Value

Owning Emotion!

by Eleanor Blayney
April 3rd, 2011

“You are SO emotional!”  How many times do women hear this from their significant or even insignificant others?

I’ll be the first to confess that this description has been leveled at me, more than once, by various business colleagues during my career.  Each time, it was not intended as a compliment nor even as a neutral comment, such as might be made about the weather.  Rather, the implicit message was that emotionality was somehow unprofessional – the antithesis of rationality and cool judgment.  In other words, to be a better manager and advisor, I needed to pull myself together.

Leaving aside hormonal bursts of emotion, such as those induced by PMS or menopause (even I will admit those particular storms can be a bit much), I do not agree with the notion that emotion somehow scatters our wits or dissipates our effectiveness as professionals.  If anything, access to our feelings is a hallmark of psychological wholeness and balance.  Those who suppress their feelings, or deny they even exist, are – dare I level back? — the ones in need of self integration, of pulling themselves together.  Me, I am quite happy sitting between feelings and facts, and find quite often that wisdom emerges when the two start shouting at one another.

The field of personal finance was originally constructed on a foundation of rationality:  the premise is that individuals manage their money dispassionately and sensibly, seeking either to grow their monetary wealth or to protect it.  Behavioral finance – a latecomer to the table – arrived to assert that humans, who may share 98% of their DNA with long-armed tree dwellers, are not as buttoned-down or logical as the financial theorists once assumed.  Through close observation of people’s choices (such as buying winning stocks and selling losers, or the decision to play golf on Sunday rather than go to a movie with the wife), behaviorists have concluded that individuals often do not act in their own best interest.  They use, in other words, certain mental short cuts that lead them far off the straight and narrow path of rationality.

While behavioral finance can be a great source of “people-do-the-darnedest-things” anecdotes and a welcome counterpoint to rationalism, it still, in my opinion, fails to give human emotion its due in the realm of personal finances.  Instead, it focuses on the “illogic” of homo sapient decision-making, which implicitly suggests that logic and rationality are more highly valued than the delightful monkey-messiness of being human.  Indeed, many advisors use the observations of behavioral finance as  “advisories” to their clients.  For example, they will explain to clients the behaviorial “availability heuristic” – which leads to the notion that what’s happening in the stock market today will also happen tomorrow – as an example of what NOT to assume when investing.

We have yet to fully acknowledge, even celebrate, the importance and power of emotions when it comes to finance.  Far from leading us astray, these emotions provide us information and guidance that can vastly improve the way we understand and advise others when it comes to money.  As David Brooks, a New York Times columnist, recently wrote in an op-ed on the new humanism, “Emotion is not opposed to reason; our emotions assign value to things and are the basis of reason” (underline mine).

Brooks is talking in his essay about government policies, but his use of the word “value” puts me instantly in mind of personal finance as well.  What he is saying to me, even if his message was otherwise directed, is that emotions and financial value are intimately and importantly aligned.  Get rid of the emotions, and we have no basis for our interactions with money.  Prices of goods and services can be denominated in dollars, and set by exchange rates, market makers, central banks, and economists, but it is ultimately our feelings and reactions of fear, anger, well-being, and compassion that inform our choice of those goods and services.

Helping women understand money and gain financial confidence is not about eliminating their emotions, but going straight to their core.  Women are indeed an emotional gender, and have always relied on those trustworthy emotions to guide us as mothers, sisters, and friends; as community activists, as consensus builders, as the primary ministers to and providers of basic human needs:  for education, healthcare, care for dependents.  Emotional outbursts may find no place on Wall Street, but elsewhere in the world, these eruptions are changing the global order and are the occasion for getting important work done.

Let it be said: as women, we are rich in emotions!  It is high time we understand and appreciate this wealth as it pertains to our decisions and choices about money.

Categories Financial Confidence, Women work
Comments (0)

A New View of Value

by Eleanor Blayney
February 22nd, 2011

When was the last time you told yourself, “No, it’s too expensive”?

Some of us have banished this phrase from our vocabulary or say it in a voice so tiny, it cannot be heard over the loud beckon of something that we want.  We don’t like telling ourselves “no,” with the result that the mental chatter in our head consists mostly of justifications for the “yes.”

For others of us,  “too expensive” is an automatic barrier we erect to keep us from engaging fully with what the world has to offer.  We don’t take the trip, go out for a nice dinner, buy the premium brand, or sit in the best seats, nor do we even let ourselves be tantalized by these luxuries.  No mental small talk here.  The price is too high – discussion over.

There is, of course, a vast middle range between the automatic self-indulgers and the knee-jerk self-deniers.  It’s here where questions of value reside – where we have to do a bit of thinking as to whether a given expenditure is really worth it.

Actually, it can involve a lot of thinking.  Value is an elusive and highly subjective concept, not to be confused with price.  One woman’s trash can be another woman’s treasure, as any inveterate prowler of Saturday yard sales will attest.  Taste, too, may play a part – if you don’t like caviar – you’re unlikely to appreciate, let alone pay the going rate for those exquisite, slimy eggs.

There may be as many different registers of value as there are individuals.  Generally speaking, however, these registers fall in one of the following categories:

  • Affordability.  In this case, we make our determination as to what we will pay based on what we CAN pay.  While this approach has the merit of keeping us out of cash flow trouble, it discounts the importance of quality in our purchase decisions.  The warning “you get what you pay for,” can be relevant here.
  • Cost/benefit analysis:  MBAs and economists favor this approach to value, particularly when evaluating alternatives.  The most valuable option will be the one with the most benefits per unit of cost.  Sounds sophisticated and scientific, but benefits (as well as costs) can be highly subjective and emotional.  Name brands use this subjectivity to their advantage.  Branded products or services almost always cost more than generics, while offering virtually the same features.  But when it comes to choosing a bottle of ketchup or aspirin, the thought that Heinz or Bayer was what “Mom always used” trumps the just-as-good generic every time.
  • External reference: Sometimes we decide what is valuable based on what others think, do, and spend.   When we are teenagers, this shows up as “peer pressure” and is, unfortunately, very powerful.   The problem is, however, not all of us grow out of this way of thinking. In its adult form, this is referred to as “keeping up with the Joneses.”  Either way we are looking outside ourselves for our measures of value.
  • Internal reference or self-esteem:  When we truly appreciate ourselves, in the sense of knowing ourselves and how we choose to live our lives, the question of monetary value becomes simple.  We don’t need accounting or economics courses to know if the price is right, and we certainly don’t need advertisers or trend-setters to tell us what to buy, and for how much.  We define value as whatever best honors us and sustains us.  Our use of money – what we buy, save, or give – is not a source of shame or indecision, but a form of personal expression.

At Directions, we believe self-knowledge is the first, and perhaps most powerful, lesson of personal finance.  This knowledge will not, of course, eliminate those occasions when we must tell ourselves “it’s too expensive” or “I can’t afford it.”   But this self-talk is no longer about denial, but affirmation that we are making a choice that honors what is most important to us.

Categories Personal Finance for Women
Comments (1)

what does it mean to change the conversation?

by Eleanor Blayney
January 11th, 2011

In light of our subscription program for advisors, we are taking a moment to review some of the basics of our initiative.
-

We talk a lot about changing the conversation about personal finance for women.  But why is this important, and what does it mean?

It’s important because women have been underserved by the financial services sector.  Many report being patronized or intimidated by financial advisors. If they are part of a couple, they may feel unheard as a result of the discussion being pitched primarily to their spouses or partners.  Many don’t feel ready for the challenge of personal financial management, having grown up without examples of mothers who worked or who were responsible for the important household financial decisions.

It’s important to change the conversation because women are rapidly gaining in economic power.  They are in the workforce to stay, and have accumulated assets of their own.  They are the inheritors of wealth because of their longer life spans.  To survive and thrive, financial advisors have to figure out better ways of reaching women.  They must realize that the traditional male-defined ways of doing business are not going to work.  Women aren’t that interested in the competitive game of money with its constantly changing roster of winners and losers.  They are interested in what money can do for their families, for their communities and networks, for their lives.

Changing the conversation will involve a shift in emphasis and delivery rather than a wholesale discarding of subject matter.  We still need to talk about investments, debt management, tax reduction, and retirement plans with our clients.   There will still be topics that are technical and complicated – estate planning comes immediately to mind – which we must make sure women understand, even when they are totally uninterested or overwhelmed.

Here are just some of the ways that Directions for Women would like to change the conversation about personal finance:

Advisors would talk to women clients:

  • Less about being rich, more about being enriched
  • Less about price, more about value
  • Less about balance sheets, more about balance
  • Less about transactions, more about engagement
  • Less about financial capital, more about social and human capital

These conversations would take place more often at kitchen tables, and less often in formal conference rooms.  Advisors would tell more life stories, and present fewer graphs and charts.

Most importantly of all, advisors would listen more, and talk less.

Categories Financial Confidence, Personal Finance for Women
Comments (2)

Directions has been quoted by:

Directions For Women
© Copyright 2011 Directions, LLC. All Rights Reserved