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The Money Habit Every Millennial Woman Needs to Start Now


The Money Habit Every Millennial Woman Needs to Start Now

Some money habits are good; some money habits are bad. But when it comes to investing in yourself and your future, having absolutely no money habits at all could cost you big time.

That’s why we need to determine what money goals we want to achieve and put in place a long-term strategy to get there. Let’s first be clear: right now is the best time in history to be a professional woman. We’ve come a long way, ladies — and to make the upheaval of 2017 count, and to make more women financially stronger in 2018 — we need to wise up — especially on the money front.  And the best thing you can do as a professional woman today is to start investing your money —whatever it is — because the reason we have less power than men is that we have less money than men (don’t kill the messenger). It’s a fact.

Research suggests that while 60% of women worry they won’t have enough money to last through retirement, only one in three Americans have a detailed budget. It seems we’re all nervous about our financial future, but we’re not taking control of our spending habits. And it’s not because we don’t work as hard as men do (we all know that we work so much harder), and it’s not because we’re not educated enough (the data is clear here; we’re actually more educated), or we’re not as good with money (women are actually better investors than men). It’s not for any of these reasons. So what is it, really?

The reason we have less money than men is simply that we’re not investing the money we earn, and they are. And when we leave our savings in cash in the bank, we may miss out on potential market gains that could be earned over timeThis, my friends, is the precursor to the gender investing gap.

Historically, the financial services industry has been made for men by men, and it’s filled with jargon and unnecessary complexity.  This realization is what led former equity analyst and CFO of Citigroup turned founder and CEO, Sallie Krawcheck to create Ellevest, a digital investing platform for women.

Ellevest breaks down that jargon and puts female investors’ money in low-cost ETFs based on a pick-and-choose set of goals, like starting a business, buying a home, taking that big trip,  and retiring comfortably. In an industry dominated by men, it’s incredibly inspiring to see Krawcheck build a platform that helps every woman start investing.

Whether you’re in your first year out of college wondering what to do with your first real paycheck, or you’ve been working for years, Krawcheck and the female-led team of at Ellevest can help get you started towards a healthy and happy financial future.

We sat down with Krawcheck to learn more about how investing works and what you need to start. Read on for how you can start investing today.

Investing vs. Saving: What’s the difference?:

“People tend to think of saving as the “safer” route, but it’s not that simple,” Krawcheck advises.

“The average interest rate on most savings accounts is actually below 1% (about 0.06% to be exact). Now, if we look at investing, the average annual return the stock markets have produced since 1926 is 10%. This includes the lowest lows: The Great Depression, the massive slide after September 11th and the financial crisis of 2008.  Let’s look at both savings and investing over time: For example, let’s say you’ve got $5,000, and you plan to use the money for 30 years.”

First scenario: “You put the $5,000 into a savings account, where it’s considered “safe.” Let’s be very generous and say that the bank offers an interest rate of 1%. So you keep your 5,000 there for 30 years. If you do this, you will end up netting out at $6,739. Great, right? It sounds great, but with an average inflation rate in 2017 around 2.5% or higher, you actually lose purchasing power.”

Second scenario: “Now, let’s say you invest with Ellevest and put that $5,000 in a highly diversified portfolio of low-cost ETF’s — aka, an investment account. Over 30 years, in the majority of market scenarios, that $5000 can grow to $27, 054 — or more.”

Third scenario: “Now, let’s say you invest that $5000 over 30 years and you add $100 a month…you’ll be making about $125,839.61. Now, we’re talking.” Click here to find out how Ellevest calculated it.

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You have a 50/30/20 rule. Can you explain that?

“The numbers to remember when you’re thinking about how to spend your take-home pay are 50, 30, 20. 50 percent goes to needs. That’s your rent, that’s the clothes on your back. 30 percent, let that go to ‘fun.’ That’s the stuff you love to do. 20 percent should go to ‘Future You.’

The research has shown if you spend the money this way — 50, 30, 20 — you are much more likely to manage through the economic ups and downs, the market ups and downs, your life ups and downs, than if you’re starting out and spending the whole thing.”

Why’s it so important to make investing a habit?

“It’s important to make investing a habit because unless you are Warren Buffett, I promise you are playing a loser’s game. The right way to invest is to take a percent out of every paycheck, whether that 1 percent of your paycheck or 20%, start now. That can mean that if you’re investing out of every paycheck, you’re investing in some markets that are high, some markets that are low, but over time those things even out such that you’re earning market-like returns.”

Compounding is the 8th wonder of the world

How does investing translate to achieving success in the workplace?

“If we’re not investing, we’re doing most of the hard work around money. You know, going to work every day, turning in that amazing design, landing the difficult-to-close client, beating our sales projections… but we’re only getting about half the reward. And so we’re depriving ourselves of the ability to take on more risks in our career if we don’t have a financial cushion built up.”

What do you wish you had learned about money sooner?

So much. Mostly, that money is power, independence, freedom, and living the lives that we want — lives that our mothers and grandmothers couldn’t have imagined.”

 

Ready to make investments now your No. 1 money habit?

Disclosures: We’re excited to be working with the team at Ellevest to start this conversation about women and money. We may receive compensation if you become an Ellevest client.

Opening image: Song of Style

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career, career tips, dream job, female empowerment, go getter, job advice, money tips, motivation tips, personal finance, sallie krawcheck, successful women habits, work

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