Oh, how times have changed! Women around the globe are taking control of their decisions and choices, where their finances are concerned. Some women have discovered the joy of emancipation and are being financially independent, and seemingly growing #herwealth into prosperity. But there are some of us, whose financial position is not in shambles, but not at the place where we want it to be.
As Carrie Schwab-Pomerantz once said, “financial independence is a matter of necessity”. An important milestone, revered by many, yet seemingly hard to attain by some. A milestone, unlike many, that is not a one-off achievement but a process of gradual improvement, unlocking one stage at a time. Financial independence then, in my opinion, is not a final destination; it is a journey and a process of planning my money to ensure that I can live the life I choose.
Let me be clear, financial independence is not the same for everyone. It means varying things to different females and may even differ at various stages of your life. For instance, last year financial independence goal was to invest in stocks and having a reasonable sum secured as emergency savings. Today, the focus is on moving out of a family home to owning an apartment. Irrespective of what it means to you, at the end of the day, us women are taking control of our money and ensuring that we live a balanced life. So, let’s talk about financial planning!
Whilst a lot of women are carving out their niche in the corporate world, there is still the notion that women empowerment conversations need to refocus on female financial empowerment; addressing the great disconnect between accomplishment and the lack of financial confidence. Why is this so?
Some argue that girls are not taught the basics of finance from a tender age and so in adulthood, they lack the know-how to attain financial independence. For some, the gender wage inequity is still prevalent, where women are being paid far less than their male counterpart in equivalent roles; which leads to women achieving less of their financial goals. What inspires me though in this era is the increasing number of female millennials striving for financial independence in aspirations of attaining early retirement. An attitude of working hard to get it right, to reap the rewards of their labour while young.
So today, I’d like to share a few tips with my #sistas who are trying to get it right while young. Let us ditch the feeling of financial shame and build confidence to move forward in conquering the financial independence deserved. So, where do we start?
- Determine your life goals
Financial independence is being able to make your own decisions regarding your money. But what decisions are those, exactly? Do you know what you want your finances to be? Have you identified the strategies (savings, investing, or otherwise) appropriate to help you reach your goals? What timelines are you looking at to attain those goals?
If you can answer all these questions, then you’ve stepped out of the starting blocks in the race to financial independence.
2. Take control of your cash flow
You must be able to support yourself financially. To do so, the first step is empowering yourself with a realistic monthly budget. That way, you have a complete picture of your income sources and is money-conscious. Here’s a simple breakdown that you can use to create a basic monthly budget:
- 20% of income to service debt (including student, car and credit cards)
- 30% of income for housing (mortgages, rental expenses, etc.)
- 10% of income for savings & investments
With that said, a mere 40% is left for survival, so you must ask yourself: do you want it or do you need it when you choose to purchase something. I know, I know! The e-commerce websites can be so addictive with their daily reminders of what’s in your shopping cart and the attractive discounts, but I am here to tell you, avoid it if you don’t need it.
Now that you’ve calculated your monthly cash flow, determine the areas of spending you can cut down on, so you can achieve your goals.
3. Eradicate Debt
As my grandmother always says: If you don’t have the cash to cover it, then you probably shouldn’t buy it. Of course, buying a home or a car are clearly two exceptions to this notion.
Now, I don’t know about you but I’ve grown to realise that not all debt is equal. A low-interest mortgage with reasonable monthly payments and longer payoff term is no way the same as a high-rate credit card debt. Guys, that plastic is elastic, very addictive and extends if loosely used and maintained.
It’s always good to pay your credit card bill in full monthly to avoid the high interests. It can be challenging but at least try as often as you can.
4. Earn, Save & Invest
I was raised with the notion that one’s primary job is to cover bills and living expenses. A secondary source of income is needed for leisure; additional savings and maintaining a diverse investment portfolio comfortably. So, what’s your 5pm to 10pm and weekend hustle? What skills do you have, that can be used to produce products or service a need?
So while you expand your income sources, always that note the following go hand in hand:
- Have an emergency fund, accessible only if an emergency arises. This should comprise at minimum 3-month savings to be able to take care of monthly living expenses.
- Diversify your investment portfolio, don’t just invest in one stock. Talk to an Investment Officer to get a sense of what investment schemes will work best for you based on your financial goals.
Investing is critical. Savings is a necessity.
So, Exchangers, what are your 2020 financial goals? Have you redefined your plan and strategy in light of the COVID-19 pandemic? In this next #herwealth series, we will look at how we can reposition ourselves and tap into the emerging opportunities and still emerge as winners in 2020.
Until then, Cheers!