What is your relationship with money? Do you love to save and budget for the future, or are you all about enjoying that hard-earned money and prepared to go into debt for it? Either way, we need to get better at talking about it if we ever want to be better at managing it, and eventually having more of it. Especially when you consider that globally, women control upwards of $20 trillion in annual consumer spending. But sadly, when it comes to managing money, women aren’t as independent as you’d expect. In fact, a mere 11% of millennial women in heterosexual relationships admit to taking control of their financial future. That means 91% of women aren’t participating in financial decisions. Well, our new series, The Money Files is set to change all that by helping women become masters of their own finances so they can manage their money and their future.
Money. We all love spending it and we all want more of it, but saving it is the hard part. It’s not that we don’t want to see more money in the bank (duh) but striking a balance between saving for the future and living the life you want isn’t always an easy one to master. Too often, the pendulum swings farther into the spending camp and before you know it, you’re in the black and playing catch-up with the interest charged on your credit card debt.
Don’t worry, we get it. That’s why we asked Priya Malani, partner of Stash Wealth to help us all get our financial shit together. So, she sent us 10 important money questions to ask ourselves so we can bank that cash, pay off that debt, and live life like a millionaire (well, that’s the dream).
1. What can I realistically do to improve my income level?
Negotiation is never a bad idea as long as you’ve planned for it. Most managers plan for you to negotiate and so there’s wiggle room in your salary range. An annual negotiation is perfectly appropriate. Use the months leading up the conversation to prime your manager and document the proof that you’ll use when going in for the ask.
When is negotiation not smart? When you go in cold and demand a raise. You’ll want to have data to support your request and documentation of your value-add (even if it’s qualitative, not quantitative). Stay factional and unemotional and above all, leave politics at the door.
Side note: IMHO, wanting to upgrade your lifestyle is not a strong reason to demand a raise. I was recently speaking to someone who was advised to use this strategy and as a business owner, I can say that not only would it not work, but it would leave me with a poorer opinion of the employees ability to #adult. Taking e-courses that are tangentially related to your field is an excellent way to demonstrate commitment to increasing productivity and value and certainly supports your case for a raise.
2. What can I do to reverse bad credit and get my score back on track?
This may sound counterintuitive but start using a credit card and paying it off in full every single week or more often. This is one of my favorite FICO hacks (FICO is an abbreviation for the Fair Isaac Corporation, the first company to offer a credit-risk model with a score). It’s a quick and easy to way positively impact one of the most important parts of your credit score—your credit utilization ratio. Make sure to never to charge up more than you can pay off.
If your credit cards are maxed, find ways you can pay down that debt ASAP. Consider airbnb’ing a room in your house, selling stuff on FB Marketplace or via Poshmark, getting a roommate, cutting any unnecessary expenses that may free up cash that you can put towards your debt. And once you find the extra money, set up a regular debt repayment automation, so you don’t accidentally spend it.
If you want to explore other actions that may bump your score, download the CreditWise app (it’s free) which includes a credit score simulator. It shows you how different actions will impact your credit score before you actually commit to doing them. I’m a huge fan of this app and use it myself.
3. Am I on a realistic savings pace for what I want to do when I’m near retirement age? How much should I be saving for retirement?
There’s no easy answer here because retirement is not one-size fits all. You can start by using an online calculator to find out how much you’d need to put away to ensure you’ll replace a portion your current income by the time you hit your desired retirement age.
Here are the main things you need to think about:
How much you earn now?
Is it just you in retirement or are you providing for someone else?
At what age do you want to retire?
How long do you expect your retirement lasting (aka life expectancy – MORBID, I know!)
Once you determine these things, you’ll have the major inputs that will help you decide how much you should be putting away for the exact retirement you picture for yourself. Yes, it’s very hard to picture what your life may look like years from now, but I have three words for you: Playing. Catch-up. Sucks.
4. If I’m planning on having children, how can I ensure I have enough funds to take care of them on one income? And when should I start saving for their schooling?
A good exercise is to stash away 10-15% of your income today and see how it feels. That’s the percentage of your income that will go towards your children for basic day to day expenses (not including schooling). If you feel you can manage on 85-90% of what comes in the door, that’s a good indication that you have room for kids, financially.
When it comes to saving for school, it all depends on how much support you want to provide them. 100% of four years at a private institution? 50% of four years at a public institution? Once you have a sense of what your priorities are here, you’ll be able to back into your savings goal. Add that savings goal to the 10-15% I spoke about earlier and plan to live without that money—is it doable? If so, start saving as soon as possible.
Once again, it’s no fun to play catch up and the longer you wait, the more you’ll have to save to be on track for your goal.
5. What would happen if my spouse passed away? How can I plan for that?
This is a not-so-fun thing to think about and plan for but it’s pretty important to do so. When it comes to the financial support your spouse provides, the first step is to decide whether you feel dependent on your spouse income or if you own property or have kids together. If so, life insurance may make sense. A life insurance person can help you evaluate how much coverage to obtain to ensure that if your spouse passes away, you wouldn’t have to change your lifestyle, in other words, you’d still be able to pay your mortgage and take care of your children in the same way you are now (monetarily speaking).
6. When should I start investing money? And how do I know what to invest in?
This question deserves a whole article in and of itself. But the long and short of it is this. Investing is a way for your money to grow over time, not overnight. If you think investing leads to a “quick win”, you’re thinking about it all wrong. Wall Street loves to portray investing more like gambling but the fact of the matter is that the sooner you start investing, the more successful you’ll be because money grows with time and you need to be patient for it to work.
As far as what to invest in, this is another area that Wall Street (and the media) portrays completely incorrectly. They make it seem like your support to pick stocks and trade frequently when the opposite in fact is true—slow and steady wins the race. If you’ve ever heard of index funds, you’re on the right track.
Investing is a means to accomplish your financial goals and so technically, no one should tell you what to invest in until they know what you’re investing for. Goal-setting is the first step to knowing what to invest in.
7. How can I save for a house? What do I need to do?
Speaking to my point above, the first step to take is to commit to home ownership as a financial goal. If you’re in a relationship, you’ll want to have this conversation with your S.O. Define the timeframe in which you’d like to accomplish buying a home. Using sites like Zillow can help you evaluate what kind of home you’d like to buy and how much it will cost. Once you know what you’re aiming for, you can back into how much you’ll have to save for a down payment. About 20% is a relatively standard down payment, but many Millennials are opting for 10% down to get into a home sooner. This is totally fine as long as you have the cash flow to cover the mortgage with wiggle room. You don’t want to end up #housepoor.
8. How can I make a budget that still allows me to live the life I want? Are there any apps that I can use?
YNAB is a great app that helps you segregate your cash into different buckets so you can set money aside for your priorities first (rent, bills, student loan payments) and then blow the rest, guilt-free. At Stash, we call it Reverse Budgeting.
9. Should I have a financial planner? How do I find one that’s right for me and isn’t going to cost too much?
Financial planners serve many purposes, but their main job is to help you consider your short, mid and long-term financial goals and then reverse engineer a game plan that puts you on track in the most cost-effective, tax-efficient way. Some people feel comfortable figuring this out on their own while others feel they might benefit from a guided conversation. A good financial planner can also serve as mediator when your in a relationship and provide that unbiased outside opinion that’s sometimes the exact thing your spouse needs to hear from someone else. Some people feel they’ve done things right and use a financial planner simply for a second opinion from an experienced professional.
Finally, a financial planner knows that you may not know all the things you should be thinking about and makes suggestions to make sure there aren’t any holes in your plan. Stash Wealth is a virtual financial planning firm for H.E.N.R.Y.s™ [High Earners, Not Rich Yet] who are in their 20s and 30s and want to take their financial life to the next level. Stash Wealth is a fiduciary (no conflicts of interest) and charges a one time flat fee to build you a customized game plan, called the Stash Plan®. Is the Stash Plan® right for me?
10. Do I have enough for an emergency fund? How much should I keep in that fund?
Unlike most financial professional, Stash Wealth believes your Emergency Fund should be no more than three months worth of your fixed expenses (rent, bills, etc). Most personal financial gurus talk about six to 12 months, but we think that’s crazy for four reasons:
Your Emergency Fund is supposed to be your first line of defense, not your only line of defense.
Millennials are hustlers. If sh*t hits the fan, we’re at a time in our careers where we are able to reset our incomes pretty quickly (of course, you know your industry best)
We have so many other financial priorities. Waiting until we’ve saved up 6 months in cash, has us wasting precious time that could have been better used helping us achieve other financial goals.
That’s way too much money sitting in cash. As good as the online banks are (and that’s where we’d recommend you keep your Emergency Fund), your money is technically still losing value every year thanks to inflation. Millennials want their money working harder for them.
Priya Malani is an entrepreneur and founding partner at Stash Wealth, a financial planning firm for H.E.N.R.Y.s™ [High Earners, Not Rich Yet].
This article originally appeared on Create and Cultivate.