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 now it’s easier than ever for us to do that with Ellevest, an innovative digital investment platform designed to help women reach their financial goals.
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 because contrary to popular belief, you could start investing in less than 10 minutes.
Let your money work for you this summer — and every summer after that — while you focus on the playing part. Who’s in?
If this is your first-time investing, we’ve done the hard part for you. We asked the co-founder and CEO at Ellevest, Sallie Krawcheck, to explain exactly what you need to know to multiply your savings with minimal risk.
Here’s how to turn your savings into a small fortune, according to a money expert.
Spend Money Where It Matters
Spend your money on what is most important. For example, if your priority at the moment is to pay off your student-loan debt, while further advancing in your career, perhaps now isn’t the time to shop for new sandals or get an outrageously expensive gym membership. Since paying off your debt and moving up the ranks at work are essential, then spend your money where it will pay off for you in the long run. But, keep in mind you can still invest while you’re paying off student debt.
First things first: It’s important to know that there is a difference between “bad debt” vs. “good debt,” for example, credit card balances are the bad debt. You should pay this debt off immediately — like now — because credit card interest rates run high. In fact, the current average annual interest rate is above 16% .
Try to pay it down as quickly as you can each month. That may mean no vacations, and not as many nights out. But, it’s worth it. Then there’s “good debt”— aka “debt” that you don’t need to pay down right away. At Ellevest, they define “good debt” as a loan that represents an investment in your future (like a student loan or a home mortgage) and that charges an annual percentage rate, or APR, of no more than 4% to 5%. So, the question becomes, “What should you do if you have the money to pay off “good” debt? Pay it off or invest?”
“Good debt” like the above does not necessarily need to be paid right away, in part because investing your money in a diversified, low-cost investment portfolio is likely to earn you a greater return than the interest on that debt will cost you over time. At Ellevest, they expect a diversified investment portfolio to return anywhere from 5% to 8% a year — not as much in some years, more in other years — but this is what we expect that it will average*. This means that, over time, it can make sense to keep that “good debt” outstanding and invest in the markets, to earn the difference between the two.
This does not mean you should get lazy about paying off your debt. You should absolutely make payments on your good debt on time every month and you should check periodically for ways to lower your payments. For example, if you have student loans, putting them on autopay, which can help you save 0.25% from most lenders (a fun little tip we learned). And look at sites like Lendkey to refinance.
With nearly 70,000 borrowers served, LendKey is a superior option for women looking to find the right option to consolidate and refinance their college loans. Instead of trudging back and forth between local banks who are likelier to give you higher APRs, LendKey offers you a way to simplify the process by bringing the best offers from over 275 lenders right to your laptop screen. The LendKey platform is uniquely qualified to help you for another reason, too: despite working with so many not-for-profit and community lenders LendKey never shares your information with anyone but the lender you choose to move forward with. This means your information is safe, you won’t get a bunch of phone calls and emails, and you only work with LendKey from the day you apply to the day you make your final loan payment.
So, in review: Consider keeping “good debt” that costs you less than 4% a year outstanding and invest your money in a diversified portfolio instead.
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.
Don’t Let Your Budget Get Your Down
One of the smartest financial decisions you can make today is to develop a budget and stick to it. No questions asked. Aside from having a mental game-plan surrounding your money, it is wise to track your finances for a couple of months and look for any patterns. Then, in response, you can address the questionable actions you take with your money and adjust your budget accordingly. Sometimes we don’t realize just how much we spend in a particular category until after the fact and that ignorance can lead to troublesome consequences for our financial security. So how to create a budget that’s right for you?
According to Krawcheck, you need to save and invest 20% of your salary. “The trick here is to take this amount out of your paycheck first, and only then figure out how much rent you can afford, what you can afford, how much vacation you can afford, and how big your clothing budget can be.” A simple rule of thumb which is easy to implement is the 50/30/20 rule, find out more about here.
“Finacial Feminism is about women doing four very important things with money: earning it, making more of it, saving and investing more of it, and using it to make our world better. It’s how we achieve greater security. It’s how we reduce the number of situations in which the other person holds most, if not all, of the power…be it in our personal or our business lives. And it’s not just good for us: the more opportunities women have, the better off society is (and the research backs this up).”
Try it now: We’re asking you to focus on your own economic empowerment. When you open an Ellevest Impact Portfolio, Ellevest will give $100 to the first 1,000 supporters that sign to help you reach your goals.* Yes. $100, no matter what amount you decide to start with.*
Saving Is Winning
Want to retire comfortably? “Aim to save 20% your annual take-home salary,” Krawcheck advises. So that you can live like a boss when you’re a grandma. A grandma boss.
In fact, according to Krawcheck tells us that even if we are part of the fortunate who has extra money laying around, that doesn’t necessarily mean we should take that for granted and spend easily. Life is full of unpredictables, and we should always keep this in mind and save where we can.
And the next step is…
Invest – And Do It Like a Boss
“The best time to invest is right now. Actually, it’s yesterday, but don’t be defeated,” says Krawcheck. Remember what we mentioned earlier this month that “money is power?” Well, let’s break down exactly how that would apply to you.
Let’s say you’re earning $85,000 a year, and you did take your annual 20% savings and invest it in a diversified investment portfolio instead of leaving it in the bank (except for your emergency fund, of course), Ellevest estimates that in 40 years, you will make from an additional $565,000 to $2.1 million more*, depending on markets. We’re no mathematicians here, but we’d say that’s worth investing in⏤and a whole lot more meaningful than getting a raise.
Here’s one of the reasons that we tend to think of investing as risky. We imagine investing it as a one-time thing. I invest, and then the market either does well, or it doesn’t. I win or I lose. But that’s not the successful way to invest. Instead, the best strategy is to invest over time, a bit every month or a bit from every paycheck.
And that way, the “decision to invest” isn’t as daunting. Not to say you shouldn’t ask for a raise. You absolutely should ask for the frickin’ raise (In fact, here are 7 things you should know before asking for a raise) But, also, invest the money you make right now.
Try it now: Ready? Be a woman with a plan. Invest with Ellevest in Under 10 Minutes. Simply, head to the Ellevest website, tell them about yourself and your life goals in 5 short steps, and they’ll suggest personalized investment portfolios based on your goals.
Yes, You Have What It Takes
Start as small as you’d like – there’s no minimum deposit for Ellevest Digital. You can start investing with as little as $5 – just get started. Get your financial plan from Ellevest today — you literally have nothing to lose.
You Can Always Afford to Splurge
Money management is serious business, no doubt. With that being said, there is always room for occasional extravagance. Life is too short to never reward yourself for being such a dazzling creature and there doesn’t always have to be a reason for spending your money on something. As long as you have sound judgment in your spending otherwise, you deserve to spoil yourself from time to time.
It will make your treats so worthwhile because they will be in moderation and you will be able to enjoy them without guilt or stress clouding your joy. Whether you love exotic traveling, designer shoes, or fancy dinners, be sure to set aside a small amount of your money towards this soul-nourishing, lighter pleasures. An investment in your happiness will never go to waste.