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5 Ways to Recover from the Bag Lady Syndrome Thumbnail

5 Ways to Recover from the Bag Lady Syndrome

The Bag Lady Syndrome is Real!  

5 Action Steps You Can Take Today to Put You On the Road to Recovery

Written by: Rachael L. DeCosta, CDFA®

Anna and The Bag Lady Syndrome

Anna has an important meeting and is dressed to the nines – she decides to wear the red bottom heels and use the quilted “C” purse that lives in its dust bag carefully placed in the back of her custom walk-in closet.  She uses her new iPhone 13 to schedule a round trip Uber Black, to avoid the hassle of parking.  She may even have time to grab her favorite Starbucks drink before her meeting.  (Shoes,  Purse and iPhone $9,500 and Uber Black and Coffee $77 – this does not phase Anna, because the shoes and purse are paid for, the new iPhone is $30 per month and the Uber Black and coffee provide immediate satisfaction – she works hard, has plenty of money in the bank and deserve it!)

The meeting was a huge success, in fact Anna secured her dream client and a hefty bonus! As she walks to the corner to get into the Uber Black, she encounters a homeless woman asking for money.  How does this make Anna feel?

Sadness for the homeless woman and her situation;
Helpless; and
Grateful for having money in the bank, food on the table and a comfortable home.

Men also share these emotions when coming across a homeless man or woman.  However, men typically do not share Anna’s most intense emotion, FEAR

Fear that one day she could find herself in the same predicament as the homeless woman, lose it all.

In the 1970s, this fear was coined the Bag Lady Syndrome, and one experienced by women from various socioeconomic backgrounds, but rarely experienced by men.

Given Anna’s financial situation coupled by her frivolous and successful day, this fear may seem irrational.  However, her fear is very real and cannot be diminished nor dismissed.  Allianz Life performed a study in 2013 of over 2,200 women aged 25yo-75yo, the study found the following:

Unfortunately, for those women suffering from the Bag Lady Syndrome, financial security and a comfortable retirement seem inaccessible.   

Why do more women than men suffer from the Bag Lady Syndrome?

The June 2020 Gender Equality Series, Brookings Institute highlights several factors impacting women in retirement, including:

  • Earnings Potential – Women’s earnings are substantially lower than men.  Women with children on average make 30%+ less than men over their lifetime. 

  • On Ramps, Off Ramps – Women often leave the work force to care for children or care for elderly parent.  These intermittent breaks decrease their lifetime earnings, retirement and where applicable, can impact pension benefits.

  • Social Security Benefits – Women on average receive 80% of the Social Security benefits of men.

  • Life Expectancy – Women have higher life expectancies than men, and anticipate greater expenses in retirement, led by health care.

  • Lack of Involvement in Finances – Men overwhelmingly handle the finances, and when women become single because of death or divorce, they are confronted with a frightening unknown.

5 Action Steps to Recover from the Bag Lady Syndrome

  1. Identify the Root of the Issue - Why do you feel this way? From where is this fear coming? What keeps you up at night? What provides you with security? Journaling these feelings help identifying the cause of the fear and guide you to solutions.

  2. Get Organized - Gather your Financial Documents, including Insurance Policies, Wills and Trusts. Ensure you have all passwords, names and contact information for your Trusted Professionals.

  3. Develop a Budget – include variable and fixed expenses and all sources of income. This will provide the foundation for your financial planning and security.

  4. Create a Balance Sheet – What are your assets? What are your liabilities? This is a snapshot of your overall financial picture.

  5. Interview Financial Planners/Wealth Managers – A holistic financial professional can help to alleviate the Bag Lady Syndrome, guide you to financial wellness and realize your goals in retirement.  

We take pride in joining our clients on their journey to financial wellness and security.  Please Contact Us for a free consultation or email me directly at rachael@sandboxfp.com and visit www.SandboxFP.com.