#1709: Women in Business, Part One | 51%

On this week’s 51%, we kick off our series on women in business. Financial advisors Kathleen Godfrey and Gretchen Meyer offer up some Investing 101, and Judy Herbst of Savvy Ladies stresses the importance of building financial independence.

Guests: Gretchen Meyer, president of Gretchen Meyer Financial; Kathleen Godfrey, president of Godfrey Financial Associates; Judy Herbst, executive director of Savvy Ladies

51% is a national production of WAMC Northeast Public Radio. It's produced by Jesse King. Our executive director is Dr. Alan Chartock, and our theme is "Lolita" by the Albany-based artist Girl Blue.

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You’re listening to 51%, a WAMC production dedicated to women’s issues and experiences. Thanks for tuning in, I’m Jesse King. 

Today we’re launching our Women in Business series. Over the next few weeks, we’ll be hearing from a host of women financial experts, entrepreneurs, and volunteers. To kick things off, we’re talking financial literacy and investing. As a somewhat-recent college grad myself, this is an area that I have been particularly intrigued, confused, and intimidated by over the past few years - and I figure I can’t be the only one. I feel it’s important to note that, for many people living paycheck to paycheck, getting to set aside fund for the future is a privilege in and of itself - but the tools we’ll discuss today are helpful for everyone. 

Our first guest today is Gretchen Meyer, owner and president of Gretchen Meyer Financial in Latham, New York. Meyer says she never initially thought she’d go into financial planning, particularly because her first experiences with money were stressful and unstable. As a kid, money became scarce when her parents took a risk and quit their jobs to open a small business, which, ultimately, proved unsuccessful. Meyer credits a theater scholarship with allowing her to attend Boston University, and it was there that she ultimately met her first husband. 

“To me, he represented more, like, financial security. He was in law school, he came from an affluent family, and I thought maybe [he was] somebody who could protect me. And so we got married when I was 22, and, unfortunately, the marriage didn't work out. And I found myself in my mid 20s, suddenly single, with a boatload of debt. And I had to crawl my way out of a situation that I found myself in, and kind of learned the hard way that financial empowerment, financial independence is all within – and you can't rely on anybody else to protect you,” says Meyer. “There's a book that I like called Prince Charming Isn’t Coming, and it’s all about how you can't expect anybody else to ever take care of you. You really need to take care of yourself. Using my story, frankly, of what not to do, I thought I can really empower women to become financially independent themselves. So I started my business here with one client, and then she told her friends, and they told their friends, and now we have collectively, maybe 1,300 / 1,400 clients all over the United States. And we help women of all ages and income levels achieve their financial goals.”

Just to start and cover some of the basics, what types of investments are there? And how do you decide which path is the best for you?

Different investments involve things like stocks. So a stock is like an equity. When you own home, you own equity, right? And you take the good with the bad. So if your roof is shot, you're gonna have to buy a new roof. And so you're building equity, yes, but also there are some downturns in having a home, right? Same with an equity. Yesterday, Netflix was down about 40%. When you own an equity, sometimes you make money, and sometimes you could also lose money. But a bond is a debt, a bond is an IOU. Governments will issue bonds, and so you have more stability, generally speaking, with bonds, because when you put your money in a bond, you're going to expect to get it all back, plus a little bit in terms of interest. So you have stocks, you have bonds, there's other things like ETFs, which are called exchange traded funds. You have mutual funds – those are mixtures of all sorts of stocks and bonds put together in a pot. You’ve got annuities, you have structured products, you have CDs. And you're absolutely right. How does anybody ever determine which is the right program for them? And not only that, which stocks to pick, and which bonds to pick? And what percentage of your overall portfolio should be in any one of those given things? So that is absolutely the mystery, and thankfully, that keeps me employed.

It really all stems with a client's goals and what they are specifically looking to do. So we always start with “Are you looking to save for retirement? Are you looking to buy a house? Are you looking to fund your child's education?” You know, what exactly are you looking to do? And then secondly, how long do you have to go before you're going to reach that goal? If you have 20 years, 30 years, 40 years until retirement, you may decide that maybe your portfolio can take on a little bit more risk then if you have a year before you're going to buy a house. So once goals are determined, then you can start to pinpoint which types of investments would be a good fit for your specific goal and time horizon. Somebody's portfolio may look completely different when they're young and getting started, where they don't really have anything to lose, versus somebody who's, you know, been saving for their entire life in their retirement, and they maybe have $1 million or $2 million in their retirement. They may want to protect their wealth. So their goal and their circumstances may inform, more or less, what they're investing in.

One thing we always hear about is how it's important to diversify your investments. Can you elaborate on that for me on why that is?

Not even the best of us have a crystal ball and can identify exactly what's going to happen when. So you have not all of your eggs in one basket, right? We have different things going on. They can ying and yang one another at the same time. So there's different kinds of diversification too. So a mutual fund might enable you to have anywhere from 30 stocks to 1,000 different stocks in one fund. So even if you have one fund, you may have lots of different things going on within that one fund. Besides that, you may have diversification in the type of investment that you're in. In other words, are you investing in large companies? Are you investing in international companies? Are you investing in commodities? Are you investing in bonds? So you may have not only different stocks, but also different asset classes, as we call them. And those asset classes are going to give you different perspectives. I'll give an example: in 2017, international companies developed markets, and emerging markets were at the top, and they were doing really, really well. And cash investments were at the bottom. But then in 2018, it completely flip-flopped, and all of a sudden, international holdings were not doing as well, and cash jumped to the top. So had we had all of our funds in that one international bucket, we could easily lose all of it.

I think the thing to keep in mind is a diversified portfolio can assist in mitigating volatility. But remember that it's not necessarily going to outperform a non-diversified portfolio. With a nice diversified portfolio, you kind of have guard rails, and you can have your investments sort of be less volatile, with a very decent return over time.

So if someone wants to start investing or just make a new investment, where do they go for that? Like, would I go to someone like you, or my bank, or maybe like an app like Robinhood? What are those first steps?

That's such a great question, and thankfully, there are so many resources. Yes, financial advisors, we will sit down with folks and help our clients understand what they are trying to do. I think half the battle with financial planning is really all about articulating your specific goals, because the financial plan can't be formulated until you actually know what you want. And then we have to figure out how much you can afford to save and put away. So usually, there's a budget involved in that articulation. Following that, once you sort of know what you want, and you know how you can afford to save in that regard – or some folks have credit card debt or student loan debt, you know, and it's not all about savings, it might just be part of your financial plan – then in order to set up an account, you can get together like a Roth IRA or a child's 529 account. You can go absolutely go to a financial advisor to do that. There are financial advisors at banks. My operation is in the independent financial planning channels, so we're not affiliated with a large establishment. You may go to other organizations, like Merrill Lynch, Northwestern Mutual, you know, some other very large organizations that you can tap into. Some organizations have minimums, so they don't necessarily always allow everybody to meet with them, to meet with a financial advisor. You have online resources available to you like Schwab. And yes, Robinhood is as a brand new one that people can tap into. So there's so many resources out there, more so than ever before. And it really depends on the level at which you feel like you would like to be supported, I think. Certain entities will provide very little support, and therefore the cost will be very low. Other entities might be much more supportive, but again, the cost might be a little bit more expensive.

OK, so you mentioned how important it is to know where you want to go. Once you've established what your goals are, how does one go about making a proper budget to achieve those goals?

I think it's important to break down a budget into your fixed expenses versus your variable expenses. And by fixed, I mean these are the things that don't change over time: your mortgage or your rent, your car, your insurances, your cell phone. But sneaky little things can get in there sometimes, like subscriptions that you might have forgotten about, or maybe you haven't checked in on lowering your cable bill for a long time, and it keeps creeping up, right, it keeps getting more and more expensive. Car insurances tend to get more expensive, cell phones tend to add little bits. So starting a budget with your fixed expenses, and identifying maybe opportunities to easily weed things out that you're not either using in terms of a subscription, or contacting your vendor to see if there are better deals out for you, make a lot of sense. From there, your variable expenses are really kind of where the opportunities lie. And by variable I mean, those are like your gas, and your groceries, and your wine. That's where you can really kind of track your expenses over time and get a sense for patterns in terms of what you spend your money on. And when are you spending your money, maybe you can start to identify, “OK, well, I want to go on a trip once a year, and my average travel is going to be $3,000.” And so you can set yourself that goal and start to save on a monthly basis toward that trip, rather than getting to that vacation, throwing it on a credit card, and then scrambling to figure out how to pay for it after. So, in terms of the budget, it does take a little bit of time to get it set up, and to figure out what you should be spending your money on – but once that process is done, and we do that with our clients all the time, then it's just a matter of tracking it to see where opportunities lie, and how much you can put toward your goals.

Is that planning any different, or are there things people should keep in mind, for big ticket items? Like if they're going to buy a house, get a mortgage, or save up for college?

Yeah, absolutely. So big ticket items can be so daunting, especially if somebody says, “Hey, you need to save $50,000 for a down payment on a mortgage. “ You're going, “Whoa, where am I gonna get that?” As they say, the journey of 1,000 miles begins with a single step. So there is a thing called the rule of 72. Have you heard of it before?

No, I haven't.

OK, it's one of my favorite little tips and tricks. So the rule of 72 is a mathematical concept. It's not like it can guarantee any rate of return, or it's not a predictor of a rate of return – it’s just a concept whereby you take 72 divided by an interest rate to get you the anticipated number of years that it would take for your money to double. If you were to take out your calculator, you can do 72 divided by the interest rate. Banks right now are paying, let's say, on average, .01 percent. I don't know, that's what's going on in my world. So it takes 7,200 years for your money to double in your bank account. An average investment in, let’s say, the S&P 500, which is stocks, has earned around 7 percent. So that means it takes 72 divided by seven – it’s a little over 10, which means your money would double in a stock account every 10 years. That talks about compound interest. By investing your money, your money is growing on itself. So you are both actively saving for your goal, and again, little bits at a time actually add up. But in addition to your own savings, allowing your investments to help you earn your money, and hopefully double your money, which then doubles your money and then doubles your money again, over time.

One thing I feel like I hear people debate is how you should tackle your debt. So for things like a mortgage or student loans, is it better to pay them off as soon as possible or to follow that extended payment plan?

Right now, with interest rates as historically low as they are, money is inexpensive to borrow. The average home loan in the last few years has been somewhere between 2.5 to 4 percent, whereas if the market is earning you, on average, 7 percent, you're better off continuing to save in the market than you are to try to hurry up and pay down your mortgage faster. Having said that, I think doing maybe a little bit of everything makes a lot of sense. So for example, if your goal is to pay down your mortgage a little earlier, maybe you make one extra payment per year toward your mortgage. And that would shave off, you know, several years on your mortgage payment. Your student loans, maybe just do a little bit more. But in the meantime, don't sacrifice your saving for retirement or saving for other things all at the cost of paying down debt. If you're trying to do a little bit of both, you're using that compound interest, that rule of 72, doubling your money every 10 years or so, you're using that inertia to build your wealth. And at the same time you're taking small steps to pay down your debts.

What do you do if you feel like you've missed the boat on saving early or investing early? What do you do in the event that you have to start over?

Nobody's ever missed the boat. Everybody's just fine. You know, sometimes people feel so guilty, and that guilt can be debilitating. You don't want to feel as though it's already too late for you, there’s nothing you can do, and so therefore you just don’t do anything. We really try to encourage our clients to start where they are, and be happy and proud that they're starting exactly where they are. The thing is that if you are starting on the later side, you will have to save a bit more than you would have, maybe, if you started on the earlier side. But it doesn't mean that all bets are off, that you can't do anything. So I would say that figuring out how much you can save, what sacrifices you're going to make if you're starting a little bit later, is important – but don't be discouraged if you are starting late. The important thing is just to start.

Well lastly, are there any investing myths that you'd like to dispel for us?

The biggest watch out I would have for folks is the expectation that you can get rich quick. If I were to give advice to somebody, it just really, truly is one step at a time. It's systematic, and it does require a little bit of sacrifice to save, but really our most successful clients are those clients who set a goal for themselves, put a chunk away on a monthly basis. You know, they forget about it, they pay themselves first, and they check in with their financial advisor at least once a year to see whether or not they're on track to meet their goals. It really isn't any more glamorous than that. It's just being disciplined and engaged in your own financial success.

Gretchen Meyer is a financial consultant and owner and president of Gretchen Meyer Financial in Latham, New York. You can learn more about her work at gretchenmeyerfinancial.com.

Of course, one of the biggest things we hope to save for is our retirement. Whether your goal is to retire early, or just to retire, period, the question remains: what are you going to do, when you can no longer work? According to the CDC, women in the U.S., on average, live about five years longer than men, but they’re less likely to have the funds to support them in those later years. In 2018, the U.S. Census Bureau’s Survey of Income and Program Participation found about 50 percent of women ages 55 to 66 had no personal retirement savings, and on the opposite end of the spectrum, women were less likely than men to have $100,000 or more saved up for retirement. 

Kathleen Godfrey joined me to share her advice when it comes to saving for retirement. Godfrey is a financial advisor and president of Godfrey Financial Associates, a fiduciary that’s specialized in serving women in Glenmont, New York for over 25 years. She says one of the most frequent questions she gets at her job is, “Am I gonna be able to retire?” 

“Whenever we're talking about women and money, I like to start at the beginning. Early in life, girls and boys are taught different messages about money. Girls are taught how to budget, how to spot a bargain, how to spend smartly. And boys are taught how to earn and invest and grow money. And so in a nutshell, girls learn how to spend money, and boys learn how to earn and invest money,” says Godfrey. “And so as a result, there are many adult women who have deep-seated anxieties and deep-seated insecurities around money and around wealth. Many women are fearful of risk, they don't want to lose. So they avoid investing in the stock market, where growth is actually the greatest over time. Many women, not all but many women, opt for CDs and other low-earning financial products because they're “safe.” And this can be really disastrous, because as inflation keeps rising, they're actually losing money. Women typically live longer than men, so their money has to last longer. And if it's all very safe, it can be disastrous really.”

So specifically when planning for retirement, what are the different options out there?

For retirement planning, women need to start saving early, early, early. I would say your first job, right out of college, or when you get your first job, start saving. Even if your employer doesn't offer a retirement plan, like a 401k or a 403b, every person who has earned income can open an IRA, which is an individual retirement account, or a Roth IRA. A traditional IRA allows you to put money aside, it grows tax deferred. So in other words, you don't pay any tax on the growth until you make withdrawals in retirement. Right now the limit on traditional IRAs is $6,000 a year, and if you're over age 50, you can put in $7,000 a year. A Roth IRA is a little bit different. It has the same contribution limits, so $6,000 if you're under age 50, and $7,000 if you're over age 50. But with a Roth IRA, you don't get any kind of deduction upfront. And when you make your withdrawals in retirement, you don't pay any tax. We recommend that you contribute as much as possible every single year, and learn that compounding is your best friend. And you just have to let your money grow, and try not to get too caught up when the market is down – because that's a good buying opportunity. When the stock market is down is a good time to be investing, it shouldn't be a time to be pulling out your money.

Is there ever a moment when it's a good time to throw in the towel and pull out your money?

You shouldn't pull it out, really, until you're retired. You really need to be disciplined enough to keep it in for the long run. In fact, there are penalties for taking your money out too early. So with most retirement plans, you would pay a 10 percent penalty if you made a withdrawal prior to age 59.5. And yeah, there will be days that the market is going to be down. There could be a couple of weeks when the market’s going to be down. Or if we go back just to 2020, in March of 2020, the stock market was horrible. So there's always going to be something going on in the world. Right now, it’s inflation, it's the war in Ukraine. There's always something that's going to affect how the stock market is doing. But investing for the long term and resisting the urge to pull your money out when things start to look a little scary – that’s how you succeed as an investor, and that's how you actually grow your funds long term.

When people are looking at potential stocks to invest in, what are some of the things that they should be keeping in mind?

That depends on how much money you have to invest and how much volatility you can handle. And I don't want to use the word risk, because risk is very relative. But you know, there are certain kinds of stocks that are less volatile, like blue chip stocks, big company stocks that pay dividends. Those tend to be less volatile. The growth is not as exciting as say, Apple or Google or tech stocks, but those stocks tend to be a lot more volatile. You also want to look at investing internationally. The United States only makes up about 40 percent of the total world economy, so you're missing out on a lot of growth opportunities by not investing overseas, in other markets. The biggest advice I can give is you want to be diversified, you want to be invested in a lot of different things. So we recommend that you look at large stocks, mid-sized stocks, small stocks, international stocks, balance that out with bonds, corporate bonds, treasury bonds, and it's helpful to work with a professional.

How do you know if you're on track? If you're trying to retire at 65, what's a good amount to feel comfortable?

There are plenty of websites where you can check your progress. I like to have people start out by saving and investing 10 percent, if they can in the beginning, with a goal of 20 percent. So if you can save and invest 20 percent of your income, that's a really great thing to do. And that's going to get you really far. Because, you know, you figure you're going to be working 20, 30, maybe 40 years. And again, compounding is your best friend when it comes to investing.

I'm curious as to your thoughts on the retirement gap, both on what you think the causes are and what women should keep in mind as a result.

Well, the retirement gap is caused by a few things. First of all, historically women tend to earn less than men. So there's less to contribute. We live longer than men, and many women take time off from their careers to have children and to care for aging parents. And so those contributions that might have been made to their retirement plan are not getting made. And so now they're behind even more. So you want to make sure that you're invested wisely, that you're invested for growth, and that you know, beyond a shadow of a doubt, that you're not going to be taking the money out. It's really designed for long term accumulation.

Overall, what would you say is the biggest mistake people make with their money?

They live beyond their means, and they spend more than they're earning and they don't save. Those are the biggest mistakes. You can build a great deal of wealth if you learn how to manage your money, not spend it all, save a good amount of it, and invest wisely.

Kathleen Godfrey is president of Godfrey Financial Associates in Glenmont, New York. You can learn more about her work at godfreyfinancial.com. Godfrey Financial Associates is a WAMC underwriter.

As Kathleen Godfrey mentioned, there are plenty of resources, both online and offline, to help you identify your goals and research potential investment strategies. Our last guest today is Judy Herbst, the executive director of Savvy Ladies, a nonprofit organization that has been such a resource for more than 25,000 women since 2003. Herbst says founder Stacy Francis started the organization with the belief that financial education and independence is key to getting women out of abusive relationships and situations. 

"She saw that her grandmother suffered from financial abuse and couldn’t get out of a marriage, and was held there because of finances. She was scared, she lacked the confidence to move herself forward, and ultimately died living in a financial abuse marriage. And Stacy, when she learned this and saw this as she was growing up, she saw the need for financial education," Herbst explains. "You know, women do not get educated about finances, we always think it's a “man's role.” And with more and more women having careers and making their own money, they need to take control, not just of their daily budgets with their family, but of their future. And it's really important for couples and individuals to know their financial situation and learn how to get out of debt and not be scared. So it's a conversation that we want to bring to the forefront."

Tell me about Savvy Ladies.

What's really unique about Savvy Ladies is that we have a free financial helpline. And with that we have a community of pro bono financial advisors from across the country that are certified CFPs, also financial executives and professionals, that are offering their expertise for one hour of time, to listen to a woman's question who comes to the helpline and give them guidance. We are not giving them like where to invest, but we are giving them the guidance of what to do to set them on the right path. So out of college: do you pay down debt? Do you save? How do you pay your rent? These are the questions we're getting. Our audience are women anywhere from age 18 to over 60. Many of the women are single women that come to Savvy Ladies. And they're single because they're right out of college, or they've been divorced, and they are now starting over – or they are widowed, and they're looking to now manage their money for the first time, and they’re 65. And how do they do that successfully?

What advice do you have when it comes to maintaining financial independence in a relationship, or perhaps at the end of a relationship, whether someone is widowed or it gets a divorce?

I think the key is transparency. So there should be an open conversation. We seem to have, as women, we love to talk about our families and sex – but we never talked about money out there on the table. So many of the advisors will say have an open conversation about money and your spending habits, so you can actually list a budget. And one of the best ways to do that, there's many different apps out there. We love to refer people to Mint. Mint is a great one out there that people are using. But just list in a notebook what are your fixed and variable expenses, and I think that is a really key place to start. And then what are the variable expenses that can actually trigger a change? So even some of those fixed expenses, you might think you can't change, but maybe you can. That could be your rent, based on your location. Do you need roommates? If you're a widower, do you take in a border? Or do you need to downsize? Many women going through divorce want to keep the home. We hear that a lot, and probably about a third of the women coming to us are going through a divorce. And many, many want to keep the house. It really is a hard look to say, “Can I really afford the house? Or is it better to cash it out and split it now?” As you go through that divorce, that's a question you need to ask yourself, and ask your lawyer as you go through it. It’s really important to understand the costs associated with keeping that house, whether you can afford them. Or is it better to downsize? Maybe stay in the same school district for your kids, but not pay those expenses? Because those expenses add up. The care of the lawn, just maintenance of the house, you never know. And then, selling the house, it becomes taxable possibly, and you need to understand those tax implications if you ultimately own it outright yourself.

What are your thoughts when it comes to having joint versus separate accounts in a relationship or marriage?

Many women commingle everything together with their spouses or their future spouses. You know, prenups are really an easy piece of paper to look at and have a conversation with your spouse. There's also postnups, you can do postnups after (the wedding). So this is becoming more and more common, and in the past it would have been totally taboo, I think, to talk about a prenup. But I think that brings the money conversation to the table. Commingling is OK, but it's also a good idea to keep a separate account in your own name. And if you are thinking about getting a divorce, and you haven't gone through all the steps yet, it is important that you begin to separate, and you can create your own account – and you should at this point, because it's probably easier for you to set up a new account in your own name, by still being married. So I would recommend to think about having a separate bank account. And there's no reason not to have your commingled as well. And understanding the commingled is what bills are being paid, and then where are you keeping [your funds]. But if you're going to get a divorce, many states are common laws. So everything from that marriage date onward is shared income, shared assets. So it is reportable, and it is traceable, and it will be looked at. But it is very important, I think from a timeline perspective, to have your own accounts.

So how early do you think we should be teaching kids in general, but especially girls, about money? And are there ways you think we can better provide financial education?

I think absolutely. And I think women are having the conversation more and more now. So I think as girlfriends and as groups speaking about it, we should have the confidence to talk about money. And that's also the income gap, you know, we should have the confidence to go in and ask for a higher wage, and a higher income based on the work we do. And I think that negotiation can happen upfront now. And you should feel very confident to have that conversation with an employer, especially with many women being independent contractors now as well, based on the Great Resignation thing – it’s a huge opportunity for women to understand that they can work from home. And it's easy to pick up and set up a business, it could be a side hustle first before you dive into it as a full time independent contractor, but we’re seeing many writers, digital marketing, social media, even virtual assistants, where women can take on these jobs that fit their schedules. Where they can do them at any time of day, but they get the job done.

And I think it the important thing is to ask for your worth – understand your value and understand your worth, and don't underprice yourself. It's actually better to price yourself for the value of what you do and what you produce, and have fewer clients, and make more money that way so you're not juggling 12 clients – it’s probably better to juggle four to five clients, and just price it right. We worked with one woman, and she actually thought she was pricing herself too high for the services she was offering. She was offering career coaching for colleges, so she was charging parents for giving advice to their kids looking for colleges. She went higher in her pricing than anyone in her neighborhood, and she actually made more money than pricing herself lower. Because I think that people thought with a higher price that she was more valuable – and of course, she was, and she was able to really balance her time with six clients versus taking on 12. Don't undervalue yourself, I think is really important.

And absolutely – you asked when to have [the conversation]. I think mothers and parents should begin to have it with their children, and begin to have that conversation. We just did a focus group on your relationship with money, and we ask people to think about, “What was the first time you thought about money, or you remember money? And did you work for it? Or was it a gift to you?” So that's really interesting, because how did that set you up your emotional relationship with money? And then how do you then use that to teach your children? So for me, my first memory of money was a gift, which is very different, other people's was around working. So I think that sets you up in how we, as parents, don't think of money when we think of our children, and how to set them up for success early on.

Judy, thanks so much for taking the time to speak with me. Is there anything that I'm missing that you'd like me to know or that you'd like our listeners to know?

The general advice is do not be scared to ask a question. Any question is a good question. And this free financial helpline is here as a resource to help all women answer that financial question, whatever age you are, whatever your question might be, whatever your income is. We have a community of over 100 volunteers that we match based on your question and expertise.

Judy Herbst is executive director of Savvy Ladies, a nonprofit dedicated to improving financial education for women. You can access their financial helpline at their website, savvyladies.org.

51% is a national production of WAMC Northeast Public Radio. It's produced by Jesse King. Our executive director is Dr. Alan Chartock, and our theme is "Lolita" by the Albany-based artist Girl Blue.