E112: The Financial Domain of Risks

Katie: I'm going to start with a family story today. I never met my grandmother, but her relationship with money shaped everything I knew about finances growing up.

My grandmother's family made their fortune . . . and they did make a fortune in the buggy whip industry back when horses and buggies were how people got around. And they were very comfortably wealthy. And so, as a young woman, my grandmother traveled all around the world. I know she saw the pyramids because I have a photo of her in front of them. And she had adventures most women of her generation could never even dream of.

And then the automobile came, and the buggy whip industry went bust. Nobody in my grandmother's family saw that coming. But the fortune evaporated. She had a little trust fund that was set aside for emergencies only. But for my grandmother, there was always an emergency. She went through the trust fund, and then she kept spending like it was still there. And eventually, she died broke.

But my mother grew up in that stage of her life when she was overspending. And in the aftermath of all that recklessness, my mother had to deal with the bill collectors calling and things getting repossessed and there was a lot of shame.

And so my mother found safety in the opposite extreme. She was a miser. She counted every penny, actually every half penny. That was sort of a joke in our house. Who has the half penny? And that was accounted for. But for my mother, security meant never spending, and never risking, and hoarding. So much hoarding. She saved everything.

And when she became a widow when I was 4, times were tight. We survived in part because she was good at saving money and she never spent more than she had. But she also never took a risk on getting a job, losing those benefits. Her security, she really fell back on that security of saving everything.

So, for me, I think I'm rebelling a little bit against my mother. I work hard. I earn a good salary. I have a respectable retirement fund. But I also have that adventurous streak like my grandmother.

Kirtly: Oh, dear.

Katie: In this, we've been exploring the 7 Domains of Risk. And in this episode, we're going to talk about the Financial Domain of Risk.

So I'm Katie Ward, grateful co-host of the "7 Domains of Women's Health." I'm a nurse practitioner, a professor in the College of Nursing, and an anthropologist. And as always, I'm joined by Dr. Kirtly Jones from Obstetrics and Gynecology, who is a . . .

Kirtly: A saver. I think we always need full disclosure. No, we don't take any money for this, and no, we don't do this and that. But when we make any recommendations, it often comes somehow . . . we filter somehow who we are. So Katie and I talk about who we are so that you know where we're coming from in our recommendations.

And for me, as we were growing up, we moved every couple years around the world as my dad would take some new jobs. It seemed that my parents lived paycheck to paycheck, though I think we always had what we needed and most of what we wanted. So we were four kids, two adults. We didn't have any fancy or expensive stuff.

My mom occasionally borrowed my babysitting money at the end of the month, and she always paid it back. And she taught me about interest because she paid it back with interest. I know money was tight, and there was no college fund that I knew about.

My dad said that if I got a scholarship that paid my way through college, he would buy me a car. And I was invited to travel to Michigan from Colorado for an interview and sit for an exam for an all-expenses college scholarship. My parents took a financial risk and paid for a plane ticket. That wasn't something that they could really afford, but they thought it was worth the risk.

Now, the chances were 1 in 10 that I would get this scholarship. The risk was 9 in 10 that I wouldn't. And I didn't, and I felt so guilty.

But fortunately, I received a more wonderful all-paid scholarship to universities in Colorado, and I got my little red Volkswagen, which I drove for 15 years until I could see the road beneath my feet from the rusted-out undercarriage. So I'm a saver.

When we had almost no money, this is my husband and I, but I had my first job out of fellowship, I had what I called pots of money in little accounts. They were little savings accounts. The emergency pot, the kid's future pot. There was no "have a lot of fun" pot in those days, not until I was about 40.

So there we are. I'm a saver, and so my recommendations as we go on are based on my background, too.

Katie: And I think the other thing, before we go further, is just something I want to name. The fact that the two of us are sitting here telling stories about trust funds or retirements means that we're talking from a position of privilege.

The financial risks that we might be thinking about today, whether to invest, when to spend, how to pass wealth on to your kids, these are choices available not to all women, but really to a small fraction.

For most of my life, risk wasn't about my retirement savings or when I could retire. I was thinking about whether or not I could make rent, whether or not I could afford to leave a relationship, whether I could afford my medications for the month. How low was my credit score, and what did that mean for other choices?

Kirtly: Oh, dear.

Katie: In spite of being fairly reckless, I have ended up somewhere in the top 25% of the wealth bracket. Not the top 1%, not even close. But there is a strata of people that have a little bit of money.

There's an author, a book that I like, Richard Reeves, who wrote a book called "Dream Hoarders." I think I sort of fall into his idea of the top 25% of people that have a little bit, but then start to make voting decisions in a way that make it difficult for others to access those same financial tools.

So somehow, by luck, by hard work, I've sort of moved from that worrying about whether or not I had the credit, what my credit score was to being in a comfortable place.

So I kind of wanted to look at financial risk across the lifespan. And I started this with my grandmother because that's been one of the things I've been thinking about, is that we start out with a lineage of beliefs and behaviors about money that are influenced by the people, the generations we didn't know.

We might replicate a family pattern that makes sense to do emotionally, or we might, like I did, rebel against it and not quite realize which path we're taking. So before we even start earning money or making financial decisions, we're running on an inherited operating system.

And this is what I talk to people about now, is as you're anticipating getting into a relationship with somebody, it's important to talk about money. Not just money, but that family story, because I think that gives you a lot of insight into the forces that influence people's behavior about money that might be more about the reasons people fight or disagree about it.

You need to understand that generational, before-you-were-even-born component that creates the script that influences you and influences your partner.

Kirtly: I'm risk-averse, as I say, and financially risk-averse, and I picked a guy who believed in "use it up, wear it out, make it do, then do without." That was his mother's motto. She had six children. She was not working outside the home, but she could do what she could do for the six. Because early on in their lives, they didn't have any extra.

Anyway, my husband had no idea what he actually earned or what was in his bank account. He didn't care. He didn't spend. So if you don't spend, then you don't have to care. And it was a perfect fit for me and my money control freak needs.

Actually, I picked him for many reasons, but his attitudes about not spending . . . And you could tell by how old the bike was that he'd had, and you could tell by his clothes, for sure. So I really wanted a saver, and I picked a saver, and his family had been savers too.

Katie: So you enter early adulthood carrying this inherited money story, and the decisions you make start to compound over decades, right? Your career choice, whether or not you take on student debt, negotiating your first salary.

And from day one, the wage gap between males and females is already at work. I think women are socialized towards more safe career paths, like me in nursing, or teaching, or social work.

And I say this as someone who loves what I do in nursing, and it's been the best choice for me. But it was a really sort of strategic one as a young woman. It was a thing I knew I could do, and there would always be work for me.

But my mother thought women should not have to go to work. She didn't plan for me to go to college. She didn't even ever consider what I might do for a living. She was the original trad wife, and that was her dream for me, that I wouldn't work outside the home.

When I said I was interested in nursing, nobody said, "Well, gosh, have you thought about medicine?" It was just, "Well, nurse, okay. You can do that if you have to work, if you must."

Kirtly: Well, a trad wife works until your job description changes because your husband dies or you get divorced. And when you make decisions, and you choose this ideal based on what has happened before you, and stuff happens, it happens. And it happened in my family, too.

In terms of who encouraged me to risk going for a traditionally male field, my daddy, who never cared about money, that was . . . I married my daddy, I guess. Anyway . . .

Katie: Therapy session.

Kirtly: I know. We're doing therapy on our podcast, "The Domains of Kirtly's Therapy."

Anyway, he told me I could do anything, and I had planned to go to grad school in molecular and developmental biology, but I realized I wasn't smart enough to be at the very top 1% to 2% of grant-getting.

I mean, when you think about doing this biology that you love, to do research, somebody's going to have to pay for it, and you have to be really good. So it was too financially risky for me to take on a lot of grad student debt and maybe not get a job.

And med school had all of what I called "oh, wow, biology." It had all the fun stuff, but at the end, I would have a job that I loved and could pay off my med school loans. And I knew I would do well in med school.

So my daddy died before I applied to medical school, and my mother had studied so she could retake her dental hygiene license. It was touch and go. My mom had a career she loved, but had stepped away to raise kids until my dad got sick in his 40s.

She luckily had a good career in her back pocket. She'd made a good career move before she was married and had kids, and had a job she could count on when there was no money.

And I know that it's popular to encourage young people, young women, to "follow their passion" in choosing an education or follow their heart in choosing a partner, but this is too financially risky for me. So try to think it through.

It's great to follow your heart, but if you can't get a job, or your job's going to be outsourced, or the person you're picking just is financially risky, it may not work out so great. Or, as in Katie's mother's case and in my mother's case, their husbands die, and they're left with nothing except their beloved children.

Katie: Yeah, my mother did not have a career or college education and didn't have that to fall back on. But she was tight with a nickel, and she had a budget, and we were going to live within that budget no matter what.

Kirtly: Yeah, I know.

Katie: I have to say I respect how she managed money. The interesting thing was is when she did take emotional risks . . . She went on a little train trip when I was about 9. I think some friends encouraged her because she was pretty depressed, and they may have paid for it too. I don't know. But the one time she ventured out and did something a little risky, she ended up meeting my stepfather on this train trip, and that changed her life.

Kirtly: Oh, good for her.

Katie: So there were sort of both lessons in there for her.

So yeah, for women without college degrees, without a family financial safety net, a lot of these decisions aren't really decisions at all. You're just surviving. You take whatever job is available. You don't really have the luxury of thinking about building long-term wealth.

And I think I see this a lot for women. You don't negotiate your salary because you can't afford to lose the offer. So people play it safe in a lot of ways. But it assumes you had a choice about that.

One of the things I see a lot where I work is I see these kind of for-profit training programs that advertise to a targeted population of free tuition and a laptop, plus maybe a stipend to become a medical assistant or some kind of assistant in a professionally-adjacent field.

Young folks without other job prospects kind of take that bait, and they end up with a big student loan, but they're trapped in a very low-paying job. And then they're just trapped. They can't really afford to rise above that.

So I see people who I work with who I wish could go to nursing school, but they're kind of trapped paying off their medical assistant student loans. Now they have a job, and they're earning, and they've got a car payment, and they're kind of deep in debt and can't really strategize to take another career step above that because that system's really holding them down. That just breaks my heart.

Kirtly: Yeah, really talented women. I mean, that's where I like to see my money go, is that there are so many talented women who worked for me and I didn't want to lose them in the job that they had. But I said, "If there's any way I can help you go back to school or go to school part-time or whatever. You are so good at this, but you'd be so good at so many things."

I think most colleges are too expensive, and you should shop around. "You" meaning the future student, you the listener, or you the family that might choose to help pay for what might be a quarter of a million dollars for a college degree at a private university.

And first, does a college degree really meet your needs and interests? More young women, I think, are considering training in careers that were traditionally for men. I've seen some women plumbers show up to my house.

Skilled trades like electrician, or plumbing, or skilled carpentry, or HVAC pay very well. And the education can be achieved at state community colleges, which may have grants. All of these are jobs that are not going to be outsourced by AI. These careers may not appeal at first because maybe you never thought of them.

If you choose a college degree, or you don't have parents who are paying the bill, or you do, but you don't want them to take the financial risk that they'll be having to pay off for the next 20 years of their retirement, paying off your college fund, think carefully about the college choice and the grants or scholarships they offer. And can you get your first couple years of courses in a local community college and then transfer your grades?

The risk of taking on a substantial student loan or loans that are a crushing burden so you can't pay your car maintenance, or your car insurance, or your rent, the things you just talked about, Katie, or health insurance, it's a very risky choice. So look before you jump. Big student loans are a big financial risk at the very beginning of your life. Oh, it's tough.

Katie: It really is. And then let's talk about the childbearing years, because there's kind of a motherhood penalty that women pay. And it's not just a wage gap, but you take time out of the workforce, or you go part-time because you're raising children.

And so as a woman, you're losing your salary, but you're also losing the compounding of retirement savings, how much money your Social Security gets calculated on, access to promotions, and all of that builds on each other when you get to starting to think about retirement.

So kind of coming and going from the workforce, it's a strategic decision, but when you're standing at the brink of retirement, sort of affecting what that looks like for you as well.

And then I think one of the other kind of insidious financial risks that women face is being dependent on their partner.

So in your 20s, you take the lower-paying job so that you have more flexibility to be there for your kids.

When you have the kids, you're the one that takes the career breaks because your partner is already earning more. So that's the one that makes sense.

And then in your 40s, the gap between your earning power and your partner's has widened so much that leaving really means a big catastrophic lifestyle drop.

And then by your 50s and you're looking at your retirement savings, that reflects decades of lower earnings and interrupted contributions and that missed compounding.

Then by the 60s, you really may not be able to afford to leave, even if the relationship's unhealthy and even if you're miserable.

So you've made a series of steps that made sense in the moment, but over the lifetime sort of leave you a little bit more stuck.

And that assumes that you have that partnership to begin with. I think for a lot of women without partners and single mothers, that squeeze of not being able to earn enough was always there, and retirement looks a little frightening.

Kirtly: Oh, this is so gloomy, Katie. I'm getting gloomed out here.

Katie: Sorry. It's sort of my life story.

Kirtly: But now you're happy and you've got wonderful children and you're traveling the world and you're teaching amazing students and you're my star. You're the brightest star in my sky, Katie. So anybody who's listening, it has a happy ending potentially. So there you go.

Katie: It does have a totally happy ending. But in my 40s, when I was thinking about getting divorced, staying married would have been the financially safe decision for me. Choosing to split up meant a big change in my standard of living.

But you're right. Emotionally, and intellectually, and freedom-wise, I'm much happier. But my financial prospects took a big hit.

Kirtly: Aw. Well, Katie, you mentioned partner again. I think when romance hits, most women don't think about financial risk. Of course, in many traditional cultures, the families make arranged marriages for financial status or status gain, both the daughter and the family.

Marrying off a daughter for a good bride price to a man, and they were always men of "good character and reasonable financial future," was the goal. And if you choose a partner for love, you may not be thinking with your brain and you can make a very risky choice. It's hard to know.

And if you're young when you're making these decisions, you just don't think about risk, because risk is not something our frontal lobe . . . We've talked about this in the Physical Domain of Risk. It isn't something our frontal lobe does very well, so we don't think about that. And it's hard to know what are the money risks your future partner likes to take. Gambling? Risky sports? Expensive equipment and toys?

Now, if you spend some time with this person, you kind of see where the money goes. Maybe that's worth it. But people kind of are in a rush, and they want to be married.

My current rant is, "Is spending $70,000 for a wedding a good financial risk given that 50% . . ." In fact, more people that have really expensive destination weddings are more likely to get divorced. Anyway, enough on that rant.

So after having a baby, breaking up or a divorce is the financially riskiest thing a woman can do in early or midlife, maybe after having a $70,000 destination wedding.

Katie: Yeah. Midlife is when a lot of women sort of wake up to all of this. Having lived this story, I can tell you you're sort of weighing that, "Do I stay in a relationship that's not serving me? Or do I take that plunge?" So I think it's never too late to recover. It's never too late to invest. It's never too late to change careers.

Women around menopause are certainly the most likely to initiate divorce. And I think if you're sort of sitting on those questions, this is a good time to get some therapy and think about what are your best choices.

I am here to tell you that investing in yourself and all of that does pay off. But that bold midlife pivot is a luxury that depends a little bit on what resources you're starting with.

Kirtly: Well, I think in my own practice, as I had a midlife women's practice, outside of my infertility practice I saw a lot of women between the ages of 40 and 65. And a lot of them were in the matter of a pivot that they didn't choose. It was the husband who was leaving, and they had no clue where their finances were.

It's risky not to know where your finances . . . a couple stands. What kind of debt has your partner assumed? Where are the savings or the retirement plan? How much do you get to access if you get divorced?

For women who have taken on the totally consuming job of house spouse and mother without benefits, taken a job without benefits or a retirement plan, the retirement plan is your husband. And it used to be that your kids could be your retirement plan, but not so much anymore. They move away. So not having the knowledge of what you have as a couple can be devastating in the case of divorce or death of a spouse.

So knowing what you've got . . . Even though your spouse may manage all the money, you should probably know what you have and where it's hiding.

And then you get old or older, and the decision about when and if to retire and what you have in retirement, if any, and Social Security, and how are you going to make sure that you have enough will take some professional advice, I think.

Maybe you're really smart about money, and you know all the things that you need to know, and you've done a lot of reading, but sometimes a professional advisor can actually sit down with you and carefully assess your wants and needs and financial risk tolerance. And if you're coupled, the risk tolerance and needs versus wants assessment takes time and sometimes a trusted third party.

So there you go. It can go very well, and people can be comfortable, or they can know what they really can do and what they can't. And as long as they work on it together, it's going to be fine. But you have to be able to talk about what is your financial risk tolerance.

Katie: And I think that can be a hard period of time in life where you . . . We talk about being on a fixed income, and that can be a big adjustment. I am not looking forward to that. I think I'll always keep a little part-time job just for mad money and just in case.

But I want to take a different tack just for a minute. I think the conventional wisdom is to save, save, save. And then in retirement, don't spend and save and pass on a big nest egg to your descendants.

Kirtly, I know we were kind of batting around a "New York Times" article that referenced this book. It was a book my son had given me a couple of years ago called "Die with Zero." The author is Bill Perkins. He argues, and I've taken this to heart a bit, that we should prioritize life experiences more than leaving a nest egg in our will. And he talks about something called memory dividends.

I like this idea that experiences you have with your children and grandchildren, if you can have them at 55, those people that you spend it with are going to have 30 years of memories. And if you wait until you're 80 to try and do that, your opportunity to remember that together is not so long. And so he kind of looks at experiences with the same value as money.

So I think it's something I want to do. I'm going to try and take my grandkids on a safari in the next year or two. And even if that means I'm going to be eating cat food and sitting in a cold room at 90, I figure the best time for me to be poor is when I can't do much, and I don't have big wants.

Kirtly: Oh, come on. You can come and live with me.

Katie: Okay. Because you will have saved all that money.

Kirtly: I will have saved. I'm counting it. You have to live with my brothers and sisters, too, though, because I have a feeling they're all going to be living with me.

Katie: There's a kid's story about this. But I think this "die with zero" philosophy is for people who have money to spend. And if you've never had your own retirement account and you gave up earning for the family and you're dependent on your partner's Social Security, then that conversation sounds very different. It's not a risk that you'll hoard too much, but you just never had it.

So I think aging can be a really scary time if you go into it without something saved up to live on. But I think there is a risk of missing experiences too if you're too afraid to spend it. So I'm trying to strike that balance.

Kirtly: Don't do it until it's too late. You've taught me that, Katie.

Well, maybe I just sound grumpy about financial risk, and I've offered up my back story as to why I might be cautious. And I know that there are many people who have saved enough and have good enough pension that they don't have to worry. But I also know that the majority of women in this country are not in that position. The number of elderly poor is rising.

Our TV, and movies, and ads, and magazines are filled with happy retired couples, all thin and gorgeous, traveling to lovely sunny spots and having a glass of wine on a deck or the dock.

But if you're like most Americans, when you get to midlife in your 30s and 50s, it's a good idea to sit down with your financial planner at your bank, or your work, or your investment company, because those are places you can often find somebody for free.

So if you're lucky to have one, then make sure that you have the resources you need, because they can give you some smart advice.

Katie: Yeah, for sure. I meet with my person regularly. He always wants me to imagine my life on the deck or the dock and I'm like, "No, you don't get it. I really like what I'm doing right now and I just want to think about working. So you wiggle my money around however you're supposed to, but don't talk to me about retirement. I'm not dreaming of retirement. I just want to keep working."

So we have a little bit of a disagreement there, but I do meet with him to sort of strategize and hopefully make sure I can do all of that, that I can take my kids on safaris and maybe not eat cat food because that actually doesn't sound that good to me.

Well, I want to come back to my grandmother's buggy whip fortune, because I think we're living through another buggy whip moment. And I just was thinking as I was working on this episode about the parallels between the 1920s, when my family's fortune disappeared, and today. It seems almost eerie, the parallels.

We have this transformative technology in AI that's reshaping our economy, just like the automobile did to the people in the buggy business. And we also have this huge wealth inequality, and market concentrations, and record consumer debt, and a post-pandemic recovery, just like we did after the Spanish flu epidemic, and all this political polarization.

So the '20s were roaring right up until they didn't. And I suspect it felt similar for my grandmother. She had gotten comfortable in the luxury that she lived in, and then the world changed underneath her feet. And so I'm cautious of that, too, that maybe I'm about to be replaced by an AI.

Kirtly: No, I don't want a machine to be doing my pelvic exam, Katie.

Katie: Okay, good.

Kirtly: Maybe it's creepy having a person doing your pelvic exam, but I think it's creepier for some device to do my pelvic exam. So, nope, you're not going to be replaced.

Katie: I hope not, but I think that's another element of this that all of us need to pay attention to and be thinking about. What is the future looking like and are we in a position to weather that?

And then there's this thing I alluded to before about just sort of pulling up the ladder for the women behind us for those of us that do have retirement funds and are able to fund a little bit for our grandchildren's education and we have that kind of flexibility. But it behooves us to be thinking about the policies that make education and make career paths accessible for the women behind us.

And that's just one of the things as I've grown into this position of more comfort now, is also thinking about what were those safety nets that were there for me that helped me rise above my beginnings and get the education I need with debt that I could pay off.

I just see a lot of forces right now that I feel like are kind of making things harder for the next generation of women. And so I feel a responsibility to pay attention to those and look for those opportunities to lower the ladder for the people coming up it.

Kirtly: Oh, that is so well put. I completely agree.

Katie: So my grandmother spent too freely, and my mother never spent at all. I'm trying to find that place in between where I'm clear-eyed about the risk, strategic about my generosity, and brave enough to live like I have money that was meant to fund a life, not just sit in an account until I'm too old to use it. So I am trying to die with zero, or at least risk dying having lived.

But I also know that finding that place in between is a privilege. And the real work, the policy work, the structural work is making sure that women have the option to even look for it.

So I'm going to fight like hell to make sure more women get that chance, and that means considering the policies that benefit me and making sure that we're not excluding future generations.

Thank you for helping us think about the financial domain of risk. We are exploring risk from all seven domains of health. We're on all your podcast platforms, or at womens7.com. So we hope you'll take a risk and listen to all of them.