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鵻 CHAPTER 1
鵻
W E A LT H B U I L DI NG
The first pearl of wisdom we want to offer you is that a woman must
build her own wealth. Traditionally, we have been raised to think that
somehow, magically, our financial well-being will be taken care of by oth-
ers, either by family inheritance or, more likely, by marrying a man who
earns a lot of money.
It is understandable that most of us have never really considered the idea of
building our own wealth; only in the last few years has it even been a realistic
possibility. Women couldn’t get a business loan on their own until the 1970s
in America. As Ana Harvey, the assistant administrator for women’s busi-
ness ownership at the U.S. Small Business Administration (SBA) explains,
It wasn’t until 1988 and the passage of the Women’s Business Own-
ership Act that the needs of women in business—such as access to re-
sources and the elimination of discriminatory lending practices by banks
that favored male business owners—were addressed. It was a move that
Julie Weeks, the head of Womenable, a research, program, and policy-
development consultancy whose mission is to improve the environment for
women-owned businesses worldwide, calls “the big bang in women’s entre-
preneurship.” According to the American Express OPEN State of Women-
Owned Businesses report, in 2011 there were an estimated 8.1 million
women-owned businesses in the United States, generating $1.3 trillion in
revenues and employing nearly 7.7 million people.1
Here is the grain of sand that first enters our snug shell—the unfortunate reality of
what happens to a woman who does not assume responsibility for building her
own wealth: She develops an unspoken terror that one day she will be the little
old homeless bag lady she sees on the street. A report from the Center for Prog-
ress called Straight Facts on Women and Poverty reveals that 13.8 percent of
women are poor in the United States versus 11.1 percent of men. Over the age of
seventy-five, 13 percent of women are poor versus 6 percent of men. This gap is
bigger here than in any other developed country in the world.2 Three quarters of
the women with incomes below the poverty line are single women. We say a
woman “must” build her own wealth to avoid becoming an unfortunate statistic.
We really must take care of ourselves!
If you do know any women like this—or if any of these situations apply to
you—then it’s a perfect opportunity to turn a grain of sand into a pearl of great
price. The good news is that today, by following our first pearl of wisdom and by
realizing that you must build your own wealth—for your own sake and for the
sake of your family—you can avoid the heartbreak of poverty in your later years.
When you have money, you have security, you have choices, and you can make
plans. Whether you are a mother planning your children’s education, a new wife
discussing money plans with your husband, a new college graduate considering
your first career, or a retiree considering helping a family member, remember that
your own financial security is paramount.
How do we build our own wealth? There are many ways to go about it;
below, we will cut through the bewildering number of possibilities and
help you get focused on the most effective strategies.
If owning your own business becomes your sole vocation, you’ll be able
to set your work schedule and get excellent tax breaks. If it’s a secondary
interest, you will gain more financial security in the new freelance econ-
omy. This is the era when your business vision can come true at any age,
and there’s a lot to consider when starting your own business. As Oprah
Winfrey says on her website, “What I know for sure is that if you want suc-
cess, you can’t make success your goal . . . the key is not to worry about
being successful; but to instead work toward being significant—and the
success will naturally follow.”
We realize there are many excellent resources available to help women
start businesses. In this section, we want to dispel some of the myths sur-
rounding this path to wealth building and help you focus on the most im-
portant things to know before you get started.
take only private clients. The growth of her business will be limited to the
number of hours in a day in which she can give massages. Ser vice busi-
nesses do not have property, manufacturing plants, or equipment, which
means that they do not have assets that could be used as collateral for a
business loan. Eventually, in order to expand a ser vice business beyond
what you can personally do, you will have to hire employees who do what
you do, and these employees may or may not be able to provide the same
level of excellence you provide in giving the ser vice.
On the other hand, people who are excellent at providing a ser vice
can translate this excellence into a products-based business. For example,
a Pilates instructor can consider writing a book on Pilates, creating DVDs
to sell, and marketing a line of clothing to wear during Pilates classes.
Products do not require you to personally interact with each potential
customer. You write a book once, and it can be read by millions, for ex-
ample. You can standardize excellence much more easily in a product than
in a ser vice. Many products take equipment to produce, and these assets
can be financed through business loans. There are tax incentives and subsi-
dies available from the federal and state governments to businesses that
hire employees. In the long run, a products-based business generally pro-
vides you with more personal flexibility than a service-based business. As
your business becomes more successful, you can hire others to run it while
you sit back and enjoy the benefits of ownership.
These helpful tips come from author and small-business management expert Jane
Applegate.
you can purchase to help you write a business plan. You must get very clear
on the costs of running your own business and understand how you will
pay for these costs. The high failure rate of new businesses can be overcome
by smart planning. If you are new to working with numbers, hire a good
accountant to help you develop a business plan, and bounce your ideas off
people with experience in the field you want to enter if you are not highly
experienced. Take advantage of the wisdom of retired executives available
through SCORE (www.score.org), which provides free small-business train-
ing and mentoring. The more research you do in advance, the more likely
your business is to thrive.
Although it may be tempting, also avoid using the excess value in your
home as collateral for a home-equity loan to start your business. If the busi-
ness does not take off, you may not be able to cover the second mortgage
payments and may, tragically, lose your home as well as your new company.
If you do not have enough personal savings to fund a new business, and many
people don’t, then you will need to look for financing.
• Don’t place high hopes on the banks unless you have other
collateral: It is extremely rare for banks to give noncollateralized loans to
start up a business. The bank may give you a loan if you have other assets
to pledge, such as a personal portfolio of securities. It may make sense to
pledge a personal securities portfolio in order to get the funds to start
your company; your securities can continue to grow while you launch
your business. In this case, negotiate for long repayment terms, or an
interest-only loan, to give yourself two or three years before you have to
start repayment. Make sure the securities are conservatively invested so
that you don’t face a margin call if the markets go through a bad period.
(A margin call means that the value of your collateral has fallen and the
bank wants to sell the securities to pay back the loan.)
16 The SEV EN PE A R LS of FINANCIAL W ISDOM
• Take a personal loan from friends and family: Many people turn
to friends and family for personal loans to start a business. In this case,
share your business plan, draw up a promissory note, and make sure
family members have reasonable expectations of when you can repay
the loan. Offer to pay interest and take out a life-insurance policy that
would repay your family member should you die unexpectedly. These
policies are usually very inexpensive if the benefit amounts are small.
• Max out your credit cards as a last resort: Some famous busi-
nesses were started by maxing out credit cards; this is a much less likely
scenario today due to tighter credit standards and smaller credit lines.