Here, our partner Ellevest — an easy online investing tool that uses algorithms tailored to your salary, gender, and lifespan (aka your real life) — put together some tips for how to stop procrastinating and start organizing our personal finances better today.
Let’s get started.
1. Stick to a budget.
First, take out your monthly bank statements and divide your after-tax income among needs, wants, savings and debt repayment, using the 50/30/20 budget as a guide. It’s a high-level, flexible budgeting framework that can help you control where your money’s going without having to count every penny.
50% of your income should go to living expenses and essentials. This includes your rent, utilities, and things like groceries and – transportation for work.
30% of your income should be used for flexible spending. This is everything you buy that you want but don’t necessarily need (like money spent on movies and travel).
20% of your income should go to financial goals, meaning your savings, investments, and debt-reduction payments (if you have debt, such as credit card payments).
Don’t think you have enough money to invest 2o percent? That’s OK. With a Robo-advisor like Ellevest, there’s no minimum to get started, so you can start wherever you are. (Seriously — start with $1, $5, or $500 … all good.) Future You will thank you for getting started today.
The goal is to eventually be setting aside 20% of every paycheck to Future You. Follow this rule of thumb, says founder of Ellevest, Sallie Krawcheck, and you’ll be set for financial success over the course of your life.
Takeaway tip: Start saving and investing. Ellevest doesn’t require any minimum to open an account, so you can start with as little or as much as you like.
Investing isn’t just for retirement. Making smaller, more flexible investments can help you connect to everyday short-term goals like starting a family or paying off debt or buying a house.
At Ellevest, they’re all about getting you to realize your biggest goals — whether that be planning for retirement, saving for that Aussie vacation, or starting a family. So with Ellevest, you’ll hear the phrase “goals-based investing.” Basically, what this means is that their investment objective is to help you reach your goals. That’s very different from trying to outperform some market index. Makes sense. Doesn’t it?
If you want to build up an emergency fund, great news — Ellevest has a goal for that. Here’s how much you need to save and what you should do with those savings. Don’t have an emergency fund set up yet? Ellevest can help you set one up for free and help you reach all of your money goals. Sans judgment, finance jargon, and trust issues. Get into it here.*
5. Don’t play the market.
Buy low! Sell high! We’ve all heard those not-so-useful investing clichés, usually in cartoonish depictions of Wall Street. While market timing — knowing when the market will be “low” or “high” — is considered to be the holy grail of investing, it’s nearly impossible to do. Very, very, very few people can time the market well, and even fewer can do it consistently. Instead, regular investing over time in every type of market climate is the best way to “play” the long game.
And six, make investing a habit. Sure, it’s easy to wait, but make it a habit. Invest a little or a little more out of every paycheck, whatever works for you and your budget. And that’s why Ellevest has no minimum account size.
And, if you have an old 401(k) or two from a past life just hanging out, don’t worry. It happens. There are a lot of moving variables when you get a new job, and it’s easy to let a former employer’s 401(k) get lost in the shuffle. The good news is that you can probably still roll it over — either into your current 401(k) or an IRA — even if it’s been hanging out for a while. Not sure what that involves? Here’s an explainer for you.
So, no matter where you start with managing your money, retirement planning and investing, the most important thing is that you get started. Because yes, life gets distracting, but as Antoine de Saint-Exupéry said, “a goal without a plan is just a wish.”
8. Find a good teacher
Find a financial advisor who will work with you and for you. If you feel like you don’t have all the answers, advisors know how to educate.