Our recent interview with Sallie Krawcheck, an investment expert, and pioneer of financial feminism was yet another reminder of the very real consequences women face when they don’t take ownership of their financial lives. And we mean literal financial consequences: missed earnings opportunities, misaligned investment incentives, saving vs. saving and investment strategies that can actually take women in the wrong direction. The result: not having the resources to live the lives they want to live.
To cut through the noise, we consulted with personal finance expert, Bola Sokunbi, to get her take on the finance strategies for every stage of your life. There will be no lecture about the negative effects that purchasing avocado toast and fresh cut flowers will have on your bank account, but we will be inviting you to ask yourself the following question: if you aren’t doing the things listed below, what’s stopping you?
Build the Foundation
Get comfortable talking about money: It is entirely possible, if not likely, that you will not have ever had a real conversation about money, other than that it is “impolite” to talk about it. Start getting over that idea now. If you don’t feel comfortable talking about money you will be less informed and less empowered to make smart financial decisions for yourself throughout your life. If money is power, then being able to talk about money is in and of itself a form of empowerment.
Start saving and learn to budget: You are never too young to start building wealth. Starting a savings account early in life maximizes your potential to take advantage of the power of compounding. If you have a part-time job or get an allowance, aim to save at least 10 – 20% of your money. Learning to budget now will set you up for success in the future. Start by allocating your money into three categories: wants, needs, and savings, then spend accordingly.
Focus on Consistency
Make Work work for you: The two most important things you can do to ensure you’re getting the most out of your employment are:
Plan for retirement: Many employers offer a 401K match. If this is the case, be sure you’re contributing enough to take advantage of the full match. Alternatively, set up your own IRA through a brokerage company and contribute to this monthly.
Get comfortable negotiating your salary: One of the best things you can do for yourself financially throughout your career is to make sure you’re being paid what you’re worth. This will likely mean hard conversations with your boss, so how can you set yourself up for success? Root your arguments in data – market standards for your industry and within your company, the specific contributions you’ve made in your role, etc. This is where getting comfortable talking about money in your teens will come in handy. Use that to have honest conversations with your friends and colleagues, both male and female, about salary and compensation.
Set up an emergency fund: Work towards building up an emergency fund equivalent to 3 – 6 months of your basic living expenses (for example, your food, transportation, and shelter). This way you don’t have to take on debt in the event that unforeseen circumstances, such as getting laid off or repairing a car or house, arise.
Start investing: Even if it’s just a small amount, it’s important to start investing early. If you don’t feel that you have the time or knowledge to manage your own investments, there are numerous platforms that you can invest through. Pay particular attention to the fees and minimum capital requirements. This is also a great time to find a trusted financial resource, like a financial planner or even a parent or family friend, who can help you navigate questions around things like investment, mortgages, and taxes.
Commit to a Plan
Get serious about paying off debt: If you haven’t already, start paying off any debt you have, including your student loans and credit cards. Prioritize paying off your highest interest debt first. The average interest rate on credit cards is around 16% while interest on student loans range from 5% to 15%, depending on the type of loan.
Increase your insurance: Your lifestyle and responsibilities may have changed in recent years, so review your insurance options, such as disability, life, homeowners, and automobile, and ensure you have the appropriate ones in place, especially if you have dependents. Be sure to update the beneficiaries on all your accounts.
Get on the same page as your partner: If you are married, or in a serious relationship, it’s important to discuss your financial goals together. Set time aside once a month to go over your progress and review your budget, goals, and investments together.
Pay off your debt: If you still have debt outside of your mortgage, now is the time to become more aggressive with your payments. This can include paying off your mortgage. If you’re able, bump up your mortgage payments and plan to pay it off early.
Expand your investment portfolio: If you’ve been investing consistently you should have a tidy sum saved up for retirement by now. Set a goal to max out your retirement contributions and then look into other ways to bulk up your savings and investments via non-retirement investment accounts. They won’t have the same tax benefits but they are a great way to boost and diversify your savings.
Prepare for Retirement
Play catch up: If you haven’t quite kept up with your retirement savings goals, it’s time to play catch up by making additional contributions. When you’re 50 or older you can add an extra $6,000 to your company retirement plan above the 2018 general contribution limit.
Review your will and life insurance policy: Make sure your will and life insurance policies are up-to-date, meet your needs, and include your beneficiaries.
Go over your retirement goals: Refine your retirement goals and determine if you’ll be able to meet them and what changes you’ll need to make. Doing this review will help you come up with a solid timeline as you inch closer to retirement.
Refine your Goals
Review your retirement plan: Pay particular attention to your risk tolerance, which should be more conservative now. Think about the amount of money you’ll be withdrawing from your retirement accounts annually and how much you’ll need to set aside to account for taxes.
Keep budgeting: At this point in your life, you may decide to take a step back and work part time as you phase into retirement. Continue to hone and refine your budget as the income you’ll be earning may change considerably.
Plan ahead: A financially sound woman in her 70s should be consistently managing annual withdrawals from her retirement fund, revising her will as necessary, working with an estate planner, and adjusting her budget to include or anticipate any medical needs and expenses that may arise. This will help make sure you’re in a position to enjoy the fruits of hard work in retirement.