Have you ever heard of the adage “do something for 21 days and it becomes a habit”? Whether it takes 21 days or 100 days, establishing good habits is extremely important for your well being.
At Style Salute, we’re obsessed with the power of habit. We know that adopting a new practice and doing it consistently is really hard, but it really pays off — literally. It’s the daily habits we stick to that have the greatest impact on how we think, feel, and ultimately live. That’s why we’ve made it our mission to make healthy, positive habits easier so that women can be at their best every single day.
Successful women don’t do anything just once — they set rules and establish good habits. Rather, they set rituals for themselves that they follow daily, like practicing gratitude, eating well, meditating, and exercising daily. And now these women are also adopting a far more important habit: investing.
I know what you’re thinking: if money is so precious, why potentially gamble it away? First, investing isn’t gambling, and no one has lost all of their money just because they had a diversified portfolio.
Sallie Krawcheck knows the investing world well. She’s worked in top finance positions at Bank of America and Citigroup. Today, she’s focused on getting young women (that’s you) investing more—and investing smarter.
To do that, she created automated Ellevest, a goal-based automated investing service —or robo-advisory—made specifically for women. Why for women? We connected with her about why we need financial advising by and for women and what investing means especially for those who are still paying off student loans.
Keep reading to learn more about how to turn your savings into a small fortune.
#1. So, Why for Women?
“When we created Ellevest, we started with the recognition that women do not invest to the same extent that men do: that we have a “gender investing gap.” And that this gap can cost us, women, hundreds of thousands — or even millions — of dollars over the course of our lives. Women also tend live longer, earn less, and really want to understand the risk of their investments—more specifically the risks of their not reaching their goals. All these things have to be addressed in an investment platform; we’re the only ones who do.”
#2. Invest or Pay Off Debt?
There are lots of different schools of thought on the topic of paying down debt or investing. But, as a general rule of thumb, if your loan APR (annual percentage rate) is in the range of 5% or more, then you should prioritize paying it down over investing. If your APR is less than 5%, then you should prioritize saving money and investing — this is particularly true if your loan interest payments are tax deductible and/or you can lower your income taxes by using tax-advantaged accounts such as a 401(k).
But no matter what, you should look for ways to increase savings in your budget early on in your career. That’s your money on the table. Use it wisely. “The right time invest is almost always “now,” so that the power of compounding can begin to work its “magic.”
“One of the worse pieces of advice ever is to wait to invest until you earn more,” says Krawcheck. The right time invest is almost always “now,” so that the power of compounding can begin to work its “magic.” Don’t wait until you’ve paid off lower interest rate loans, like student loans — do what you can to save even a small amount of your big goals in life and retirement.”
#3. But, Isn’t Investing Risky?
Not investing is a lot riskier. Need proof? Let’s look at a hypothetical example:
Mary is 28 and she just accepted a new job offer in Los Angeles. Her annual salary is $85,000.
If Mary puts 20% of her paycheck in a savings account, here’s what it’ll get her:
If you put 20% of your paycheck in a savings account each year, you’ll have $1.5 million after 40 years. A nice chunk of change, sure, until you think about how much you would have had if you invested that money instead.
If Mary invest 20% of her paycheck in a diversified investment portfolio, here’s what it’ll get her:
With a diversified portfolio, you could have an additional $1 million or more in that same amount of time even with market fluctuations. That’s an additional $100 a day that you’re missing out on by not investing your money.
Just think of all you can accomplish with a little extra set aside for emergencies, epic vacations, and whatever else you can possibly imagine. Instead of stretching every last dollar you have or relying on someone for financial support, on top of everything else that’s stressing you out in life, investing lets your money work for you. Put in however much you want, understand the way your portfolio works, and pat yourself on the back for doing Future You a solid.
#4. How Much Should I Invest
If you’ve paid off all your high-interest debt and built your emergency fund (three-six months of take-home pay held in cash), then you’re ready to take that next step towards building a healthy financial future for you and invest your money.
Now, the next step is to figure out how much to invest. If you’re not sure how much to invest, Krawcheck recommends this ratio: 50% for needs/30% for wants/20% for investing, but it’s not a one size fits all thing. Do what works for you, just invest some percent of every paycheck, and get yourself in that habit of investing, whether it’s with every paycheck, every week, month, or quarter. Make it a routine like brushing your teeth.
More than half of Ellevest clients invest this way, with recurring deposits set up. Next, figure out what to invest towards first. Need help? Ellevest‘s team can guide you through every step of putting your financial plan together, and it only takes a few minutes.
Try it now: New to investing? Ellevest is fiduciary, and their number one goal (24/7/365) is making investing a better experience for you. It’s that simple.