Mama and Investing: A Story of a mother who wants to Be financially Independent.

As a mother and a wife, have you ever worried about your family finances? Maybe not all mothers worry too much as I do, but I believe the worries about the household, steady income, a dream house, retirement plan, kids' college fee, etc. etc. are a staple doubt within every mother’s heart. So instead of worrying too much, once I become a mother, I decided that this topic needs to be addressed. I believe that thorough financial planning – both for the parents as well as for the children - will save the family later in life.

If you think as I do and want to give a head start as much as possible to your children, maybe we can share a thing or two. So, I have been thinking about writing an investing story for a while in a spirit to share and learn from each other. Personally, my financial goal is to be financially independent even after retirement. And since I become a mother, I also want to pass on financial wisdom to my daughter as early as possible. I believe teaching her to catch fish is way more valuable than handing her the fish.

To tell you the truth, birth and child-rearing changed my perspective towards many things including financial planning. Before having a baby, my financial goals revolve a lot around my personal gain: to achieve this and that, something like a mountain to climb. However, after I became a mother, things turned out to be different. I accepted a career halt not as a failure and suddenly money becomes more like leverage – to guarantee that my daughter will benefit from it rather than to spend or hoard it.

However, when we hear about investment or financial planning, most of us mothers tend to avoid this topic. Many excuses include,

“I am not financially literate enough; my husband handles our finances.”

“I don’t handle finance, I don’t earn.”

“Financially speaking, I do most of the groceries and my husband is doing the rest.”

Although mothers deal with financial issues on an everyday basis, let it be the groceries or sweet treats, we don’t always share this worry with our significant other. When we do share it though, it often becomes a topic of debate rather than a shared hobby.

Like many other traditional wives (if you call it), I believe that husbands are likely to take a leadership role within a family. However, I firmly believe that even the best leader needs an advocate. So rather than being the head, I’d prefer to be the neck. Being the neck doesn’t mean leaving the family finances 100% to our husbands. It means to discuss and share with them if any biases or holes are overseen along the way.

In fact, statistically speaking, 50% of men die earlier than their spouses (Harvard Health). Not to mention, fathers and husbands tend to be more disorganized and take too much risk without forethinking. However, jumping all over to your husband won’t be a good idea either. Household finance and investment should be a joint project that both parties enjoy.

For example, doing a tax return is something I like to do together with my husband. In fact, it sparks my research and collecting spirits to optimize our yearly income. So instead of keeping all this spirit within myself, I decided to share my ideas with as many women and mothers out there hoping that we all can benefit from understanding finance better.

Of course, the things I write here are my own opinion and by no means to advise you financially. If you need personal financial advice, I strongly suggest visiting a financial advisor whom you trust.

1. Do the homework

Before we talk about investment, I believe every household needs to do their homework.

Ugh, homework?! We don’t like it much, but we know that doing it will help us understand the lesson we learn in class. It is not about being financially savvy but being hands-on and practicing financial discipline along the way. This homework includes understanding the family cash flow and allocating them to the right posts.

The easiest way to do that is to know how much your net worth, your income, your saving, and your spending. Our net worth is everything we own minus our liability. Remember our net worth is changing over time (because things we own may get depreciated or appreciated over time). So, it is very beneficial to do this calculation at least on a yearly basis.

Then, what happens if it seems we don’t own anything or even in the minus for having too many liabilities? Don’t panic or damn yourself. Everyone starts somewhere and it is totally not bad to start it now. Most people don’t even know how much they are worth and they don’t even do this exercise. So, if you are the few people who give real thought to it, in fact, you are already stepping toward your financial goals.

Another important point is about your saving and spending. I will talk more about saving on a later note and focus this chapter on the spending habit. The old tale says, never spend more than you earn. So, my womanly nature when we talk about spending is, to minimize or even better eliminate it. Do you also remember what a grandma will do with her grocery money? She will have a budget and will spend less than her budget. My grandma has an old biscuit jar where she put all the change from her groceries. She basically spent so little, and it feels like her biscuit jar was never empty. Sometimes, it is also beneficial to have a spending plan and count your real spending to minimize errors of judgment.

However, like many other women, I like to spend money on mundane things like purses, shoes, skincare, make-ups, and many other stuffs that are totally unnecessary. Yes, I feel you! But remember, our goal is to be rich not to look rich. It is a very different concept of being. So, I often do a mental justification before buying anything. Is it necessary? Can I justify it? And even when I can justify it, I sleep over it for several nights (at least 48 hours span) before deciding to buy something. Now that I become a mother and my income slashed by almost half, I tightened my belt even more.

Another interesting fact is that for many people, it is not their level of income that determines their net worth but their spending habits. In the end, I believe by getting our finances organized is the first step towards achieving financial independence.

2. Start Now

If you are like me you tend to see dangers everywhere and tend to be very risk-averse when it comes to investing. I will tell you a mantra: “The riskiest thing to do, is when you are not doing anything (with your money)”. I learned this lesson from my own experience. It was when I saw my savings were eaten away by rampant inflation which happened shortly after COVID-19 pandemic.

I always like to save money, as a kid, I was so happy to see my piggy bank become so full that I couldn’t put any coins in anymore. That means it was time to count and to buy something with the money (I bought my own bike, presents for my mother, and a birthday party for my doll with my own saving by that time). Even in my early years, I knew that money should be saved and spent for your own pleasure and the people you love.

As I grew up, I learned that many women, when they chose to save and to invest, have too much money in their savings and checking accounts. And seeing the buying power of money decrease after I saved it so rigorously, was in a way, heartbreaking. That was when my husband and I decided to buy a house in Indonesia, and I was reluctant to convert my Euro to Rupiah thinking that euro will get stronger when the payment was due. Then COVID-19 and the Ukraine-Russia war happened. Suddenly the Euro got so weak that we had to pay several thousand difference to match the invoice. If I were smart enough to put that money in a more stable currency or a high-yield investment like a deposit account or a blue-chip stock, I might be luckier and could cushion the risk of Euro’s inflation better.

My message is: saving is great, but investing is even better! If you don’t have anything to save, you’d likely not have anything to invest. So, let’s start to save for the rainy days and retirement. In fact, saving our retirement is one of the most important things to do if we earn and we work. A study conducted by YouGov points out that women have 30% less savings than men when they retired (Women Have 30 Percent Less Savings Than Men When They Retire. Here’s How to Change That (yahoo.com)). Even when we save, we put the money in an inflation-prone instrument that eats away the value. In my experience, this can be true because women earn less, have a longer career break, and when they return to work – it will be mostly on a part-time basis.

Despite damning ourselves because we were born women, let's just close the gap and start now! First, check with your retirement provider what is your status is and the income projection when you retire (In my case, it is the DRV in Germany and the Jamsostek in Indonesia). If you have a chance to adjust and to max it, please do so. Otherwise, mind that we need to supplement! In my case, I don’t even know when I will work or retire in the future. So, my husband and I decided to supplement my retirement savings with several insurance and financial instruments. Some of the supplements that you can think of: are insurance if you (or your husband) are unable to work, ROTH IRA in the US or a private retirement account in Germany, and last but not least an asset that is less liquid but will appreciate in value – such as a renting property.

But how about women who do not work in any formal sector? Or chose to be a stay-at-home mother? Although it will be more difficult if your income stream fluctuates monthly, it is not a dead road. Again, I can give my grandma as an example. She never worked in any formal sector, she had to collect woodcuts from the forest to sell them at the traditional market, she never knew any financial instrument at all, yet she is now richer than most grandma I met in my life. So, what was her secret? She barely had any secret apart from being very frugal with spending, saving most of her income, and protecting her wealth (from inflation) by investing her hard-earned money into land, gold, and fine jewelry. Every land that she inherited or bought was very productive in those days. She cultivated rice, corn, and live stocks and sold the harvest directly in the market. The only one time I heard that she sold her land was when my aunt needed money for her education. Now that my aunt became successful in her career, she paid back everything and gave much more. To us, her grandchildren, my grandma would only know one kind of gift – it was gold – mostly a nice pair of earrings. She also lives a very healthy life – I never see my grandma consuming meat when I was young. Her self-control was remarkable. And by 70, she can basically live out of the interest rate from her deposit account which was managed by my aunt.

Finally, I believe that before investing you really need to know your risk appetite. Let's think about a water tank, it is safer and nicer to have a full water tank. However, every drop above the maximum level is something that we can use to water the plants – that was exactly what my grandma did, every excess cent is there to invest. If you want to learn more about this philosophy, you can read more about the FIRE movement (Financial Independence, Retired Early) here

3. Different Financial Instrument

So, when we have the basic retirement account and emergency savings in control, it is time to have fun! I personally prefer to treat investing as a hobby – and like any other hobby – you are obsessed with it, do it regularly, want to learn deeply into it, and get personal satisfaction from it. To give you a rough description of what a standard financial instrument can be, I can list some easy terminologies here:

- Stock: A piece of paper issued by a company that indicates ownership. Some companies will give dividends (a payout to the stock owner) regularly and some do not.

- ETF (Exhange-Traded Fund): a basket of stocks that tracks the market (commodity, tech, consumer, utilities, etc.)

- Index Fund: a basket of stocks that tracks a country’s market performance (for example S&P 500)

- Bond: A piece of paper issued by someone who borrows money (usually government). The bondholder will be paid back (including interest) at the end of the term.

Remember that the value of these financial instruments changes over time. Their values fluctuate hence you will often hear a bear and a bull market. A bear market where the value decrease and a bull market are when the value increase. If you want to learn more about financial terminology, I can suggest an Investopedia site for a starter: Investopedia

Of course, there are many alternative instruments out there. Women tend to say,

“This purse is an investment.”

“My skincare is an investment. etc etc”

This statement is somewhat true but could be misleading. Alternative investments like luxury purses, diamonds, arts, and branded goods are designed for the selected few. Without deep knowledge (and sometimes insider knowledge), a common person like you and me could not follow where the winds would blow. I am not saying that this is impossible, but market entry is way much more difficult than a standard financial instrument – like stocks or ETF. But, if you are interested we can talk about it another time.

Moreover, with stocks, ETFs, or Index Funds, the key is to be patient. The market will boom and crash – but it will always recover. And like Steve Jobs mentioned during his famous speech at Stanford University, “You can’t connect the dots looking forwards, you can only connect them looking backwards.” That’s why investing (a future-looking activity) requires us to have a leap of faith – logical reasoning, good judgment, and a bit of prayer – which will give us a great return in the future.

So, if you like to learn more about the market cycles – and why humans struggle to think statistically – which will lead to the decision to hold stocks for the long run, I highly recommend a book from Daniel Kahneman called Thinking, Fast and Slow - Wikipedia. In fact, when it comes to the stock market, people and mostly men, tend to sell their stocks too fast. If you orient yourself to a long-term investor like Warren Buffet, you will likely hear this saying, “If you don't feel comfortable owning a stock for 10 years, you shouldn't own it for 10 minutes”. It is a long game, Ladies! Make sure your spouse knows it too. And what is the reason for an early sale? One of many reasons is fear. Fear of a market crash, fear of a missing opportunity, and a fear of a missing safety net. Stocks are not emergency savings!! So as much as how easy we can convert the gain, selling your stocks too early means you are missing that snowballing effect. Moreover, hope will always triumph over fear and if you have the capacity to hold, the price will only (most likely) go up! So, ladies, let’s build this capacity, and let’s buy to hold.

But which stocks should we buy? Unfortunately, I can’t write more than that due to a conflict of interest as my line of work is closely related to the market-maker industry. However, to give you a rule of thumb, buy something that you know, companies whose products you enjoy, and companies whose products are used by many young people.

4. It is about sleeping sound at night

Investing is more like psychology. Many economists and researchers alike tend to assume that humans made logical decisions when it comes to investing, while they are not. If I were logical, I would put much more money in the capital market and have barely any savings. I would also apply to more debt because the interest rate is comparatively low in comparison to 20 years prior. However, many of my financial decisions are illogical and so are yours. My point is, if we know that we are heading in the right direction – investing is a very personal journey. My aspiration can be different than your aspiration – It is not my dream to have a city mansion – but it is my dream to have a retirement home close to nature. I imagine it a lot – I already have a vision of its floor and its surroundings – but I would not indebt myself to having it in the next 5 years. I have a short-term and a long-term financial plan which I believe will help me to pursue my aspiration while gauging it from uncertainty. And to be able to run this marathon, we need to practice, know our limits, keep our speed, and have an optimistic mindset. So let it be a heavy loan, a risky stock, or other alternative investments – if you can sleep soundly at night – you are probably on good terms.

A book that I can recommend to any woman out there is the Smart Women Finish Rich by David Bach (Smart Women Finish Rich: 9 Steps to Achieving Financial Security and Funding Your Dreams by David Bach | Goodreads). In fact, I have read this book again and again just to make sure that I am on the right path.

Finally, if we can do all of these and become the best role models for our children and spouse, how can we teach our kids to catch fish? I believe there are two most important things to teach: fiscal discipline and all things related to money. Fiscal discipline is everything related to saving, collecting, and delayed gratification. It is like putting coins in your piggy bank and not checking them all the time. As a kid, I learned about all of this by seeing my parents do the same thing. It was not easy for some children but sooner or later, they will get that concept. It is our job as parents to make this activity enjoyable. For example, doing a piggy bank routine, going to the bank together to open a child’s first savings account, and telling them – openly – where the money comes from and where the money goes. I believe financial rewards are not a bad thing if we don’t overdo them. It teaches children that we live in a capitalist society, and it is important to reward them financially.

The second thing is to teach children about money and the deeper meaning of it. So, what is money Mama? Money is a legal tender, a store of value, and trust. Immediately, money is used to exchange goods and services. In the long term, money is used to store value and hedge the future’s risks. In its essence, money is about the trust that you put into a currency – let it be a US Dollar, Euro, or a Crypto – you own it, hoard it, and spend it, because you have trust in it. As parents, it is our job to bridge the child’s aspirations (mainly in the future) and how money can help reach them.

Since children are very imaginative, it is not difficult to let them dream. In fact, dreams with concrete actions are half reality! Some children also have a remarkable entrepreneurial spirit. My sister, for example, had an idea to make money out of a kicker competition league in the elementary school. Her friends, mostly boys, like to play kicker with each other using merely paper. She arranged the competitions: bords and schedule and asked for an entrance fee. The winner will get some money, but the rest will go to her as an organizer! Another example is my mom who supported our hobby of collecting stickers. At school, children like to exchange and buy stickers for their diaries. So, my mom bought a wholesale sticker and encouraged us to sell it ala carte if our friends wanted it. I made a few bucks from it and once we break even, I just give some stickers away to my best friends. It was fun but I also learned it was a tiring job to promote my stickers. I learned that being in direct sales is not my preference, so I focus on other things. That was how I learned about my dreams and how I can capitalize on them.

But money is so complex, and it is also not easy once you have it – it is not easy for us and is also not easy for our children. Instead of saving money for the bike, they can spend it on candies. This is where a bit of character-building plays in: trust your children. Money attracts trustworthy people. We tend to give money to trustworthy people and to help our children become them – we need to give them trust and show them trust. Money also moves from the impatient to patient people – like stocks – you will benefit from the compounding interest if you are patient enough to hold the stocks. Luckily, patience is something that we can learn. The easiest way to teach children this concept is by gardening. In fact, the most impactful experience I had was when I grew green beans together with my kindergarten teacher. I learned that when I have the right amount of water and sunlight, with patience, my green beans flourished.

Hopefully, this article can give you some fresh air about investing. It is not perfect and will likely be updated when I have learned more about the topic. I believe by writing it down and teaching something to other people will make us learn more. What do you think about this article? Do you also have a wisdom or two about investing? Are you struggling on something? Let us share, solve the problems, and be on the winning side together!