Sunday Reading 6/26/2016: Women and Money

Olivia Palermo carrying a Birkin

Alas, I'm proving unable to maintain these posts as a weekly feature. I'm finding that I have a propensity for serious topics, which require a fair bit of thought and editing time before I'm ready to post. Thus, these will be a "Sunday Reading" thing, on an irregular schedule, especially now that I'm back to posting more regularly throughout the week. I have a few posts lined up for the near future, and I hope that these will continue to be interesting and inspire discussion!

One aspect of sexism is that hobbies associated with women are seen as frivolous, and (if expensive) extravagant. We see this with in discourse about makeup and fashion. When people hear about, say, Hermès Birkins, the inevitable reaction is sneering at how insane it is for there to be handbags that cost that much and extravagantly wasteful and out of touch women who buy them. Never mind that a small category of the highest-end designer products are "investments" in the sense of having a positive rate of return. In the case of the Birkin, that rate of return even rivals that of the S&P 500. Many designer products hold their value pretty well in the resale market, possibly better (with less depreciation) than, say, cars or electronics. I, like many other young professionals, cannot currently dream of shopping for that type of product... ever, really, but there is some financial rationale there, or, at least, some valid financial post-hoc justification for it.

That's a roundabout way of getting to today's topic, a meandering discussion of a few things related to the theme of "women and money." I don't think I'm imagining it when I say there's a general stereotype in American culture that women are bigger spenders and consumers than men. Sexism plays a role: even as society places high expectations on women in terms of their dress and grooming, it decries women for their extravagance when they follow those expectations. (Male politicians being criticized for the price of what they wear is almost unthinkable in contemporary American society, I think.)

I'd like to share one blog entry that touches on that paradox, where women are simultaneously expected to and even obligated to spend more on certain things while also being seen as inherently less frugal or less good with money. That blog, Frugalwoods, is in the "financial independence" genre. Financial independence (distinct from financial self-sufficiency) is, on a basic level, the philosophy of saving (and investing) as rapidly as possible so that, upon retirement, one can live indefinitely off of investment returns without touching the principle invested. A yearly withdrawal rate of up to 4% is potentially safe, taking into account average market returns over time, so $1 million could theoretically support a lifestyle costing $40,000/year. Mr. Money Mustache is the most famous proponent. There's often a large frugality component, which facilitates a sky-high savings rate and needing less upon retirement. The goal is often to retire early so one can spend their time doing what's important to them. Financial independence in that sense is not my goal (too much future uncertainty makes the required math difficult), but I read about it for inspiration for increasing my savings rate now because the years I spend in biglaw will likely be the highest-earning in my life. The Frugalwoods lifestyle is, of course, extremely different from the one I choose, but it's fascinating food for thought.

Less potentially controversial is the point that all women, and all people in general, benefit from having an emergency fund or "fuck off fund." It's a basic enough point, but important. I have been fortunate that I've yet to need to dip in to my fairly robust emergency fund (6 months basic living expenses), but the point is that it's there, and it makes the significant pay cut during my clerkship relatively stress-free. My future co-clerks and I were asked to start a month or two earlier than expected, which throws off various financial calculations (fewer biglaw paychecks, more clerk paychecks at the lower "new graduate" salary before I'm "promoted" to the "one-year experience" salary). I decided take the leap with an one month earlier start date, and my emergency fund facilitated it.

Finally, because I found Equire's "Four Men with Four Very Different Incomes" piece very educational a few weeks ago, I thought I'd share their equivalent piece for women. Unfortunately, I don't think this one's as good: They awkwardly pulled out quotes from the highest-income women to support a point about the "pay gap," except that the interview subjects in question reported that they specifically did not see themselves as victims of a gender-based pay gap. The first saw herself as a businesswoman whose income naturally fluctuates based on her own efforts, while the second chose to go part time in her day job as a doctor to care for her children, which accounts for her reduced income there, relative to people who do it full-time (she's also a real-estate investor on the side). I'm obviously in favor of vocal criticism of all aspects of sexism at the workplace, this was just an awkward article to attempt it in.

Do you ever encounter negative gender stereotypes about women and personal finance in your own life? Do you worry about a gender-based pay gap in your field?