By Amber Miller, CFP®
Imagine Suzie: she’s a young professional with a promising career she loves.
Suzie has a significant other and two young children. She likes to go on vacations skiing and soaking up the sun. She spends her evenings split between dinners out, running the kids to sporting events, and evenings with Netflix. She’s successful by any sense of the word.
But is she taking care of herself?
More specifically, is she taking care of her future self?
The biggest money mistake I see women make is not putting their future-selves first. I’m not sure if this is a conscious choice, or if we’re just not making it a priority. And while I want you to eat your vegetables and hit the gym each week, making yourself a priority also means paying attention to your finances.
First, pay attention to your money
Do you know where your accounts are and how to access them? Are you monitoring them regularly? This includes your bank accounts and your investments. (If this seems daunting, my post 6 ways to make investing easier than reading your bank statement makes it easy to do!) If you have questions, get answers by doing research online or meeting with a financial planner.
Financial illiteracy is a choice
Now that you’re paying attention, the next step is addressing financial literacy. It’s not too complicated. I promise: you’ve managed much more complicated concepts in your career. There are a plethora of videos, articles, podcasts and free seminars out there. Start small – attend one seminar a month, or listen to one podcast each week. Build up your knowledge.
These are key concepts to be aware of on your path to financial literacy and independence:
- Build an emergency savings or cash reserve account. It should cover 3-12 months’ living expenses. Having a solid savings account is the cornerstone of a good financial plan.
- Understand how to calculate your net worth. Simply stated, your net worth is all your assets added together (investment, bank accounts, your house, your cars, artwork, etc.), minus all your liabilities or your debts (car loan balance, mortgage balance, credit card balances, etc.). Know where you stand financially and track your net worth over time.
- Learn the difference between good and bad debt. (Yes! There is such a thing as good debt!)
- Learn what your employee benefits are and how to take advantage of them.
- Learn why you may need life insurance – and what your policy and coverage options are.
- Learn the difference between saving and investing – the difference is huge! Savings accounts are found at your local (or online) bank or savings and loan, and earn a fixed (and typically low) rate of interest. Investing is strategically growing your money through compounding interest, diversification, and, yes, taking some investment risks.
Join the conversation
If you have a spouse or partner, begin having regular conversations together about everything involving your finances. This includes your net worth, your goals, your values, and spending habits. Put everything on the table and discuss it. If you have a financial planner, go to meetings together.
Have the hard conversations too. If the inevitable were to happen to either you or your partner, what are your final wishes? What accounts do you each have? Do you know how to access these accounts and know the passwords? You want to be ready to take over the financial reins should an unexpected life event occur.
Whether we like it or not, we need money
We need money to pay the bills, go out to dinner or the movies, send our kids to college, and ultimately retire. Your past, present, and future depend on your savvy use of limited resources.
You’ve probably heard this statistic before: 50% of marriages end in divorce. Even more startling is this number: the average age of widows is 55. The AVERAGE. And by age 75, 75% of women are widowed.
Whatever our age, it’s of the utmost importance that we know a little something about finances – because whether we find ourselves as a statistic or not—we women have an uphill battle. Many women out there are managing not only their household finances, but also their investments and planning for their future on their own.
Your future depends on what you do today
Establish goals for yourself and set some savings objectives. Make sure to carve out time each month to check in with yourself – are you on track? Talk to your partner, do some research, get organized, and be smarter. If this process still seems daunting, find a financial planner who can help you. The time is now – your future self will thank you for putting her first.
Amber Miller, CFP® is a Financial Planner in the Twin Cities office of The Planning Center, a fee-only financial planning and wealth management firm. She specializes in working with adventurous, motivated women and young professionals who are socially aware, value education and are looking for a partner to help plan for their future and leave a legacy for the next generation. In her non-work hours she’s outside hiking, rowing, reading and planning how to share more time with the great outdoors.
Please email her at: firstname.lastname@example.org.