do with what we learn.


What we're going to do in this chapter is familiarize you with what I call the financial facts of life. By the time you have taken in all the facts, you will understand fully why it's essential that you take charge of your own financial future. Moreover, you will be totally motivated to get started learning how to do it.

The first fact of financial life to understand is that while planning ahead is important for everyone, it's more important for women. Indeed, though in many ways we live in an age of equality, there is no question that . . .

Fair or not, women need to do more financial planning than men.

As I said in the introduction, compared to previous eras, this is a great time for you to be a woman. In terms of opportunities and resources, you couldn't have picked a better time to begin a journey to a secure a financial future. And it's more than just a matter of economics. Because of advances in both technology and public attitudes, women are not only living longer than ever before, they are active longer. In my seminars, I often joke that today's 80-year-old women are drinking "green juice" and doing aerobics every morning. I know my Grandma Bach was like that. Up to the age of 86, she hiked five miles a day and went dancing three nights a week! In her mid-80s, my grandmother enjoyed a life that was more active, socially and physically, than mine was at 30!

But if the good news is that we live in an age in which the barriers that held women back for so long seem finally to be falling, the bad news is that there are still many obstacles to be overcome. For one thing . . .

Women still typically earn 25 percent less than men.

For another, women are less likely to have a steady income stream over the course of their lifetimes. In some cases, that's due to discrimination, but it's also due to the fact that responsibilities such as child rearing and caring for elderly parents cause women to move in and out of the workforce a lot more than men do. In all, over their working lifetimes, women spend a total of 11 1/2 years off the job on average, versus only 16 months for men.

What's more, according to a recent study by the U.S. Department of Labor . . .

Women are the ones hurt most by corporate downsizing.

That's because it takes women longer to find new work, and the replacement jobs women get are often part-time posts that offer less pay and fewer benefits.

As a result of all this, your accumulated pension benefits probably are going to be lower than those of your male counterparts--that is, if you have a pension at all. While half of all men get one . . .

Only about one woman in five over the age of 65 receives a pension.

But it's not simply that as a woman you'll have fewer benefits to look forward to. It's also that, as a woman, you'll have to make them go further. Specifically, you probably are going to live longer than most of your male counterparts (by an average of about seven years, according to the National Center for Health), which means that you are going to need even more retirement resources than they will. And not just for yourself. Because of your longer life expectancy, chances are that the financial burden of caring for elderly parents will fall on your shoulders.

What All This Adds Up to Is One Big Ouch!

This, in a nutshell, is why long-term financial planning is more important for women. Compared to men, you've got to be more farsighted, start saving earlier, and stick to your plans with more discipline. Fortunately, doing all this is not only possible, it's actually relatively easy. The trick is simply recognizing that it needs to be done--which leads us to the other basic fact of financial life: Ignorance is not bliss. Quite the contrary . . .

It's what you don't know that can hurt you!

A wise woman once said, "It's not what you know that can hurt you but rather what you don't know." I'd like to extend that thought a bit and suggest that what generally causes the most suffering and pain is what you don't know that you don't know.

Think about that for a minute. In our everyday lives, there are really only a few categories of knowledge.

* What you know you know (e.g., how much money you earn each month)

* What you know you don't know (e.g., what the stock market will do next year)

* What you know you should know (e.g., how much it will take for you to be able to retire comfortably)

* What you don't know you don't know (e.g., that in 2001 the government made over 400 amendments to the tax code, many of which could directly affect how much you will be able to afford to spend on child care, college tuitions, medical expenses, and your own retirement)

It's this last category, by the way, that causes the most problems in our lives. Think about it. When you find yourself in a real jam, doesn't it always seem to be the result of something you didn't know that you didn't know? (Consider the "prime" Florida real estate you bought that actually was in the middle of an alligator swamp.) That's the way life is--especially when it comes to money. Indeed, the reason most people fail financially--and, as a result, never have the kind of life they want--is almost always because of stuff they didn't know that they didn't know.

This concept is incredibly simple, but it's also tremendously powerful. Among other things, it means that if we can reduce what you don't know that you don't know about money, your chances of becoming financially successful--and, most important, staying financially successful--can be significantly increased. (It also means that the more you realize you don't know as you read this book, the happier you should be, because it shows you are already proactively learning!)

So how do we apply this concept? Well, I think the best way to reduce what you don't know that you don't know about money is to learn what you need to unlearn. That is, you need to discover what you may have come to believe about money that isn't really true. Or, as I like to put it . . .

Don't fall for the most common myths about money.

Whenever I conduct one of my Smart Women Finish Rich seminars, I generally begin the class by suggesting that the reason most people--not just women--fail financially is that they have fallen for a bunch of money myths that are simply not true. As we're learning the facts, I think it's important to spend a little time exploring these myths and learning to recognize them for what they are. The reason is simple: By doing this, you lessen the chances that you'll ever be taken in by them.


The most commonly held myth about personal finances is that the most important factor in determining whether you will ever be rich is how much money you make. To put it another way, ask most women what it takes to be well off, and they will invariably say, "More money."

It seems logical, right? Make more money and you'll be rich. Now, you may be thinking, "What's wrong with that? How can it be a myth?"

Well, to me, the phrase "Make more money and you'll be rich" brings to mind certain late-night TV infomercials, with their enthusiastic pitchmen and slick get-rich-quick schemes. My current favorite is the one in which a guy wearing a gold necklace smiles into the camera and says you can earn a fortune while lying on the sofa watching television. Without getting into the question of whether his particular scheme makes any business sense, let me suggest to you that the basic premise of his pitch--namely, that the key to wealth is finding some quick and easy way to boost your income--is simply not true. In fact, what determines your wealth is not how much you make but how much you keep of what you make.

I'll take that even further. I believe that most Americans who think they have an income problem actually don't. You may not believe that. It's possible you feel you have an income problem yourself. Perhaps you're thinking right now, David, I'm sorry. I don't care what you say--with my bills and expenses, I'm telling you I have an income problem.

Well, I'm not saying that you might not be facing some financial challenges. But I would be willing to bet that if we were to take a good look at your situation, we'd find that the problem really isn't the size of your income. Indeed, if you're at all typical, over the course of your working life you will likely earn a phenomenal amount of money. If you find that hard to believe, take a look at the Earnings Outlook chart (see p. 22).

The numbers don't lie. Over the course of their lifetimes, most Americans will earn between $1 million and $3 million!

Based on your monthly income, how much money does it look like you will earn in your lifetime? It's well into seven figures, isn't it? Don't you think you deserve to keep some of that money? I do--and I bet you do too! Unfortunately, most of us don't keep any. In fact, the average American works a total of some 90,000 hours in his or her life--and has nothing to show for it at the end! The typical 50-year-old in this country has less than $10,000 in savings!

How do we explain that? It's simple, really.

The problem is not our income, it's what we spend!

We'll go into detail on this concept in Step Four. For now, just trust me on this one. It's not the size of your income that will determine your financial well-being over the next 20 or 30 years, it's how you handle the money you earn.

Table of Contents

Introduction: Why Smart Women are Taking Control of Their Financial Futures1
Step 1Learn The Facts And Myths About Your Money15
Step 2Put Your Money Where Your Values are38
Step 3Figure Out Where You Stand Financially And Where You Want to Go56
Step 4Use The Power of The Latte Factor. How to Create Massive Wealth on Just A Few Dollars a Week!85
Step 5Practice Grandma's Three-Basket Approach to Financial Security103
Step 6Learn The Nine Biggest Mistakes Investors Make and How To Avoid Them194
Step 7Follow The 12 Commandments Of Attracting Greater Wealth213
Appendix 1Where Does Your Money Really Go?226
Appendix 2Financial Inventory Worksheet230
Suggested Programs and Readings236

What People are Saying About This

Harry S. Dent

Finally, a financial planning guide that addresses the unique issues that women face today. But what I like the most is that David starts with the most important principle: aligning your money with your values.
(Harry S. Dent, Jr., bestselling author of The Roaring 2000s)

John Gray

Inspires women to start planning today for a secure financial future. Every woman can benefit from this book . . . Bach is an excellent money coach.

Barbara DeAngelis

Finally, a book for women that talks about money in a way that makes sense. David Bach is not just an expert in managing money--he's the ultimate motivational coach for women. I can't recommend this book enough. It's a must-read.
— (Barbara DeAngelis, Ph.D., bestselling author of Real Moments)

Anthony Robbins

David Bach is the one expert to listen to when you're intimidated by your finances. His easy-to-understand program will show you how to afford your dreams.
— (Anthony Robbins, author of Awaken the Giant Within)

Laurie Beth Jones

David Bach is a financial genius with a passion for helping women get rich. Read this book—and prosper.
— (Laurie Beth Jones, bestselling author of Jesus CEO)


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:

  • 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.

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