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What Women Must Do to Ditch Bag Lady Syndrome

Tips from a financial adviser with a new book on the subject


This is a blog post I really didn’t want to write: How women can avoid the “Bag Lady Syndrome.”
 
I find the term offensive. “Bag Lady Syndrome,” first coined in the 1970s, is the term given to describe the feeling some middle-aged women have that they’ll wind up homeless and carrying around their possessions in shopping bags.
 
The Common ‘Bag Lady’ Fear
 
And yet it’s a real worry for many women. In a 2013 Allianz study of 2,213 women with household incomes of $30,000 or higher, 49 percent of respondents, and a third of those with incomes of $200,000 or more, said they "often" or "sometimes" fear losing all their money and becoming homeless.
 
(MORE: Shrewd Money Advice for Women Over 50)
 
It’s why Lance Drucker, CEO and President of Drucker Wealth Management, a chi-chi Park Avenue firm handling affluent clients, just wrote How to Avoid Bag Lady Syndrome [B.L.S.]: A Strong Woman’s Guide to Financial Peace of Mind. He says bag lady syndrome is women’s No. 1 financial fear.

I spoke with Drucker — recipient of the Women’s Choice Award for Financial Advisors — to get his advice for women and to hear him explain why B.L.S. isn't BS:
 
Next Avenue: Why do some middle-income and affluent women have “bag lady syndrome?”
 
Lance Drucker:  I’ll tell you a story. I remember meeting with a middle-aged, affluent, successful fashion executive when I was starting out. I was out of my league; she had more money than I’d ever dealt with. And I said: ‘What keeps you up at night?’ And she said: ‘I’m terrified about become the best-dressed bag lady in Manhattan. I spend everything I take in; I don’t have a plan. If my paycheck stops, I could have nice stuff but nothing to show for it.’ That stayed with me.
 
With every client I’ve had since, I ask: ‘What keeps you up at night.’ And women often say: ‘I’m terrified of losing my financial peace of mind.’ Some say: ‘I’m terrified about becoming homeless.’ Men won’t articulate it like that.
 
Bag Lady Syndrome is a real thing.
 
(MORE: Money: The Subject Women Don’t Want to Discuss)
 
Why don’t men have this fear?
 
Some do. For the most part, there are three things we as men don’t think we need help with: Directions; in the bedroom — men think they were born with an extra gift — and money. We think we can figure it out on our own. I tell women this and they’re hysterical; they know how ridiculous it is.
 
Are women worrying too much about become bag ladies?
 
I get women with Ph.Ds, doctors and attorneys who come to me and say: ‘Lance, I’m stupid.’ What they mean is: I’m so confused by financial jargon and I don’t know where to turn or who to trust. Women are more honest than men about money.
 
But the reality is also that women, on average, live longer than men and get paid less for the same job. So they have less money to put aside. And many leave the workforce for a period of time to raise a family, so they have less time to contribute to a retirement account. Plus, there’s divorce and widowhood.
 
(MORE: 7 Steps to a Secure Retirement for Women)
 
Do single and divorced women have this fear more than married women?
 
Absolutely. Because they’re on their own. When a woman gets divorced, she’s gone through a cataclysmic change. The decision to divorce took a lot of guts; now her life partner isn’t part of the team. In a lot of cases, the husband took care of the money and now the woman is confronted by it.

What should women do to avoid Bag Lady Syndrome?
 
First, identify the pain. How did you get there? Did this happen to your mom or someone you know?
 
The second step is to look at your budget, including your fixed, variable and one-time expenses, and create a balance sheet. Everyone wants to talk about their investing plan. But they need to figure out a budget balance sheet with what they have and what they’d like to have.
 
Once you know your budget, you can start building out a cash cushion and a retirement-income stream that will sustain you.
 
Then, look at your health insurance, your life insurance and your estate plan — wills and trusts, a durable power of attorney and health care proxies.
 
So, what about investing?
 
A lot of clients go to financial advisers who ask: ‘How much do you want to invest?’ and then say ‘Here’s a great portfolio.’ But that’s the tail wagging the dog. An investment portfolio has to be driven by purpose and match up with your life goals.
 
Are you looking to preserve income? Generate income? Grow your estate? Die with a buck fifty or with more money than you’ve ever had before? Investments need to be driven by what you want to do.
 
A big, and real, fear some women have is incurring big expenses for health care or long-term care in their 70s or 80s. What should women in their 40s, 50s and 60s do to reduce this fear?
 
That’s an easy one if you’re in decent health: Long-term care insurance was created for that reason. The federal government made the benefits tax-free and let people take a deduction for the premiums. My father-in- law and my dad both had long-term care insurance and both collected on it.
 
What should husbands do to help prevent their wives from becoming bag ladies?
 
If a wife needs help and if a husband is running the fiefdom, the couple has to have an open, honest discussion on what’s going on financially.  Too many times, women have no idea.
 
Women have to know where the financial statements are. If financial accounts are online, they have to know the passwords and security codes.
 
What can husbands do? Involve your wife.

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