Got 5 Minutes? 5 Money Moves to Take Control of Your Finances Now

Got 5 Minutes? 5 Money Moves to Take Control of Your Finances Now
Photo: _hollyt

Here’s a question for you: what is one of most powerful things a professional woman can do? If you answered, be responsible with her hard earned money, ding, ding, ding—you’re right.

We are living in a time when men are in power (sorry, it’s the truth), and when you look at this from a birds-eye-view, it’s quite easy to see why.  Right now, men have more money than women, and matter of factly: Money is power. 

So, how can we flip the coin⏤or at the very least be equal with men?  We need to manage our finances better, and that means investing our money.

For a professional woman, putting her paycheck into a savings account and not investing that cash can translate into hundreds of thousands or even millions of dollars lost over the course of a lifetime. The good news: we can fix this.  Contrary to popular belief, you could start investing in your future less than 10 minutes with Ellevest, a digital investment platform designed to help women reach their financial goals.

If this is your first-time investing, we’ve done the hard part for you.

Here are the most valuable lessons I learned from chatting with Sallie Krawcheck, co-founder and CEO at Ellevest. After just one meeting, my financial anxiety disappeared, and I feel more control of my future. As it turns out, it wasn’t so scary after all.

Here are her 5 tips for how to budget and invest with intention and purpose — in a way that works for you.

1. Breakdown Your Income and Diversify

You’re going to make it a habit to invest a little each month, but how much exactly? According to Krawcheck, you should 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.

  • 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. Start with 1%, then work your way to 5% and then 10 %. The goal is to eventually be setting aside 20% of every paycheck to Future You. Follow this rule of thumb, Krawcheck says, and you’ll be set for financial success over the course of your life.

All investing involves risk — if it didn’t, you’d just be “saving,” earning almost zero return, and actually losing ground over time due to inflation. The key is reducing risk with investing, and one of the most effective ways to do this is to diversify across different asset classes, like the US and international stocks, global bonds, and real estate.

True diversification means that over a given time period, some investments will be up and others will be down. Ellevest allocates across 21 different asset classes in our goal-based portfolios, to reduce risk. As financial markets move over time, your portfolio may shift away from its original allocations, so we recommend reviewing it once or twice a year to check if it needs to be rebalanced. At Ellevest, they rebalance your portfolio automatically as needed.

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.

2. Keep Costs Low

Since markets are unpredictable, we know we can’t control them. One thing we can control? Fees. At Ellevest, they advise investing in low-cost exchange-traded funds, otherwise known as ETFs, where possible. And for a digital adviser, the management fee, the amount that adviser charges you, should be well below 1%.

3. 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. Which leads us to the next rule…

4. Make Investing a Habit

Invest regularly, whether it’s with every paycheck, every week, month, or quarter. Make it a routine like brushing your teeth or wine o’clock on Fridays. This is how successful women invest, with recurring deposits set up.

Our friends at Ellevest can help you get started. Typically, if you’re a first-time investor,  they recommend a diversified portfolio. This means you’re investing in different types of things, which may offer a lower risk of loss. Here are some options: Mutual Funds, ETF’s, and Bonds.

Why Ellevest?

There’s investing, then there’s Ellevesting. Ellevest has built into their proprietary algorithm women’s unique salary curves and longer lifespans, to give you an investment plan designed to help you achieve your goals in the majority of market scenarios.

The platform is well-designed, easy-to-use, and speaks to our unique financial needs  — whether that be planning for retirement, that Aussie vacation, or starting a family.   The best part? The advisors at Ellevest are incredibly knowledgeable and will help you every step of the way.

Investing can be a great way to build wealth. Do your research. And choose what’s right for you.

5. Keep it simple

There are literally thousands of investments to choose from these days. Some try to predict which stocks will do the best in the coming year, others try to choose asset classes that will outperform, and some have strategies with made-up names I can’t even pronounce. Research shows, however, that straightforward, low-cost index funds outperform nearly all of those strategies in the long run.

Whether you decide to go ahead and invest your money is absolutely up to you, but after just one phone chat with Krawcheck, I signed up for an investment plan and rolled over my old 401k as well. Now, I feel so much more confident. With a new year ahead, it’s one less thing I have to stress about.