Money can be the # 1 stress that we can have in our lives. A recent study by Wells Fargo shows that millennial women are not closing the gender pay gap – the median annual household income for millennial men was found to be $77,000, compared with $56,000 for women.
That’s a big difference on an annual basis, let alone over time. This all means that women generally have a lower lifetime income than men from which to build up their retirement nest eggs.
Let alone these statistics:
- 75% of people at age 50 have less than $5K in their bank account
- 98% of retired people depend on outside financial resources (i.e. Social Security)
- The average income for retirement in the US is $4,500 per month ($54K per year). A nest egg of $1,080,000 invested and earning 5% interest is needed to receive this monthly.
- 80% of women are more likely to be impoverished in retirement
- 40-year working career needs to save & invest $27K per year
It can feel overwhelming and daunting to think about saving money for an emergency, fun, or even thinking about retirement. When I was younger, I always thought that I had time to plan and figure it out. Before I knew it, years went by and I wasn’t where I wanted to be with my money. I was in debt, had student loans, and was struggling.
Then one day, I decided to get serious. I read an article called, The 60/40 budget. This was popularized by Richard Jenkins, former editor-in-chief of MSN Money, who called it “the 60% solution.” Later, I read a book called, Smart Women Finish Rich, by David Bach. These resources changed my life and propelled me to start thinking about my money in a different way and gave me a plan to use to move forward.
In the last 10 years, I have taken what I have learned and it’s helped me to be financially secure, have control over my money, and allowed me to make better decisions because I had options. It’s also what helped me take the leap of faith and start my own business.
Through this experience, I’ve had the opportunity to see what works and what doesn’t when it comes to taking control of my money. And now, I’m sharing my FAVORITE TIPS with you. I know that this will change your life.
7 Steps to Money Success
1. MINDSET
Mindset – We all have deeply held beliefs about money that we carry with us, whether we are aware of them or not. These beliefs shape our thoughts, feelings, and actions which ultimately determine our results. These results can be either positive or negative.
Take a minute to think and write down your thoughts and beliefs that you have about money, savings, finances. What are they?
- It’s too complex?
- I don’t have time?
- I don’t know where to start?
- I can’t save, I am just getting by?
Many of my clients have had the same thoughts and beliefs These beliefs are sometimes what hold us back from what we truly want in our lives. If you understand that how we think and feel about money can be what holds us back, it can help you to make better choices and move forward.
“Some people make enough, some people don’t, and it has nothing to do with their paycheck “
Janene Murphy
2. GOALS
Goals – Many of us understand the importance of goals. These goals should be purposeful, positive, measurable, and actionable.
- Purposeful – Why do you have the goal?
- Positive – Inspiring/Uplifting
- Measurable – Specific/Realistic
- Actionable – When will I do it? and bite-size, small enough to set yourself up for success.
3. DATA
The next step is that we are going to collect data regarding our money. We will be looking at sources of income, where is my money (savings, checking, IRA), how much debt do I have, and in what form, how, and where I spend my money. I asked myself these questions
- How much money do I earn after taxes?
- What are my sources of income? (Paycheck, Interest from IRA/Savings, Social Security)
- Am I missing out on “free money”? (401K matching, Interest, Taxes)
- Where is my money? (Checking, Savings, IRA/401K)
- What do I spend my money on? (Use Budget & Planner Tools such as Mint Financial, Everydollar)
- What debt do I have? (Mortgage, Student Loan, Car, Credit Cards)
- How much money have I saved?
- Am I saving money, regularly?
- How much money do I need to “actually” live?
The importance of this step is to be “honest” about where we are. Sometimes we can start to judge ourselves when we start to evaluate our money situation. Just remember this is a fact-finding mission.
4. Plan
I have decided this step into 4 buckets.
- Income: This bucket makes up any sources of income you may have i.e., paycheck, interest, side hustle, etc.
- Live: This bucket makes up the amount of money that it takes to Live (fixed expenses) i.e., your mortgage, rent, utilities, food, gas, etc. These are expenses that you need to “actually” live.
- Save: This bucket includes rainy day/emergency fund, retirement, short-term or long-term savings i.e., house, car repairs, wedding, baby
- Fun: The last bucket is the “no-guilt” bucket i.e., going out for drinks, clothes, shoes
When I first started out, I divided my income (after taxes) into the following buckets.
Live – 60%, Save 30% and Fun 10%. The number must add up to 100 percent. You can vary this depending on your situation.
5. AUTOMATE
In this step, we will be creating checking/savings accounts for each bucket and determining what % of our income will be “automatically” deposited into each account.
I direct deposit from my paycheck into 3 different accounts based on the split above. In this way, you don’t have to worry if you moved money into the various accounts. This made it simple.
Find free checking/savings accounts that don’t charge any fees and may provide more interest when you do save. An example, I have is using Ally Bank for a savings account.
6. EVALUATE
In this step, we will be creating a “Money Minute” to revisit how we are doing in each bucket and how to optimize, maximize, and eliminate.
- Eliminate – Can I eliminate some of my expenses? Are you paying banking fees, credit card fees, a magazine subscription that you don’t need anymore?
- Optimize – Reducing your current fixed expenses. Shopping for car insurance at a lower rate, refinancing your mortgage, cell phone, utilities, internet.
- Maximize – How can I make my money work for me? Moving money into accounts that have more interest, starting a side hustle, selling items you no longer use. Ensuring you are taking advantage of free money i.e. 401K Matching and contributing to IRA to reduce the amount of taxes
I recommend setting up a monthly review, 6-month review, and at least every year to determine if you are getting closer or further from your goals.
7. SUPPORT
The last step is to find support. Get educated: read books, listen to podcasts, use free financial tools, and seek out professionals (CPA, Attorney, Financial Planners) that you can ask questions to move you closer to your goals.
Special Note: Always seek out a licensed professional CPA and/or Financial Planner to help you make decisions.
If you have any questions or would like more information, please let me know. I am very passionate about this topic and want to support you in your journey to financial success.
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