Sheconomics: The Psychology of women and money

1
Sheconomics The Psychology of women and money

• Karen Pine University of Hertfordshire
• Simonne Gnessen Wise Monkey Financial Coaching

2
Introductions
Sheconomics

• Who we are
• How we got here
• Overview of the session

3
Aims
Sheconomics

• To explore in an accessible and interactive way
  the psychology of money.
• To demonstrate that our economic behaviour is not
  always rational.
• To help you understand that emotional management
  is the key to good financial management.
• To present strategies to help you improve your
  relationship with money.

4
Women and money Some facts
Sheconomics
Women

• live longer than men
• still earn less than men
• more likely to take career breaks
• lower potential earnings over lifetime
• take fewer risks and stay loyal
• provide for others before themselves
• come off worse in divorce
• more emotional relationship with money
• more at risk during economic downturn

5
How good are you with money?
6
My relationship with money is a bit like the one
with my cat. I like it. Its a comfort. But I
dont understand it and Ive no idea where it
goes.
7
The Ultimatum Game
Sheconomics

• Imagine you and your partner have to split ten
  pounds between you. Shes been given the tenner
  and told to share it with you - in any way she
  likes. She can decide how much to keep and how
  much to give to you. Theres just one condition.
• If you refuse what you are offered, neither of
  you get anything.
• What would you turn down?

8
Sheconomics

• Psychologist Daniel Kahnemann was the first to
  show that many human decisions are not logical
  and rational (Kahnemann Tversky, 1982).
• In research studies at least half the people
  would turn down anything less than 2.50

9
Science 13 June 2003, Vol. 300. The Neural
Basis of Economic Decision-Making in the
Ultimatum GameSanfey et alNeuroeconomics
seeks to ground economic decision-making in the
biological substrate of the brain. Sanfey et al
scanned players brains as they responded to fair
and unfair proposals. Unfair offers elicited
activity in brain areas related to both emotion
(anterior insula) and cognition (dorsolateral
prefrontal cortex). Further, significantly
heightened activity in anterior insula for
rejected unfair offers suggests an important role
for emotions in decision-making.
Sheconomics
10
Scenario A
Sheconomics

• Imagine youve always found it hard to save, but
  two months ago you finally got round to setting
  up a savings account with 50 going straight in
  from your salary every month.
• Then today you noticed your favourite perfume
  brand has launched a new fragrance. Its
  extortionately priced at 100 (but youve got
  100 saved and you know itll make you feel
  fabulous). How likely are you to buy it?

1.Not at all likely 2. Not very likely
3. Not sure 4. Quite likely 5. Very
likely
11
Scenario B
Sheconomics

• Imagine youve recently discovered youve been
  paying too much tax and have just received a 100
  tax rebate in your pay packet.
• Then today you noticed your favourite perfume
  brand has launched a new fragrance. Its
  extortionately priced at 100 (but youve
  received 100 tax rebate and you know itll make
  you feel fabulous). How likely are you to buy it?

1.Not at all likely 2. Not very likely
3. Not sure 4. Quite likely 5. Very
likely
12
Mental accounting The tendency to value some
s less than others - and therefore to waste
them. First identified by Richard Thaler
(Thaler, 1985).
Sheconomics
13
Mental accounting exercise 2
Sheconomics

• You are going to the theatre and, when you get
  there, realise youve lost your ticket that cost
  you 50.
• You have enough money on you but
• do you buy another ticket?

14
Sheconomics

• OK, again imagine you are going to the theatre
  but havent yet bought your 50 ticket.
• At the theatre you realise youve lost 50 cash.
  You still have enough money to buy your ticket.
  Do you?

Research by Kahnemann Tverysky found most
people would not buy a ticket if they had lost a
previously purchased one. But they would buy one
if theyd lost 50 cash. Both scenarios offer
the same outcome 100 out of pocket for a 50
spendbut they feel different
15
Sheconomics

• Law 1 Take emotional control

• Examples of actions you could take
• Reframe purchases (e.g. no of hours worked)
• Delay spending decisions
• Create pots in savings

16
Money messages
Sheconomics
What messages did you get as you were growing
up?
17
Are you an under-earner?
Sheconomics

• 1. Do you avoid asking for a pay rise or putting
  up your prices?
• 2. Do you work very hard for little money?
• 3. Would you think it unfair for you to earn a
  high income if other people work harder for less
  money?
• 4. Do you often give away your time for free, do
  jobs for people or put in extra time at work, for
  no extra pay?
• 5. Do you find it hard to think of ideas to make
  money?
• 6. Are you often in debt with no idea how youll
  achieve financial success?
• 7. Are you proud of the fact that you can manage
  on less money than most?
• 8. Does the idea of having lots of money make you
  feel uncomfortable or fearful?
• 9. Do you live in financial chaos, with little or
  no idea what you earn, spend and what debt you
  have?
• 10. Do you think that people who seek wealth are
  greedy?

18
Law 2 Go beyond beliefs
Sheconomics

• Take one of your negative beliefs.
• Think about where it came from, and how it
  affects what you do.
• Next replace it with a positive belief.
• Consider how youd feel if this positive belief
  was true.
• Finally, think of how you could reinforce the
  positive belief.
• What would you actually do?
• Commit to taking some concrete steps towards
  making this happen.

Me, fail English? Thats unpossible
19
What we focus on matters
Sheconomics
Ever noticed..
. when you buy a new car
you suddenly see that model everywhere?
20
We only focus on a small fraction of what is
going on around us. Our beliefs
determine what we focus on
21
Women and spending
Sheconomics

• NEWS Shopaholic crushed to death by a pile
  of goods
• A shopaholic has been found dead after a pile of
  the goodies she hoarded apparently collapsed on
  her. Joan Cunnane's body was found in a back
  bedroom underneath a mountain of suitcases which
  had been stacked to the ceiling. Neighbours
  raised the alarm but her house was so crammed
  that police issued a missing persons appeal and
  sent in sniffer dogs.

22
QUESTION
Sheconomics

• Are you more likely to go on a spending spree
  and spend more than you should when
• You want to cheer yourself up
• You want to treat others
• You feel youre looking good

79 75 61
23
HAVE YOU RECENTLY
Sheconomics
70 60 55 46 35 22

1. Worried about money
2. Bought something on impulse
3. Spent at least 25 more than you needed to
4. Gone shopping for something and come home with
   something completely different
5. Felt shame or guilt after a shopping trip
6. Bought something youre unlikely to ever use or
   wear?

24
RETAIL THERAPY?
Spending is a way of regulating, or managing,
emotions.
(for a review of emotion regulation see
Gross, 1998, Review of General Psychology, 2, 3.)
25
Law 3 Spend with power
Sheconomics

• Actions
• Take cash only
• Careful who you shop with
• Delay purchasing
• Reframe the cost
• Break the habit
• Plan occasional spends
• See www.sheconomics.com for more tips

26
The evil credit card
Sheconomics

• Buying something is a trade-off between the
  pleasure and pain areas of the brain.
• Credit cards delay the pain of spending and so
  we spend more when using them.
• Knutson et al, (2007) Neuron, 53.

27
Law 4 Have goals
Sheconomics

• If you fail to plan you plan to.
• Create compelling life goals
• Fit financial goals into the plan
• Financial freedom - universal goal
• Take consistent action

28
Building your net worth
Sheconomics
Income
Expenses
Assets Liabilities
29
Sheconomics
Its not about what you earn, its about what you
keep.

• What action are you taking to increase your net
  worth?

30
Law 5 Look debt in the face
Sheconomics

• Good debt can make you wealthy
• Bad debt makes you poor

31
Compound interest
Sheconomics

• If you put a penny into a jar on the first of
  January and then doubled the amount you put in
  every day for a month (2p on the second, 4p on
  the third, 8p on the fourth, etc) how much do you
  think you'd have at the end of the month?
• a) 62p
• b) 12.80
• c) 10,737,418.00.

32
The true cost of debt
Sheconomics
4,956 credit card debt _at_ 17.9 APR
Monthly cost Time to repay Total cost
MINIMUM REPAYMENT 2 per month 53 yrs 9 mths 17,972
MINIMUM REPAYMENT PLUS 10 19 yrs 7 mths 11,807
MINIMUM REPAYMENT PLUS 50 6 yrs 7 mths 7,573
MINIMUM REPAYMENT PLUS 100 3 yrs 8 mths 6,434
MINIMUM REPAYMENT PLUS 200 1 yr 11 mths 5,737
33
What you focus on matters

• Opportunitiesarenowhere

Did you see
Opportunities are nowhere
or Opportunities are now here ?
34
When the winds of change blow, some build
shelters others build windmills. What will you
do?

35
Law 6 Share financial intimacies
Sheconomics

• No secrecy
• No deception
• Talk openly and honestly about money
• (avoid financial adultery.)

See www.sheconomics.com for a quiz on whether you
and your partner are financially in tune
36
Whats your purse-onality?
37
Whats your purse-onality?
Sheconomics
Notes stored flat and neatly? Everything in right section? 1 1
Small amount of change? 1
No more than 2 credit/debit cards? 1
Emergency contact details? 1
PIN numbers with cards? -3
Foreign money from last trip? -2
Wadges of receipts? -1
How did YOU score? Max. 5
38
The story of June and Angie
Sheconomics
June and Angie have been friends since they were
12. June (left) put away a bit of money every
month from when she was 21. At 30 she stopped to
have her first child and never started saving
again.

• Angie (right) didnt get round to starting a
  savings plan until she was 35. But then she kept
  it up for the next 30 years, until she was 65.
• QUESTION
• If each saved 100 per month over this time -
  June for 9 years, leaving the savings untouched
  for a further 35 years, and Angie for 30 years -
  who do you think would be better off at age 65?

39
Law 7 Know tomorrow comes
Sheconomics

• Take action for a secure future
• Dont delay those all-important decisions.

40
150 per month saved
Sheconomics
5 10 15
10,243 11,712 13,452
61,912 114,855 227,393
125,359 341,899 1,051,473
5 yrs
20 yrs
30 yrs
41
The rewards of regular investing
Sheconomics
Source Benefiting from Volatility Pound Cost
Averaging, www.torquilclark.com
42
Pension ball
Sheconomics

• Throw the ball and call out a word that comes
  to mind when you think of the word pension.

43
The power of reframing

Think of your pension as a gift to your future
self
44
Or how about a pension cake?
45
Sheconomics
Sues pension cake
46
Recipe for a great big pension cake
Sheconomics

• Step 1 Pre-heat the oven
• Step 2 Get all the ingredients together
• Step 3 Top up the missing ingredients
• Step 4 Keep an eye on the cake while its baking

47
Someone's sitting in the shade today because
someone planted a tree a long time ago. Warren
Buffet
48
Thank you
Sheconomics
Sheconomics
www.sheconomics.com