As anyone who identifies as a perfectionist knows, this attribute can be both a blessing and a curse. According to Harvard Business Review, perfectionists are often highly motivated, conscientious and produce high-quality work. But on the other hand, they are also more likely to hold themselves to impossibly high standards and to have an all-or-nothing mindset when it comes to how they approach things. This can spill over into how you approach your finances — which isn’t always a good thing.
In this “Financially Savvy Female” column, we’re chatting with Dr. Patricia Villarreal, a licensed clinical psychologist and the co-founder and chief clinical officer of Em-Powered Network, and Vanessa N. Martinez, a wealth management professional and co-founder and CEO of Em-Powered Network, to get their unique perspectives on how perfectionism could be holding you back financially, and how to move past the mental hurdles you may have set for yourself.
What advice would you give to women who see financial planning as an all-or-nothing situation?
Villarreal: Oftentimes, we allow our internalized judgments or misjudgments of ourselves to dictate what we can or cannot do. In an effort to not make ‘mistakes,’ we err on the side of caution and inaction. What we tend to neglect is that there is a learning curve for everything. While we are bound to take some missteps along the way, this is the journey to new knowledge and confidence in a new skill we would not otherwise gain. We also tend to learn more when we make mistakes, so I would advise women to remember this whenever we try anything new!
Martinez: The idea that if we are going to get something done it must be done right is one of the reasons we, as women, tend to hold off on making many decisions in life. I like to call it Decision Paralysis. Not making a decision is a decision! By doing nothing, you are still on a financial journey, even if you aren’t taking an active role in the decision-making process. The path is simply blind and aimless.
As daunting as it is to start your financial planning journey, knowing that you have gotten started by simply investing in your 401(k) at work, listing out all your income and expenses, or writing down your wealth goals will make you feel a lot better. It’s all about taking the first step, and there is no perfect first step. (In fact, it is literally impossible to be perfect at finance in general!) Take the first step that you feel makes sense for you. Now, make sure you have written down what the next step will be, even if you don’t follow through right away.
What small steps can women take to improve their financial situation that can lead to feeling more confident about making bigger moves?
Martinez: The first step is knowing where you stand today with your financial situation. Build out a budget and look for the 50/30/20 rule: Do you spend 50% on your needs (rent, utilities, food, healthcare, etc.), 30% on wants (gym membership, cable, eating out, etc.), and 20% to save and invest? If you don’t, where can you make some adjustments?
If you have achieved this rule or, better yet, surpassed it, now you can be proud of yourself and move on to setting wealth goals for yourself to achieve over time. Break down your ultimate goals into smaller goals each year or quarter so you can monitor the progress. Set calendar reminders to check in on your progress, and don’t forget to celebrate the small wins! Treating yourself to appropriately-sized rewards for meeting small goals creates an opportunity for reflection and motivation to keep working towards the big picture.
What resources can women turn to that can help build their confidence or lessen their fear of making money missteps?
Villarreal: The truth about building confidence is that unfortunately, there is no single quick fix to it. When embarking on anything new, some anxiety about risks is completely normal and even healthy. We should not judge ourselves for not knowing or being fearful of making new decisions. Instead, we should work on understanding that confidence is born out of courage and actions.
Martinez: Knowing that it’s OK to be afraid and still move forward is courage, and the confidence that we see in some women is truly their courage shining through. We all have fears, we will make some mistakes, but those who take no risks reap no rewards. Be courageous to create and learn from new opportunities in all aspects of our lives.
For specific resources women can turn to for guidance, I suggest they join a group or network to help source ideas, confidence and growth. They can also grow their knowledge and confidence by reading self-help or finance books, or even taking a class online in the subject they want to prosper in. Finding a mentor to connect with can be beneficial as well. Even if it’s just a family member or friend, having someone who can help guide you and build up your confidence can be a beneficial source of information and help.
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GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.