The Four Keys
Ladies, there is one thing no one wants to talk about but is on the forefront of our minds day in and day out. It’s that green you are out there hustling so hard for. So why does no one want to talk about it? Money is one of the top anxiety triggers for women of our generation and its time we got down to business. Whether you are sitting pretty with a solid investment portfolio or are drowning under student loans and credit card debt, there are a few key things we all need to keep in mind to stay accountable and how I used them to stay financially independent.
Key #1: Get that debt out of here
The biggest buzzkill of them all is getting that hard earned paycheck and having to send it all to credit card companies or loan agencies. If you don’t have any debt (you lucky SOB) skip this key and move along to #2. The first step to tackling debt is to get real with your situation and set up some sort of document that shows exactly how much debt you have, who the lenders are and what the interest rate is on that debt. Then when you have it organized, go one by one and pay off each debt from highest interest rate to lowest (there are other methods you can google but this is the one that has the most satisfaction in my opinion). It could take months or years to pay off your balances depending on your situation, but the “paid in full” notices you’ll get are priceless. Also while you are paying off your balances, set up an emergency fund with anywhere from $1,000-$3,000 in it to handle any crazy expenses that come up like medical expenses or a rescue dog you want to give a forever home.
How I used Key #1: I started my first job out of college with close to $80k worth of debt (private student loans, federal loans and credit card debt) and had to get real with myself about how I wanted to live out my 20’s. I could be completely independent and spend 10 years paying off my debt or I could live at home and cut my expenses down to almost nothing (while swallowing my pride). I chose the latter and it ended up being the best smartest decision I made. It also gave me some wiggle room in my budget for things like glitter booties and velvet chokers.
Key #2: INVESTMENTS
Now you are living debt free and have a fat savings account, what are you supposed to do with all this extra money? Investing can seem like something only old white men do in their spare time but it’s necessary to set yourself up to retire one day. First step is if you work for a company that has a sponsored 401k program start contributing the full amount from your paycheck. Most companies will match up to a certain percentage of what you put into this account which means they are throwing free money in your face, so take it. An easy next step would be to set up an account with a roboadvisor (website that basically using algorithms to invest and give you a diversified portfolio based on the level of risk you are wanting) and put money you have been saving into an account and let it start making money for you. You can also talk with someone at your bank about other investing options that would be tailored more to your specific income level and investment goals. The main thing is get the ball rolling.
How I used Key #2: While I was paying off my debt in Key #1 I set up an account with Wealthfront and put some of my savings into it so I would not leave it sitting at the bank making next to nothing but also have the peace of mind that it was making a little extra on the side. I also maxed out my 401k contribution with my company so that each paycheck I knew some money was being put aside but I didn’t have to actually do anything (it is automatically deducted from your paycheck).
Key #3: Budget Bitch
This key could be used before the other two, but its kind of a buzzkill so I wanted you to read a bit before throwing you into the depressing stuff. Keeping a budget is one of the most important things you can do in your 20’s. If you get a paycheck and have no idea where all the money went then you should probably jump on this right away. There is no excuse not to keep a budget in 2016 with apps like Mint right at your fingertips that can keep track of your money and bank accounts for you. After you get a budget set up and see where your money is going, take a hard look and see if there is anything you can get rid of (buying shots for the hot guy at the end of the bar with the manbun, said glitter boots from key #1, or organic peanut butter from Whole Foods). Once you get your budget and spending habits in check you can move onto Key #4.
How I used Key#3: I made my own type of budget in excel, pretty simple with my net paycheck and expenses for the month and with what was leftover I allocated to other categories. The budget was updated based on my personal goals, debt levels and what I had going on that month. Some months had a lot of expenses and others had a lot going to paying off debt, it all depends on your personal situation which is why creating your own budget can be so beneficial.
Key #4: Save something, anything.
Last key to financial savviness is the worst one by far (sorry in advance). No one likes to save money, it somehow feels like a waste when in reality it’s the opposite. All of the keys work together to give you financial independence but if you aren’t saving then they all can become useless. You can save to make a big payment on your debt, save to set up an IRA at the end of the year, use your budget to start a savings account, add to that emergency fund. All of these are great but the best thing you can save for is things you really WANT. Saving can lead to a worry free vacay to Tahiti if that’s what you want. The one thing you have to do is be diligent about saving for goals that are specific to you and once you hit some of your savings goals you will be well on your way to financial success.
How I used Key#4: Anything I had left over from my budget in Key#3 I would throw into savings accounts. I had three separate savings accounts, one for vacations, one for investments, and one emergency fund. I made sure at least 10% of each paycheck went to savings no matter how crazy the month’s expenses were I knew I had to save at least 10%. This turned out to be my favorite key because it gave me the freedom to take a vacation when I wanted to and not have to worry about how I was going to pay for it, or buy a gift for my boyfriend and not have it hit my credit card balance. Trust me you will learn to love your savings accounts.
After you’ve set up all 4 keys you will feel well on your way to being a financially independent woman. I know it took me a long time to get real with debt, investments, budgets and savings but once I did I knew I would never stop because the freedom it gave me was too powerful. So next time you see an alert on your phone letting you know you’ve over drafted your checking account (again!) take some keys and get to work, you’ll thank me later!