Investing for Beginners: 21 Things You Need to Know

Investing is defined as, “the outlay of money usually for income or profit.” The idea behind investing? Put your money to work for you, in something you believe will increase in value over time. Investing your money in the stock market may seem like a foreign concept; How do you know which funds to invest in? How does trading actually work? And what the heck is a mutual fund?

There are some gender differences, too. Men are generally more confident about investing, while women are more goal-directed and trade less. Women tend to keep 10% more of their savings in cash than our male counterparts. Millennial women report a lower level of financial comfort. On average, we are less likely to feel “in control” or “confident” about our financial future. And, women generally have a smaller total invested when we retire - because we earn less.

Where to start? I’ve got you - the items below serve as a beginner’s guide to investing.

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1. Investing builds wealth

Is there anything more powerful than the idea of your money making money for you, without you lifting a finger? That’s at the heart of investing.

The power of compound interest means that the earlier you invest, the sooner your investments start growing and making money on your behalf. This builds your wealth far more rapidly than saving in a checking account.

2. The market is where companies go to attract investors

When people talk about investing in “the market” what are they referring to? Today’s markets are largely exchanges - like the New York Stock Exchange (NYSE) - that allow us to buy and sell investments to others. You’ve seen photos of business executives and celebrities “ringing the bell” to open the NYSE, but it’s not the only market; others include the NASDAQ, London Stock Exchange, and many others.

The market is a general term for spaces where companies go to attract investors, and where investors buy and sell with each other.

3. Investing allows you to own a portion of a larger business

Buying stock is like purchasing a little slice of a company. Say you buy stock in consumer goods company P&G (manufacturer of Tide, Crest, Dawn, Tampax, and many other household names); that stock costs $90.98 per share at the time of this writing. If you buy that share, you are betting that P&G will continue to grow and make money. P&G uses your $90.98 to invest in its business; open new locations, fund new products, hire new staff.

4. Owners make money when the businesses they own make money

Companies like P&G that offer stock to investors often give investors some of the money they earn. Every three months, these companies tell investors how they are doing by issuing financial statements.

If they are doing well (taking in more money than they spend, which is called profit), they will often give a portion of the money to investors. These payments, called dividends, can be re-invested or cashed out by investors.

5. You need an investment account to invest in the market

Investment accounts are offered by financial services companies (like Vanguard, Charles Schwab, and Fidelity) and allow you to buy stocks and other investments. Once you’ve determined what to invest in, it’s easier to select the right investment account.

6. Investment accounts come in several forms

There are several types of investment accounts, designed for different purposes.

Retirement accounts are for the future, and include 401(k) and IRA accounts. These typically include penalties if you access them before retirement age, and the government often gives you tax breaks on them to encourage investing.

Regular investment accounts are often referred to as brokerage accounts. These aren't necessarily for retirement, so you can add or withdraw your money as you see fit. These don't have special tax benefits (unlike many retirement accounts.)

7. 401(k) accounts are provided by your employer help you save for retirement

Retirement accounts, like a 401(k) or 403(b), can only be offered through your employer. They are named for the section of the Internal Revenue Code that outlines how they work.

401(k) plans can be offered by private companies. Similarly, 403(b) plans can be offered by public education employers, some non-profits, and the like.

8. IRA accounts are for you to save for your retirement

While 401(k) plans are offered by employers, a Roth or traditional IRA is available to anyone that earns an income. This helps those that work for companies that don't provide a 401(k) benefit, as well as those who want to invest more for their retirement.

You have to open this account for yourself at a qualified bank or broker, like Vanguard or Fidelity.

Traditional IRAs are funded with wages that you have already paid taxes on. However, depending on your income, you may be able to deduct your contributions from your taxes.

9. Some IRA accounts (Roth IRAs) allow you to access money in the future, without taxes

Roth accounts are funded with money that has already been taxed, so you do not owe the government any taxes when you access it in retirement.

Some people prefer Roth accounts because they like the predictably of knowing they will not be taxed in the future. Regardless of whether you prefer a Roth or Traditional IRA, the most important step is to begin investing. Either would be better than neither!

10. You need to fund your investment account in order to buy investments

Once you have selected both the type of account you are focused on (IRA, 401(k), brokerage) and the financial services provider (Vanguard, Fidelity, Charles Schwab), you need to fund the account by putting money in.

If you are just starting to invest, you can call the financial services provider or go to their website to send them your money and open your account. This money will sit in the investment account in cash until you decide which investments to purchase.

11. It is very, very hard to pick the right stock to buy.

All this knowledge is useless if you don’t put your money to work for you by selecting an investment. This is where many women, wanting to know all the details can face analysis paralysis.

Since a stock is like purchasing a little slice of a company, many people like to analyze company information (financial performance, industry trends, competitive landscape, emerging regulations), and then buy the companies they think will win.

A caution: this is very, very difficult to do. If you are buying individual stocks, it is very challenging to consistently make money.

Think about it; as an individual investor, you need to be educated enough to buy only the stocks that will continue to pay dividends OR buy (and sell) the right stocks at the right time, when they increase in price. And you’re competing with everyone else who watches the market - including professionals.

One of the money mistakes I made was trying my hand at purchasing individual stocks. I have shared how that worked out - disastrously - for me. There are over half a million companies you can invest in on public exchanges. How will we pick the right ones to buy stock in? Read the next steps to learn how.

12. Mutual funds allow you to buy many companies in one purchase

Mutual funds are one investment vehicle that allows us to buy many, many stocks in just one purchase. I prefer these to individual stocks because you can own hundreds of companies in each share.

Many retirement accounts only allow mutual funds, given they offer more companies in each purchase and are generally seen as less risky than stocks.

13. ETFs are like mutual funds, but cheaper

ETFs are my favorite type of investment. ETF stands for Exchange-Traded Fund. Like mutual funds, ETFs allow investors to buy many companies in a single share. They are nearly identical to mutual funds, save for some technical differences (how they are traded and regulated, for example).

I like these better than individual stocks and even mutual funds because they are generally less costly to the investor and have low expense ratios, as I explain in the next step.

14. Investments have costs

What's the expense ratio? This is how much the company that manages the mutual fund or ETF charges you for their work.

An average expense ratio is around .6% - meaning, for every $100 you have invested, the fund rakes in 60 cents. Sounds small - but tiny fees make a meaningful difference in your wealth over the long term. Vanguard’s average expense ratio is .12% - meaning, for every $100 you invest in a Vanguard mutual fund, they charge 12 cents. That’s much, much lower, and lets you keep more of your hard-earned money.

Are there other fees? It can be costly to create fancy, actively-managed mutual funds. So, look carefully for purchase or redemption fees, or 12b-1 fees (marketing or distribution fees.)

You can find these fees easily online when you research your potential investments, because companies are required to publish expense ratios and 12b-1 fees to their prospective investors.

Fees are taken directly out of the investment, so you do not see a “line item” of how much they are when your money is invested. This is convenient for expensive funds with high fees.

15. Returns help investors compare performance

Returns are indicators of how well (or poorly) investments perform. They help investors easily compare performance across different investment vehicles. Returns are expressed in percentages.

For example, if I invested $100 in an ETF that achieved a 4% one-year return, I would have earned $4 in that time period.

You can compare any range of time when looking at returns and compare your potential investment to a few big benchmarks.

Investment returns are from past performance and are not a guarantee of how well they will do in the future. However, they are a useful indicator.

15. Benchmarks like the S&P 500 help compare performance

How did this fund perform over the last decade, compared to the S&P 500? The S&P 500 is a very common performance benchmark because it includes the 500 largest U.S. companies. If the mutual fund or ETF seriously underperformed the S&P 500, it may not be worthy of your hard-earned money.

16. Review the 10-year return to compare performance

There are many ways to evaluate investment performance. I recommend using the 10-year return because I like a longer view into performance.

Compare your investments 10-year return to the S&P 500 10-year return so you can see if you are buying something slightly better than, or worse than, the performance of that group of companies.

Candidly, I keep my investments very simple and largely buy ETFs and mutual funds that match the S&P 500. That works well for me.

Investment experts like Warren Buffett recommend this approach for individual investors and studies show it is very difficult to beat “the market” consistently (meaning, a large benchmarked group of companies like the S&P 500).

17. Target date funds can make investing for retirement easy

Many financial services providers offer “target date funds” which are designed to help you save for retirement by adjusting over time. These funds buy less risky investments as the target date gets closer.

If you are planning on retiring in 30 years, you would buy the target date fund that is dated 30 years from today.

Keep an eye on the expense ratios and other fees associated with these funds. Many are modest, but I have seen some that are far higher than the average mutual fund (which is .6% industry-wide but .12% for Vanguard funds).

18. Investing is easier when you do it automatically

I strongly recommend a regular, automatic transfer timed with your payday. Start with whatever you can afford today, and aim to steadily increase it over time.

Automatic investing will ensure you’re always paying yourself first. Let’s take advice from Warren Buffett one more time. He says, “Do not save what is left after spending, but spend what is left after saving.”

19. Investments pay you through dividends and growth

Investments like mutual funds and ETFs make money for investors in two basic ways.

First, the company may perform well, create profits, and pay stockholders dividends from those profits as I outlined above. Dividends are a financial “thank you” for investing in the company.

If you choose to reinvest the dividends you receive, and buy more shares, you are creating a powerful wealth-building cycle.

Second, you can make money by selling your stock to someone else. Then, you profit (or lose) the difference.

20. The best day to start investing is today

Is there more complexity we could examine? Sure. But, these basics will put you ahead of most that are hesitating to get started due to lack of knowledge or analysis paralysis. Don’t let that be you. Are you ready to get started? You've got this!

xoxo, Ms. Financier

This post also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.

Saving for Retirement: The Beginner’s Guide

When you’re starting your career, you’ve got a ton on your “must do” list: impressing your boss on your first solo assignment, successfully navigating workplace politics, preparing to ask for your first raise, curating the perfect work wardrobe...the list goes on and on.

There’s another, critical, financial to-do that you need to accomplish. You need to start investing for retirement.

Why should you care about investing for retirement? Fair question - retirement can seem like a hazy event in the future, making it feel far less urgent than other life priorities. However, let’s learn from others - not saving early enough for retirement is the number one financial regret of Baby Boomers in America. In contrast, I have never heard anyone say they regret saving too much for retirement, too early.

Further, investing a modest amount today can be more powerful than investing a larger sum later in life. The power of compound interest means that the earlier you invest, the sooner your investments start growing and making money on your behalf. You can never, ever recapture time. Starting today with smaller amounts will build financial momentum in your investment accounts.

Finally, women should care about investing for retirement because we face a retirement gender gap. We tend to live longer, face a wage gap over the length of our careers, and spend more time out of the workforce than men. On average, we need to save $1.25 for every $1 saved by men.

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What type of account is best - an IRA or a 401(k)? Once you’ve decided to invest, it’s time to identify the best type of account for your retirement investing. Let me be clear: either an IRA or a 401(k) is better than doing nothing. Both are fabulous options that are set up to encourage investing. Don’t spend months trying to make the perfect choice; you’ll lose valuable time where your money could be in the market, growing for you.

If you’d like to learn more details about investing, here’s how to start investing in four steps. I’ve also created a very simple summary of what investing in the market really means. Here’s a summary of the main differences between an IRA and 401(k):

Traditional 401(k) Account: Offered by your employer, this account allows you to invest a percentage of your wages for retirement.

  • 401(k) accounts are funded with pre-tax wages. This means you pay less in taxes to the IRS. It also means you’re investing a larger amount of money (since you’re investing a full dollar earned, not just the portion remaining after taxes are paid).

  • Many employers will “match” a portion of your savings. This is free money; never pass up free money!

  • You pay taxes on the money when you withdraw it in retirement.

  • In 2017, you can save up to $18,000 annually in a 401(k) - more if you are over 50.

  • Generally, you cannot access the funds in a 401(k) account without paying steep penalties until you reach retirement.

  • 401(k) is the subsection of the Internal Revenue Code that defines how these accounts work, hence the name of this retirement vehicle.

Traditional Individual Retirement Account (IRA): You have to open this account for yourself at a qualified bank or broker, like Vanguard or Fidelity.

  • Traditional IRAs are funded with wages that you have already paid taxes on. However, depending on your income, you may be able to deduct your contributions from your taxes.

  • You pay taxes on the money when you withdraw it in retirement.

  • In 2017, you can save up to $5,500 annually in an IRA - more if you are over 50. The limit is far lower than 401(k) limits in most cases.

  • Funds in an IRA account are for your retirement, but certain qualifying expenses allow you to skirt tax penalties. These include higher education expenses, a first-time home purchase, and medical costs.

In addition to the differences above, 401(k) and IRA accounts may come in two flavors: Traditional and Roth.

  • Traditional accounts have been funded with money that hasn’t been taxed, so you pay taxes on the money when you access it in retirement. (Traditional IRA investments receive a tax deduction, which makes it the same as a pre-tax 401(k) investment.)

  • Roth accounts are funded with money that has already been taxed, so you do not owe the government any taxes when you access it in retirement.

So, which is the right type of account for you? Like many financial answers, it depends. In general, I recommend prioritizing a 401(k) account, because it often includes both employer matching funds, and you can save far more money for your retirement, in one place.

That said, the best advice I can give you is to make an informed decision quickly, and start investing (or, increasing your investing). Every day that passes without your money in the market is another day that you’re missing out on the amazing power of compound interest. You’ve got this!

xoxo, Ms. Financier

This post originally appeared on Victori Media, a site dedicated to helping millennial women live life victoriously. I love the site’s mission and am inspired by its creator, Tori Dunlap, who built her first business at age nine and is an award-winning digital marketer, entrepreneur and blogger.

How to Slay Your First Job Out of College

This post is by my fabulous internet friend Tori Dunlap. Founder of her first business at age nine, Tori is an award-winning digital marketer, entrepreneur, and blogger. She has led, developed, and executed social media and communication plans for global brands. Tori is founder of Victori Media, helping millennial women live life victoriously and is obsessed with finding cheap flights, reading a good book in the bathtub, and watching classic "Whose Line" episodes.

You’ve walked across that stage, diploma in hand. You’re absolutely exhausted, and elated for what’s to come. But whether you have a job lined up already or are beginning the search, your challenges (both good and bad!) are just beginning.

I was in your shoes just a few short years ago, when I graduated college and launched my career. Like most graduates, I was discovering how to navigate the corporate world. But unlike most graduates, I landed a job that had me running marketing and communication strategy for a global company of 5,000. By myself.

In order to be successful, I knew I was going to have to constantly learn. And since my first day on the job, I’ve been given more responsibilities, had fantastic opportunities to travel and work special events, and even earned a massive raise.

Here’s what I learned about how to kill it at your first corporate job.

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1. Chat with your boss

Discovering more about your role requires a 1:1 discussion with your supervisor. Your first week on the job is a great time to figure out the big picture stuff, like how success will be defined in your position — is it quantitative or qualitative? The number of clients you bring in, or an increase in brand awareness? — and what your goals should be in this first year.

More day-to-day expectations are important too — do you need to stay as late as your boss? Can you work from home (if so, how often?) What meetings should you be attending? Ask questions now before you regret NOT asking them later.

2. Get some info

The best resource for getting your feet wet at your first job? The people you’ll work with every day! It’s your chance to learn everything you can about a new company: make friends with people in other departments, email executives a few questions about their role and experience (after you’ve done your research on their background and achievements), ask someone out for coffee. Sit with new people at lunch every day for your first few weeks, ask to observe any executive meetings — soak it all in!

3. Bond with your peers out of office

Work is better with friends — your mental health is proven to increase when you have friends at the office. Having people that will support you, guide you, and have your back will be so important as you take on larger projects. Go to lunch together, or bring your home lunches outside. Visit the art museum together, go to a movie, grab drinks. Building positive, friendly relationships with coworkers will make tough days easier, and will congratulate you and cheer you on when things go right.

4. Contribute innovative ideas

Going above and beyond in your job is not just working hard. You want to be an innovator. See where you could fill a need, and pitch it to your boss (chances are, you learned some of the challenges in your informational interviews!) Begin to seek out the organization’s problems, and dream up ways to solve them. For example, I implemented our Lunch and Learn program at our office (and it helped me get that huge raise!)

5. Offer support and encouragement

Your coworkers are just like anyone else: to be successful, they want to feel supported. When a coworker is set to leave for vacation, ask them if there is anything you can assist with while they’re away. When the person in the cubicle next to you gets a raise or promotion, handwrite a note of congratulations. Make them something small for their birthday, or help decorate their desk. It’s the small things, but they’ll go a long way in having a more cohesive, collaborative team who feels respected.

6. Ask for feedback

In that very first meeting with your boss, you want to set up sessions for formal feedback. Ask her for a formal review every 6 months, with consistent check-ins when you meet one-on-one. The last thing you want is to feel like you’re doing a great job, only to have a negative review from lack of communication. Ask for feedback from peers and other team members, too. Let them know you’re eager for feedback on what you can improve, since you’re looking to grow.

7. Constantly strive to learn

Whether this learning comes from your on-the-job training, an introductory interview with someone in another department, a book, or an online course, the best thing you can do for your career is to keep learning (and you thought college was over!) Free webinars and networking events have been very helpful for me, as well as collaborating with colleagues on projects. Ask your boss if there is a discretionary budget for learning materials, courses, or certifications.

For those of you just launching your careers, be compassionate and confident in your skills, and never stop asking questions. You’ve got this! If you’re looking to discover your path after graduation, or are having a hard time finding that perfect fit — drop me a line! I would love to work with you to discover your full potential.

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I love Tori's thoughtful, practical advice on how to slay your first job out of college! For those that have been in the workplace for some time, you probably realized you're doing several of these things already. Or, perhaps you found something new to incorporate. Thank you, Tori, for your take!

xoxo, Ms. Financier

 

How My Mentor Helped Me Get Promoted

In the workforce, doing great work isn’t enough to accelerate your career. Mentors and sponsors ensure your great work is recognized, acknowledged, and appreciated by those in power. My mentor has been a tremendously valuable source of guidance throughout my career, and our partnership helped me earn my most recent (and significant) promotion.

Let’s take a moment to define terms:

  • Mentors provide guidance, coaching, and perspective on your career and professional ambitions. I think of my best mentors as a second set of eyes on my life decisions, and love this article on the four things the best mentors do. Mentors may be within or outside of your organization.

  • Sponsors may do some of the things mentors do, but they exert effort on your behalf. They actively seek, develop, and create professional opportunities for you. I believe you must have at least one sponsor within your own organization.

A report by executive search firm Egon Zehnder indicated that only 54% of women have sponsors or mentors supporting their career. Frustratingly, women have fewer sponsors than men. In my experience, I find we are less assertive about developing senior relationships because we often feel uncomfortable asking for help. If you don’t yet have a mentor, here are six tips on how to get one.

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My primary mentor is an amazing, inspiring businesswoman with over a decade of additional professional experience. Let’s call her Amani. Her guidance has been valuable throughout my career and she played a massive role in helping me secure a big promotion.

Eighteen months ago, I felt stuck in a professional rut. Amani and I had a conversation where I shared this feeling with her, and she asked me several pointed questions to help me diagnose the source of my angst. I find that the best mentors, like Amani, often listen more than they speak.

One of the questions she asked me was: “If you weren’t stuck, what would be happening differently at work and in your career?” This simple, thoughtful question required me to gather my thoughts. I shared some of the frustrations that would be eliminated, the projects I’d stop spending time on, how I’d change my staff, and the new things I’d take on. “Well,” Amani chuckled, “let’s build your plan to do just that.”

Over the next several weeks, I evaluated and retired lower-value projects; I assessed my staff, and adjusted workload and responsibilities. With Amani’s guidance echoing in my head, I built a small working team to re-evaluate internal processes that had grown cumbersome and inefficient, and began working towards new goals that inspired me.

In the eighteen months that followed, Amani served as a “second set of eyes,” as I ran any new project and commitment by her. Her objective perspective helped me evaluate which opportunities truly matched the revised vision of my career.

Before a particularly difficult meeting, with several executives that never agreed on anything, she was my audience as I practiced the meeting, executive concerns, and questions I would need to address.

Amani helped me clarify my focus and served as a meaningful source of inspiration, particularly when some of my proposals went down in flames. She reminded me, “Your next role isn’t going to come because you were right every time, it’s going to be awarded to you because you’re a great executive and thoughtful leader. Keep proving that, and the opportunity will come.”

Importantly, Amani helped me communicate the case for my promotion in the six months leading up to the review cycle. She and I would discuss which leaders had confirmed their support and strategize on which critical promotion decision-makers needed to shift from neutral to supportive.

My great work and strong leadership earned me a promotion eighteen months after I articulated my feeling of being professionally “stuck” with Amani. Her guidance, support, and objective advice are things I’m forever grateful for. You might be curious how I pay her back? She always asks one thing: that I return the favor by mentoring other women. I’m happy to oblige.

I’d love to hear how you’ve benefited from the partnership of a mentor...or, how you’re supporting other women by serving as their mentor. By intentionally spending the time to support those around us, we’re elevating all women, which is a beautiful thing.

xoxo, Ms. Financier

This post also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.

How to Give to Charity and Have a Big Impact

One of the best things about building wealth and making money is the opportunity to give your money away. On this blog, I’ve talked about giving to charity as one of the six expenses I’ll never cut back on and donating regularly is one of the things that successful 30-year olds should be doing with their money!

I believe that anyone that is privileged enough to be investing, budgeting, and saving extra money has an opportunity to have a big impact through charitable donations. Here’s how to give to charity and have a significant impact across the course of your life.

Select a few causes that mean the most to you. I recommend identifying a small number of charities or organizations that align with your values and passions. Selecting 3 - 6 that you can truly research, understand, follow and volunteer with allows you to stay close to the impact your donations are having. By now, you’ll realize I’m a fan of focus and simplicity. With a smaller number of organizations, you can truly remain engaged and aware, and your limited resources will, by definition, go further among a smaller set of causes. What if you have more than six that you care deeply about? That’s fabulous - I don’t want you to feel limited - but think carefully about how you’ll prioritize your limited time and money to support a wider group.

Research them carefully. There are amazing resources today that help you understand the impact your selected nonprofit is having. I prefer Charity Navigator, which is itself a charitable organization. Charity Navigator evaluates nonprofit organizations against a variety of objective criteria, including financial health, accountability, and transparency. Using their site, you can easily explore how the organization uses its budget, understanding how much goes to paying its staff, versus to the causes it is designed to support.

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Set up recurring monthly donations. Like anything in your financial life, automation will make your donations easier to maintain. Further, recurring donations provide your charities with a more reliable stream of income. Fundraising is costly and very time-intensive, so your automatic donation helps alleviate some of that strain.

How much should you donate on a monthly basis? Like everything in personal finance, the answer is “it depends.” Many cite 10% of your income, linking back to the practice of tithing. I recommend starting with that as a benchmark - and lowering or raising it to fit your budget. When your income increases, or your expenses drop, you can adjust your donations as needed.

Evaluate your budget for additional donations. If your budget allows, you may want to create space for additional donations to the causes you care about. Many organizations have an annual fundraiser and run periodic giving campaigns. Contributing to those efforts provides additional support to the programs you value.

Mr. Financier and I set aside budget to participate in - and invite guests to - the annual events that are thrown by our favorite charities. It’s a great way to connect our friends to the causes we care about, connect with the leaders of the organization, and understand the progress and strategies of the coming years.

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Determine your practice for unexpected donations. The causes you care about deeply represent your personal priorities. However, if you’re like me, you have friends and family that have other philanthropic passions that they work to support throughout the year. These efforts often come in the form of a personal campaign or athletic competition.

I suggest you take one of two approaches when you’re approached by a loved one about donating to a new non-profit organization:

  • Set a budget and stick to it. Create an “on demand donation” budget that you can use when you’re asked for ad-hoc donations. This small slush fund allows you to contribute, but not go overboard or contribute at the expense of your other charitable goals. When you’ve exceeded the budget, allow yourself the permission to say, “I’m honored you asked, but I’ve already spent my budget for charitable donations - is there another way I could support you?”

  • Politely decline. There’s nothing wrong with saying no. Women, particularly, were often socialized to be “people pleasers,” and can struggle with this small phrase. You can be kind and still say no. If you choose, you may offer an explanation, “I appreciate your passion for this cause - however, I’ve decided to funnel all of my charitable giving to a small number of causes so I can have the greatest impact.”

Explore your company’s employee matching policy. Once you’ve settled on your charitable goals, your company may be able to provide additional support. Many businesses offer Corporate Matching Gift Programs, where the company will match employee donations, usually up to a certain dollar amount annually. Contact your human resources team to understand if your company has one in place, and if they do, take advantage of this “free money” for your favorite causes!

Don’t forget about donating clothing and household goods. You could spend time selling your gently used items online, or via consignment...but if you can afford to go without that “found income,” donating your physical goods to shelters, return-to-work programs, and other organizations can have a tremendous impact. When donating physical goods, take the time to research the requirements of the specific charity - you’ll save them time and effort if you provide only what they are looking for.

Finally, no amount is too small. Occasionally, I hear women muse about whether “smaller donations” have an impact. While large donations catch headlines, every nonprofit is grateful for even the most modest amount. Start with what you can afford, and don’t demean your donation. Every contribution counts and will support the organizations you care about.

Are you interested in learning more about smart giving strategies? I loved the Charitable Giving Boot Camp episode of the Better Off podcast. Host Jill Schlesinger speaks with the CEO of Charity Navigator about how to maximize your charitable giving. Their discussion explores the impact of philanthropy and several common questions about charitable giving.

One of my other favorite podcasters, Jean Chatzky, also addressed charitable giving on an episode entitled Doing Well While Doing Good with Katherina Rosqueta, the founding executive director for the Center for High Impact Philanthropy at the University of Pennsylvania. Katherina noted that 80% of Americans give to charity, and shares several practical tactics to bring to your own philanthropic efforts. She also reminded listeners that philanthropy isn’t just for the wealthy - anyone that engages in charitable efforts is contributing to the greater good.

I haven’t addressed the potential tax benefits of charitable donations, but there are opportunities to deduct donations from your tax bill. This is a nice incentive, but not the driving purpose behind my giving, personally.

I’d love to hear about the strategies you use to support your favorite charitable organizations! How did you identify the causes and organization you support today? What techniques do you use to balance their support with your other financial priorities? Looking forward to your feedback!

xoxo, Ms. Financier

Talking About Women and Money with a Financial Planner

Certified Financial Planner™ professionals help clients align their finances with life goals. I prefer fee-based planners that have earned a CFPⓇ certification, and recommend you consider them if you’re selecting an advisor to help you with your financial plans.

If you’re like me, you probably wonder about the lessons these financial gurus have learned from years of serving clients. Is there secret perspective that they have gained from those experiences? What patterns and pitfalls do they see in their clients?

I had the opportunity to interview Mark Newfield, a Richmond-based financial advisor who started his financial planning career after a successful first career in consulting. Mark and his team shared their perspective on personal finance with me, reflecting decades of collective experience. Here’s a summary of our conversation.

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The question you should always ask a planner. I started our discussion with the basics, “Why did you get involved in financial planning?” In Mark’s view, this is the first question any prospective client should ask before engaging a planner. He noted that very few people ever ask him this, and his team always proactively shares why they are in this business.

Mark and Angela Lessor, Director of Investment Operations, both cited the personal satisfaction they get from helping others. During Mark’s first career as a consultant, he was always the person eager to talk about money and often shared personal financial advice and perspective. When he decided it was time to move on from consulting, but wasn’t ready to quit working, he, “...put two and two together,” and shifted into a second career focused on helping people with their money. Mark proudly shared, “I have a stack of notes on my bookcase from clients saying thank you for our efforts.”

Angela shared a similar sentiment. She noted that it is incredibly satisfying to help people, many of whom come in disorganized or overwhelmed with their financial situation. Developing a plan that clients can follow, helping them get their financial footing, and partnering with clients to see that their goals are achievable are some of her favorite things about the role.

This passion for helping others is a common thread among quality CFPⓇ professionals. I follow several CFPⓇ gurus on Twitter, and can feel their excitement in empowering and enabling clients to succeed. When you are working with a planner, I believe you should feel the same from them. If they talk only about beating the market, making money, and growing wealth (but with no reflection on their passion for your success, or appreciation for your goals), that’s a red flag to me.

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In general, what differences do you see between men and women in how they manage their money? While every individual is different, Mark and Angela noted that they have observed general trends across genders. In general, they observe women making many of the financial decisions in the daily running of the household. Mark noted, “It seems like people are finally starting to become aware of that, but that hasn’t changed in decades.”

Women tend to prefer more advice and consultation, and men generally like to see the numbers. Women often want to deeply understand where their money is going and what they’re about to invest in. Like many planners, Mark and Angela engage their clients in an initial assessment, which can identify where partners (same-sex or heterosexual) differ; these distinctions may or may not be gender-based, and every couple tends to differ in a few personal finance areas.

Taking a fact-based approach enables CFPⓇ professionals to help partners navigate tricky financial decisions. While the general observations Mark and Angela shared line up with much of the gender-based research on money and investing, I recommend looking for a planner that has a defined process to engage with you. This may include an assessment, detailed questionnaires about your spending and income, and a clear long-term plan to support you. This illustrates their commitment to your overall financial health and their desire to build a plan suited for you, versus a one-size-fits-all approach.

Many people struggle to talk openly about money. Why do you think that is and what advice do you have to start a money-related discussion with a friend or family member? I was curious to understand how a professional team that constantly discusses money can help us improve our comfort with the topic.

Mark and Angela shared that getting the emotion out on the table is a good first step. For example, if you’re struggling with credit card debt, you could say to your partner: “I’m worried about debt, and I think we ought to have a conversation about it. How do you feel?”

They acknowledged that most clients know intuitively whether they are in good financial shape (or not) and most aren’t as “disciplined” as they believe they need to be. This discomfort or shame can hinder communications. Mark shared, “We see people with high incomes, say an average of $300,000 annually, and yet the number of people who come in and feel wealthy are few.”

Further, Mark mentioned the relief that many clients feel when they start to discuss money openly and candidly. I can relate to this personally; when I had massive credit card debt I felt incredibly ashamed. Once I started addressing it openly with my partner, it was like a massive weight had been lifted off my shoulders.

I found these observations from Mark and Angela illuminating on several fronts. We often compare ourselves to others, assuming they are making smarter decisions with money, know something financially we don’t, or don’t have debt. The reality is, we all make money mistakes (I’ve shared several of mine), and many in the United States struggle with financial literacy. If we are brave enough to be vulnerable and share our concerns and emotions about money with others, we can engage in a more authentic dialogue.

Further, there is a perception that more money immediately equates to fewer money-related stresses. I’ll always have more empathy for those at the lowest ends of the income spectrum, even those with means struggle to consistently make the “right” decisions with their money. Removing the assumptions that some of us have, that money can solve all problems, can give those that earn more the opportunity to engage in financial improvement.

What are the top three "money mistakes" you see women make? I was very interested to see what patterns had emerged across their client base, since we all have room to improve with how we manage our money.

Budget - no one has one. Mark and Angela noted that they rarely see clients that have set up a budget, and many women spend first and try to save the reminder. They noted that this approach is often a “complete failure, except in the most disciplined people.”

They have found that they help women get serious about their budget once they illustrate the net available cash flow after required expenses (like mortgage payments and utilities). Usually, this cash flow is two or three times the amount their clients think they can save.

Ladies, this first one is good news - it means that most of us have an opportunity to save a lot more than we do today, simply by starting to track our expenses and save first, then spend (which I call “Scarcity Budgeting,” and use diligently.)

Having too many financial accounts. I wasn’t expecting this insight, but it makes a lot of sense. Mark regularly counsels clients to consolidate accounts, because “...the more stuff you have, the harder it is to manage.” He notes that many clients don’t even know their rates of return on their investments, because they have so many accounts and can’t easily keep on top of their money.

If your employer has a 401(k) or other retirement program, you are likely tied to that financial provider. Beyond that, you may have one other brokerage accounts for other investment purposes. I believe more than two financial institutions gets difficult for the average person to manage on a regular basis. If you have not done a financial inventory, it may be a wise first step to identify where your accounts are, and how you can consolidate and simplify your financial life.

If you’re partnered - be open and transparent about money. Mark and Angela noted that many women in significant relationships struggle to be open with their finances. This is related to the question above, as talking about money when you’re struggling with certain aspects of your financial life can be truly challenging.

However, surprises and secrets can be damaging and hurtful to a relationship. Both Mark and Angela advised an open discussion, and acknowledged that working with a CFPⓇ certificant can help partners be more open about money. Mark shared, “More often than not, we do counseling on our clients spending habits. We’ve had to help with where they want to live and other significant topics in a relationship.”

I agree that a professional can help guide these conversations, and believe partners should work towards becoming financially intimate.

What additional financial advice do you have for women? Before we closed our discussion, I wanted to understand what our financial experts would recommend to women looking to grow their wealth.

Mark jumped on this question, and shared; “You’re never going to figure out what you need until you figure out what you want. Financial independence - whatever that means for each client - is a set of behaviors. How do you want to live? Answer that first.”

I couldn’t agree more! We all have unique goals for the life we want to live; these goals may include travel, passion projects, ambitions for our family, career objectives. Getting crystal clear on those objectives will help us direct our money to serve (and not detract from) those objectives.

I hope you enjoyed this perspective from Mark Newfield and Angela Lessor! I’m always intrigued to learn from those that are lucky enough to help others with their money, day in and day out. Are there any tidbits from this discussion that surprised you? What other questions might you have for a CFPⓇ expert? Or, if you are a CFPⓇ professional, what would you add to this dialogue?

xoxo, Ms. Financier

Do Women Need To Save More Than Men for Retirement?

I have been thrilled to read recent reports that millennials are out-saving other generations. On average, we save 19% of our income, which is 5% more than Gen Xers and Baby Boomers, who average only 14%.

Many of us are focusing our saving on near-term objectives, like housing, or to live a certain lifestyle. It is equally important that we save for retirement. Investing small amounts regularly can build tremendous wealth, due to the amazing power of compound interest. But, does your gender matter in your retirement planning?

I’m disappointed to say it does, because the data suggests women need to save more than men. We face a retirement gender gap. The first reason is a positive one; women tend to live longer. This is the case without a single exception, in all countries. Because of this difference, we need more money to sustain our longer lives.

The other reasons contributing to the retirement gap are frustrating. Women face a persistent wage gap over the length of our careers and spend more time out of the workforce than men. On average, we need to save $1.25 for every $1 saved by men.

A recent article in the Journal of Accountancy addressed this topic and highlighted the health care penalty that women face;

“With longer lives, women also have more years of healthcare to pay for. According to HealthView Services, a company that publishes healthcare cost research for financial advisers, a healthy 55-year old woman can expect to spend $79,000 more on healthcare in retirement than a man of the same age. And women are much more likely to need long-term care, too...It's no coincidence that over 70% of the residents in nursing homes are women.”

The article also noted that, in heterosexual couples, "Statistically, men tend to go first, and it's their wives who had to take care of them.”

The retirement gap that exists between men and women may be frustrating, but it is important to understand now, in our working years, so we can take action. Here are some practical steps that you can take to address your personal retirement gap:

  • Redirect money from lower-importance categories. Look out for the sneaky ways we spend more than we mean to. These small expenses can add up; reducing them creates wiggle room for more saving.

  • Increase your retirement saving. If you have a 401(k) at work, you can invest up to $18,000 tax-free. Your employer may match a portion of that, which is like free money.

  • Start talking more frequently about money with the women in your life, because knowledge is power. A Fidelity study found that 92% of women want to learn more about financial planning, but eight in 10 “...confess they have refrained at some point from talking about their finances with those they are close to.” Women report that talking about money is “too personal.”

  • Encourage other women to save for retirement. Be the woman at work that encourages HR to host retirement savings webinars with your 401(k) provider, and talks openly about how excited you are to increase your 401(k) contributions. Your positive, non-judgemental approach will inspire others.

  • Grow your income. This may not happen overnight, but it is the surest path to close your personal retirement and wage gap. At a minimum, you should ensure HR has verified that there is no wage gap between you and your male peers. But I know you can do even more than that to build your wealth.

While data tell us we need to save more than men, I’m hopeful that our generation will be able to apply our tendency to save towards retirement investing. I’ve never met a retiree that regretted saving too much for their future. Let’s start building wealth now, so we can live our Golden Girls life in style, just like Blanche, Dorothy, Sophia, and Rose.

xoxo,

Ms. Financier

What’s the Difference Between an IRA and 401(k)? Why Does it Matter?

Saving for retirement can be daunting...and the finance industry’s love for confusing acronyms doesn’t help. So, what’s the difference between an IRA and a 401(k)? And, do those differences even matter? Let’s explore the basics, to prepare you to build wealth.

Why should you care about investing for retirement? Fair question - retirement can seem like a hazy event in the future, making it feel far less urgent than other life priorities. However, let’s learn from our parents - not saving early enough for retirement is the number one financial regret of Baby Boomers in America. In contrast, I have never heard anyone say they regret saving too much for retirement, too early.

Further, investing a modest amount today can be more powerful than investing a larger sum later in life. The power of compound interest means that the earlier you invest, the sooner your investments start growing and making money on your behalf. You can never, ever recapture time. Starting today with smaller amounts will build financial momentum in your investment accounts.

Finally, women should care about investing for retirement because we face a retirement gender gap. We tend to live longer, face a wage gap over the length of our careers, and spend more time out of the workforce than men. On average, we need to save $1.25 for every $1 saved by men.

What type of account is best - an IRA or a 401(k)? Once you’ve decided to invest, it’s time to identify the best type of account for your retirement investing. Let me be clear: either an IRA or a 401(k) is better than doing nothing. Both are fabulous options that are set up to encourage investing. Don’t spend months trying to make the perfect choice; you’ll lose valuable time where your money could be in the market, growing for you.

If you’d like to learn more details about investing, here’s how to start investing in four steps. I’ve also created a very simple summary of what investing in the market really means. Here’s a summary of the main differences between an IRA and 401(k):

Traditional 401(k) Account: Offered by your employer, this account allows you to invest a percentage of your wages for retirement.

  • 401(k) accounts are funded with pre-tax wages. This means you pay less in taxes to the IRS. It also means you’re investing a larger amount of money (since you’re investing a full dollar earned, not just the portion remaining after taxes are paid).

  • Many employers will “match” a portion of your savings. This is free money; never pass up free money!

  • You pay taxes on the money when you withdraw it in retirement.

  • In 2017, you can save up to $18,000 annually in a 401(k) - more if you are over 50.

  • Generally, you cannot access the funds in a 401(k) account without paying steep penalties until you reach retirement.

  • 401(k) is the subsection of the Internal Revenue Code that defines how these accounts work, hence the name of this retirement vehicle.

Traditional Individual Retirement Account (IRA): You have to open this account for yourself at a qualified bank or broker, like Vanguard or Fidelity.

  • Traditional IRAs are funded with wages that you have already paid taxes on. However, depending on your income, you may be able to deduct your contributions from your taxes.

  • You pay taxes on the money when you withdraw it in retirement.

  • In 2017, you can save up to $5,500 annually in an IRA - more if you are over 50. The limit is far lower than 401(k) limits in most cases.

  • Funds in an IRA account are for your retirement, but certain qualifying expenses allow you to skirt tax penalties. These include higher education expenses, a first-time home purchase, and medical costs.

In addition to the differences above, 401(k) and IRA accounts may come in two flavors: Traditional and Roth.

  • Traditional accounts have been funded with money that hasn’t been taxed, so you pay taxes on the money when you access it in retirement. (Traditional IRA investments receive a tax deduction, which makes it the same as a pre-tax 401(k) investment.)

  • Roth accounts are funded with money that has already been taxed, so you do not owe the government any taxes when you access it in retirement.

So, which is the right type of account for you? Like many financial answers, it depends. In general, I recommend prioritizing a 401(k) account, because it often includes both employer matching funds, and you can save far more money for your retirement, in one place.

That said, the best advice I can give you is to make an informed decision quickly, and start investing (or, increasing your investing). Every day that passes without your money in the market is another day that you’re missing out on the amazing power of compound interest.

I’m curious if you have any other questions about the differences between these accounts. Which have you prioritized? Let’s get investing - you’ve got this!

xoxo,

Ms. Financier

This post also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.

What Successful 30-Year-Olds Do With Their Money

You’ve reached your 30s - congratulations! If your 20s are all about change (graduating college, starting a career, exploring new relationships, and living on your own), your 30s are about taking your life to the next level; accelerating your career, exploring the world, and making a difference.

Don’t ignore your finances in this critical decade. You have finally made a dent in your student loans, grown your paycheck, and started saving. There are six other things successful 30-year-olds do with their money to set themselves up for a more powerful future.

Grow your income. There are two primary levers to building wealth: reducing expenses and growing your income. Now that you have established years of experiences and accomplishments, build a plan to grow your income.

Women still face a wage gap relative to their male counterparts; this begins after college and persists throughout our professional careers. The average mid-forties male college graduate earns 55% more than his female counterparts.

Build your negotiation skills in preparation for asking for a raise or promotion. Here’s how to approach the conversation. Practice with a savvy friend and don’t get discouraged if you get an initial no; build a specific plan for what you need to demonstrate to secure a raise in the future. You may also want to read my experiences as a manager; the good, bad, and ugly when employees ask for a raise.

Save to spend. This sounds so easy, yet many in their 30s (and 40s and 50s...) spend first and then pay off debt. By your 30s, you should be setting aside money for future expenses, which include splurges like vacations and gifts as well as car maintenance and home repairs.

I recommend doing this automatically; set up a regular transfer from your paycheck into a “save to spend” account that you use for larger, irregular expenses. This is separate from emergency savings; a vacation to Puerto Rico in the middle of January does not qualify as an emergency!

Eliminate unnecessary expenses. You may have enjoyed an increase in salary across your 20s. If you’re like most of us, lifestyle inflation crept in; your spending increased as your paycheck grew. Enjoy the fruits of your labor, but not at a cost to your financial health.

Take the time to evaluate your expenses; you can use tools like Quicken, YNAB (You Need a Budget) and Mint to track your spending automatically. By keeping an eye out for the sneaky ways you spend more than you mean to, you can re-direct your money to align with your goals.

Invest for your future. In your 30s, you should be investing regularly. The number one regret of older Americans is not saving for retirement early enough. Set yourself up for a wealthy future by investing automatically, starting with your employer-sponsored retirement plan.

Investing is critical for women. Men are generally more confident about investing, while women are more goal-directed and trade less. Women tend to keep 10% more of their savings in cash than our male counterparts. Millennial women report a lower level of financial comfort. On average, we are less likely to feel “in control” or “confident” about our financial future. And, women generally have a smaller total invested when we retire - because we earn less.

If you don’t yet invest, then the best time to start is today. Here’s what investing in the market really means and how to start investing in four steps.

Manage risk. In your 30s, you may have accumulated assets, started a family, and purchased a home. You likely have insurance policies in place for home, health, and automobiles.

However, most Americans do not have a will; only 35% of us aged 30-49 have one. While wills are better than nothing, they do not afford the same protections as other important legal documents. A living revocable trust can allow you to more privacy (it does not need to be filed in court like a will) and healthcare and financial directives dictate who makes decisions regarding your health and wealth should you become incapacitated.

These topics aren’t easy to address; however, consider the additional stress you’d feel if your partner or family member passed and didn’t have this documentation in place.

Give back regularly. Finally, but importantly, in your 30s you should be giving back. Many Millennials are volunteering regularly; much has been written about the importance we place on contributing to the causes we care about.

Beyond your valuable time, set up recurring donations to the causes you support most. I recommend a monthly donation that you increase with every pay raise. Fundraising is a perennial challenge for nonprofits; your regular donations will provide a needed, predictable income stream for your favorite charities.

Strengthen your financial future by taking these six steps to emulate what successful 30-year-olds do with money.  If you have any other suggestions, I’d love to hear from you.

xoxo, Ms. Financier

This post also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.

How to Save Money In Your 20s

Your 20s are all about change; graduating college, starting a career, exploring new relationships, and living on your own. Many of these are tremendously exciting; I’ll never forget my first client presentation to six senior executives only a few months after starting my first job. I walked on air after impressing them with my research.

That said, many of these changes are stressful and costly. I racked up a massive credit card bill right after I moved to Washington, D.C. for my first job. I thoughtlessly swiped my credit card to buy essentials for my first solo apartment, shop for a work-appropriate wardrobe, and splurge in D.C. bars and restaurants.

It can be tempting to put off saving money, but if you save small amounts early in your career, you create massive wealth for your future self. When you save and invest, your money makes more money on your behalf, and that’s an amazing thing! So let’s do this - here’s how to save money in your 20s.

Automate. Set up an automatic transfer to your savings account on payday. Start with the biggest amount you can - that might be $20, or $200. Increase this amount at least once every three months - even if only by one dollar.

Invest. Yes, you need to start now! If you work for an employer that offers a 401(k) or other retirement plan, sign up immediately. Some employers will match your contribution up to a certain percentage; if you’re lucky enough to have this benefit, take advantage of this free money! If you’re new to investing, that’s okay. Here’s a primer on all you need to know.

Bring your lunch. If you pack your lunch four days each week, you’re saving $10 a meal on average, or $40 weekly compared to someone that goes out for lunch every day. That gives you over $1,000 to save each year, compared to the cost of making lunch at home. Make a “bring your own lunch” date with fabulous brown-baggers in your office to stay motivated.

Talk about money. Seriously. Women are curious about money, but are often taught that it is a taboo topic. A Fidelity study found that 92% of us want to learn more about financial planning; that means nearly every woman in your life is interested in talking about finances. Start the conversation by sharing posts (like this one) and following financial gurus on social media. By sharing that you’re interested in saving money, you’ll get creative ideas from your girlfriends and hold one another accountable. Ban any shame and judgment from your money conversations and you’ll be amazed at what you can learn.

Stop comparing. President Theodore Roosevelt said, “Comparison is the thief of joy.” Social media gives us the amazing power to stay connected to friends and icons, but heavy use has been linked to depression. Scrolling through everyone’s life highlights can make us feel like we’re not enough - which can trigger emotional spending to make ourselves feel better, temporarily. Make a conscious effort to stop yourself any time you start comparing yourself to others; run your own race!

Track your spending. You work hard for your money and deserve to know where it goes. Popular apps like Mint, YNAB, and Quicken can help you understand if you’re falling prey to the sneaky ways we spend more than we mean to. Figure out where you’re spending too much, and divert those expenses to more important goals like your next vacation or your investment account.

I’d love to hear if you have any other suggestions to save money in your 20s. What tactics worked for you? If you make saving a habit now, your future self will be so pleased with all the wealth created when you were just starting out. You’ve got this! 

xoxo, Ms. Financier

This post also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.

How Many Credit Cards Should You Have?

Credit can be a beautiful thing – allowing you to safely make purchases and earn rewards. Managing credit cards responsibly can help your credit, which can make you a more attractive renter, get you a better interest rate, and can even impact your candidacy for a new job.

However, paying with credit cards disassociates us from the physical act of spending cash, making it easier to spend more money. Further, there’s a reason that card companies offer bonuses and points. The average American household has a credit card balance of $8,377 and has an interest rate that is greater than 12%.

While credit can be powerful, it can also be a nightmare; I’ve struggled out of credit card debt many times. I’m now out of credit card debt and have vowed to never rack up a balance again. One key to reining in my debt was properly managing the right number of credit cards. So, how many credit cards should you have? My answer is at least two, and no more than four.

Why do you need to have at least two cards? You may run into a situation where your card isn’t taken by a particular merchant. Select at least two cards and ensure at least one is a Visa or MasterCard; these are widely accepted. Discover and American Express can offer powerful benefits but tend to be accepted by fewer stores.

Why shouldn’t you have more than four cards? Because complexity makes it more difficult to manage your debts. Psychologically, it can be “easier” to spend if you have more cards – your Visa may have a $2,300 balance, but your Discover is paid off; so charging that new maxi dress to your Discover isn’t that bad…(Yes, it is!)

Beyond your two basic credit cards, add up to two more that allow for special benefits. For example, one of these might be a card tied to a hotel chain or airline that you frequent and provide additional value like upgrades or early boarding. One might be a card linked to a charity you support; this allows you to donate regularly to a cause via your regular spending.

What shouldn’t you do?

No store cards. I’m serious; store cards offered by retailers have very high interest rates and generate huge profits for the businesses that offer them. There’s a reason why every cashier asks if you’d like to save today by signing up – many are compensated to do so because of the revenue these cards generate.

Avoid cards with annual fees. There’s no reason to pay an annual fee for a card unless you’re absolutely certain it is a good value. One of my frequent traveling friends has an airline-branded credit card, with an annual fee of nearly $500. However, because she’s constantly on the road, the cost of the lounge access provided by this card is worth the high annual fee. She can grab free snacks, drinks, and a quiet place to recharge between flights; some lounges even have showers for post-red-eye refreshing.

No foreign transaction fees. If you travel, secure at least one card that doesn’t have a foreign transaction fee. Foreign transaction fees hover around 3% and are charged when you buy an item in a foreign currency. That can add up for frequent travelers.

Don’t add your partner to your card too early. Credit card debt accumulated on a joint card is the responsibility of both parties. If your partner racks up a $25,000 credit card bill on a joint account, you share liability for that debt. I would not add someone to my credit card account unless I had a legal agreement in place that dictated payment responsibilities in situations like this; (a cohabitation agreement or prenuptial agreement can cover this.)

Don’t churn cards for points (unless you have the time and are extremely disciplined). There are many stories about people who funded luxury vacations using the “free” points they got from “churning” credit cards (signing up for cards temporarily to take advantage of card bonuses.) Most of us don’t have the time and focus to keep track of the details needed to profit from this exercise.

If you have too many cards, start canceling them gradually. Your credit score may take a small dip, but it is worth it to avoid managing many cards. You could also cut up your cards and wait to close the actual account (unless there is a fee associated with the card, in which case I’d suggest canceling it right away.)

Sort your cards by interest rate and credit limit; keep those you've had the longest, with the lowest rates and highest credit limits. You may also elect to negotiate those before you cancel, if there’s a card you love to use but it has a very high interest rate, for example.

Don’t ring up a balance you can’t pay off. Get into the habit of paying your credit card debt off every month. As someone who has struggled with credit card debt, I have to put steps in place to ensure I don’t overspend. I only put expenses greater than $100 on credit cards, and I transfer the money immediately from my checking account to my credit card – typically the day I make the purchase.

Get your finances in order by getting the right number of credit cards in your wallet! There are many resources for you to compare credit cards and select the right one for you, including NerdwalletCredit Card Tune-Up, WalletHub, and Consumer Reports.

What are your credit card tips? Is there anything I missed? Let me know your thoughts - you’ve got this!

xoxo, Ms. Financier

This post also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.

My Money Mistakes: The Four Times I Accumulated Credit Card Debt

I’ve made a commitment to share my money-related mistakes. These financial lowlights aren’t my proudest moments, but I hope sharing my missteps can help remove some shame and embarrassment from the topic of personal finance.

My mistake with credit cards is a series of mistakes that repeated it four times. Unfortunately, I’m not alone in accumulating too much credit card debt. As of this writing, the average American household has a credit card balance of $8,377 and has an interest rate that is greater than 12%. Consumers typically have 9 credit cards and approximately 14% of Americans have more than 10 cards. (This is far more than the number of credit cards I recommend, which I’ll cover in the next post.)

Mistake #1: Credit card debt in college. I was thrilled when I got accepted into the University of Michigan, the only school I wanted to attend. (Go Blue!) When school started, I couldn’t believe how lucky I was to be attending a school in beautiful Ann Arbor, with fascinating classes, inspiring campus life, and creative, thoughtful students.

It was also my first exposure to those who appeared very wealthy. Some students had cars that cost more than my childhood home, parents that bought them an Ann Arbor house as “an investment property,” or spent their winter break in Switzerland. My sturdy Eddie Bauer backpack seemed out of place - many of the women in my classes carried their books in Kate Spade, Fendi, and Louis Vuitton bags, which I had only seen on Sex and the City.

By the time I reached my junior year, I had accumulated around $2,500 of credit card debt. This debt wasn’t for my books or school supplies, but all splurges I felt I had “earned.” You know, because I was working so hard in school...and “all” my peers had nice stuff, too, so...

To manage the credit card debt, I ignored it and headed off to my summer internship in Washington, D.C. One evening, I was walking to the Metro when my cell phone rang. It was the credit card company, frustrated by my lack of payment. The representative offered to “charge off” my debt. I happily accepted.

Once I returned to campus to begin my senior year, I checked my credit score. It was in the toilet because of my decision to ignore my debt. I worked out an arrangement to repay the debt, which modestly improved my score. My first experience with credit card debt was a double-whammy; I accumulated debt buying things I didn’t need and did a horrible job of managing the debt. I swore I’d never get into credit card debt again.

Mistake #2: Credit card debt after moving to D.C. After I graduated, I moved to the nation’s capital and promptly racked up another credit card bill, around $2,700. I thoughtlessly swiped my credit card to buy essentials for my first solo apartment, shop for a work-appropriate wardrobe, and splurge in D.C. bars and restaurants.

Further, if I had been shocked by the wealth I saw on display in Ann Arbor, D.C. was another level. I vividly remember going to “pregame” one evening at a colleague’s apartment, which had amazing views of the National Mall. He told me it was his parent’s second home, which he’d be getting when his trust fund kicked in. This started a conversation on provisions in trust funds; I finally understood how my peers could afford their lifestyle. Unlike me, they had another meaningful source of income beyond their entry-level job.

About six months into my new job, I got my act together, stopped spending thoughtlessly, and actively sought out friends that didn’t live a lavish lifestyle. I also earned a promotion (and pay increase); all of my extra income went towards my credit card debt. I promised myself I’d never get into credit card debt again.

Mistake #3: Credit card debt after buying a home. I’ve shared the massive size and wild terms of my first mortgage. When my partner and I moved in, we left a 500-square-foot studio apartment for a 3,000+ square-foot house.

There were plenty of things we needed (fire extinguisher, household tools, window coverings for our bedroom) and plenty of things we convinced ourselves we needed (brand new furniture). Together, we racked up over $12,000 in credit card debt. This was the largest amount yet; a massive mortgage and large credit card balance made me feel trapped.

In 2006, Mr. Financier and I created a goal to eliminate our credit card debt in one year, with two $500 payments each month, diverting any “found” money to debt, and reducing three household expenses. We paid the debt off earlier than planned; I kept a handwritten log next to my bed to track our progress.

This was the most significant credit card debt I’d ever paid off, and I swore I’d never get into credit card debt again.

Mistake #4: Credit card debt following a significant raise. When I started my consulting career, I set a goal to be a Director by the time I turned 30. Colleagues in this position were generally 35 or older, but my career ambition and desire to grow my income inspired me to put my nose to the grindstone and shoot for this lofty goal. I earned a promotion into the Director position the month after I turned 30; my base salary rose to $150,000.

In End Financial Stress Now, Emily Guy Birken writes about the windfall effect. When we receive a windfall - an unanticipated bonus, or a generous birthday check - we’re more tempted to frivolously, quickly spend it. Our brains tend to compartmentalize and we view the extra money as distinct from our paycheck (which we spend more responsibly). One study on the psychology of unexpected, windfall gains concluded, “...the unanticipated nature of windfall gains is responsible for their heightened proclivity to be spent.”

I had one hell of a windfall on my hands, so I did what all responsible adults do in that situation. I rewarded myself well before I had actually saved the money to do so. Yup, you guessed it - I racked up another $3,100 in credit card debt. After the high from my shopping sprees wore off, I felt sick to my stomach. How in the world did I end up in debt, again?

It was this fourth time in debt that forced me to break my pattern. I was ashamed to be carrying a balance on my credit cards (yet again) and my debt dulled the achievement associated with my promotion. I had more than enough in my emergency fund to pay the debt off, but refused to do so, forcing myself to pay the costly interest charges as penance.

My fourth time in debt finally caused me to reflect on what habits I needed to change; there were four.

1. Watch out for life changes. I realized that I’m vulnerable to credit card debt during big life changes or times of stress. I’d feel like I “deserve” something nice and this emotional spending would push me into debt. This may not be unique to me, but since I’m conscious of this fact, I put my credit cards on lockdown when change is afoot and watch my spending even more closely.

2. Increase my save-to-spend account. I needed a cushion to fund the things I enjoy. My budget was so lean that I didn’t leave myself enough space for occasional splurges. I adjusted my automatic savings, increasing the amount going to my “save-to-spend” accounts to allow for the things I love, like shoes and dining out, that can tempt me into debt.

3. Change my shopping habits. I adjusted my shopping patterns to make myself less vulnerable to temptations. I stopped meeting up with girlfriends to shop - instead, we went to art galleries, parks, vineyards. I stopped browsing and only go shopping (online or in a store) when I have a specific item missing from my wardrobe. And, I unsubscribed from the many email lists I was on from my favorite retailers. If I missed out on a huge sale, so be it - I wouldn’t miss the possibility of subsequent debt.

4. Stop using credit cards by default. I changed my default card to my debit card, which pulled directly out of my checking account. Today, I only “allow” myself to put expenses greater than $100 on credit cards and I transfer the payment immediately from my checking to my credit card, so I can’t be surprised by large credit card bills.

I currently remain out of credit card debt and love getting zero-balance credit card bills in the mail. My money mistake with credit cards is one that I chose to repeat until I took the time to address the underlying issues. Have you struggled with credit card debt? Or, are you one of the lucky ones that excel at keeping your cards under control?

xoxo, Ms. Financier

How to Set Money Goals That Align with Your Values

Each of us has a unique set of values that we hold dear, even if we haven’t defined them. For example, I value security and exploration very highly; in the past few years, I’ve gotten better at consistently aligning my money with these values. As a result, I’m a happier person. Exploration includes mountaineering adventures, local hiking and kayaking, as well as traveling to new cities and continents. Therefore, I prioritize funding my travel budget; it is one of the six expenses I’ll never cut back on. I also prioritize donating to nonprofits that support conservation and preserve the beautiful spaces I enjoy exploring.

I recommend that each person (or couple, if you’re partnered) first take the time to define what they value. Financial guru David Bach says, “When your values are clear your financial decisions become easy.” I couldn’t agree more. Defining and recording your values may seem like an unnecessary step, but they serve as the foundation to your money goals. If you’re struggling with this step, watch David Bach and Marie Forleo have a candid discussion about this philosophy.

However, without goals, your values can go unfulfilled. The next step is to define goals to align your finances with your values. Otherwise, it can be terribly easy to spend on material goods that provide momentary joy, but don’t have a long-term impact on your life.

There’s a type of goal you should create, referred to as a SMART goal. These are Specific, Measurable, Achievable, Relevant, and Time-bound objectives that will define your plan and allow you to measure your progress.

My partner and I consistently use SMART goals in our financial planning. In 2006, we were in credit card debt. I had over $10,000, and Mr. Financier had over $2,000. We created a goal to eliminate that $12,000 debt completely in one year, with two $500 payments each month, diverting any “found” money to debt, and reducing three household expenses. We paid the debt off earlier than planned; having a SMART goal helped us stay the course and remain accountable.

I recommend you focus on no more than three SMART goals at any given time. Ideally, these goals have different time horizons, with one that you can accomplish in six months or less. For example – today, I have a goal to save for an upcoming trip (in the next three months) and another long-term goal to achieve financial freedom before the year 2027.

By recording and defining your values and creating SMART goals to align your finances accordingly, you’re taking a critical step to strengthen your future. What values do you hold dear? How are your money goals supporting those values? I’d love to hear from you.

xoxo, Ms. Financier

I also wrote about values-based budgeting in the She Spends newsletter. She Spends is a weekly newsletter and website created to close the wage gap, investment gap and board seat gap among women. I admire their goals and love their content.

Is This Real Life!? The Feminist Financier Is Now an Award-Winning Blog!

This morning, I found out that The Feminist Financier was named Best Investing Blog at the 8th annual Plutus Awards. I was surprised, humbled, and thrilled...and subsequently spent a solid hour on Twitter eagerly exploring the other winners and joyfully reading the notes of congratulations from other personal finance gurus.

You read this blog for personal finance perspective, not blogger awards. But let me tell you why this award is so amazing, and then we’ll return to our regularly-scheduled money-focused programming.

The Plutus Awards celebrate the best in personal finance, and are affiliated with The Plutus Foundation, a nonprofit that provides, “...opportunities for the financial media to create, develop, and administer community-based programs that enhance financial literacy, education, and empowerment.”

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As you know, I believe wealth equality is at the heart of gender equality. Wealth provides the holder with security, options, and power. I started this blog to be a drop in the sea of change...in order to help more women build wealth. This blog is not a business - it doesn’t earn me any money, nor do I offer any affiliate links. The Feminist Financier was created with the sole focus of supporting wealth equality.

Today, the finance industry is not set up well to serve women. Sallie Krawcheck puts this so well - she says the investing industry has been, “by men, for men,” and has historically kept women from achieving their financial goals. That’s problematic because investing early and often is at the heart of building wealth.

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The power of compound interest means that the earlier women invest, the sooner our investments start growing and making money on our behalf. And, today, women invest less than men. We tend to keep 10% more of our savings in cash than our male counterparts. Millennial women report a lower level of financial comfort - on average, we are less confident in our financial future, and less likely to feel “in control” or “confident” about our financial future.

This blog is all about changing that trend, and that’s why I’m so thrilled to receive acknowledgment that this is the best investing blog out there! It means that no-nonsense straight talk that cuts through the jargon is providing you with the information you need to succeed.

You can easily browse all the blog posts on the site, or view only those related to investing. An easy way to start is the “investing in four steps” series, which includes:

As always, I welcome your feedback and am honored that you spend some of your valuable time with me. I’m looking forward to continuing to support financial literacy and help more women improve our finances and build wealth.

xoxo, Ms. Financier

Six Expenses I’ll Never Cut Back On

The difference between cheap and frugal lies in priorities. Someone that is cheap enjoys spending as little as possible. They prioritize cost reduction in all expenses, in every area of their life. 

Someone that is frugal reduces expenses selectively. They prioritize specific experiences or things that deliver value and are okay with spending more in those areas. Those that are frugal do focus on reducing or eliminating expenses associated with things that aren’t a priority.

I've shared three ways I live frugally - but there's another side to that, as I don't view myself as cheap. In this post, I’ll share six areas where I splurge. This topic is important because many personal finance enthusiasts inadvertently create a culture of shame, judgment, and embarrassment around spending more than the minimum on any item. I’ve fallen into that trap myself; it isn’t motivating to others. We all have different values; part of becoming financially free is aligning your spending with your unique goals. For many of us, that doesn’t include deprive ourselves of all of life’s luxuries.

Shoes. I have a weakness for fabulous shoes, which are often (but not always) expensive. I prefer shoes to either clothes or handbags and get an irrational frisson of happiness when I’m wearing a pair that I love. As I write this, I'm wearing a pair of studded Marc Jacobs mouse flats. These little rodents make my day. The right pair of shoes bolsters my confidence, lifts my mood, and takes my primarily monochromatic wardrobe to the next level.

When my grandmother passed away, she had accumulated over 100 pairs of shoes. Clearly, I inherited her passion for footwear. My shoe collection includes inexpensive, unique heels that I snapped up at no-name shops alongside fabulous Manolos, Louboutins, and Choos. It’s a Carrie Bradshaw cliché - a woman who loves shoes. But I do!

Wine. In the past several years, I’ve become an amateur wine enthusiast. My splurge on wine doesn’t include endless cases of Chateau Mouton Rothschild, but I do have a 200-bottle wine fridge that I keep stocked with delicious discoveries. Wine allows me to explore the world with each bottle and I get quite a lot of enjoyment from the different tastes, characteristics, and regions represented in my collection.

I use CellarTracker to keep track of my wine; what I’ve bought, tasted, or have on my wish list. It also keeps track of how much I spend on the bottles I log. I could save more money if I drank less wine, visited fewer wineries, or switched completely to Bota Box (which I enjoy and often have in my pantry, it's a great price-to-value.)

Benjamin Franklin was quoted as saying, “Wine makes daily living easier, less hurried, with fewer tensions and more tolerance.” I couldn’t agree more.

Sunscreen. My daily sunscreen is an indulgent beauty splurge. While I buy drugstore brand makeup, the Kiehl’s sunscreen I prefer is over $20 an ounce. It protects my skin and feels amazing. Similarly, I splurge on two other skincare items, my nightly moisturizer from Dermalogica and a lovely Origins moisturizer ironically called Starting Over. These products might have less expensive alternatives, but I haven’t yet identified them.

I had terrible skin in my late teens and used to spend a ridiculous amount on high-end skin care and makeup in my early 20s. Once I figured out the right way to protect and manage my skin, I happily continued to buy the pricier items made a difference in my complexion.

Travel. Exploring is something I value tremendously and will always budget for. I aim to spend more on traveling as I age; my current retirement budget includes a line item that is three times what we spend today.

My partner and I both enjoy a wide range of travel experiences; we have as much fun climbing a mountain in the Pacific Northwest or camping in West Virginia’s gorgeous Monongahela National Forest as we do on a luxurious Parisian getaway. Even in lean times, I’ve been fortunate to continue to invest in travel experiences that both broaden my perspective and recharge my batteries.

Home. This is my biggest splurge; Mr. Financier and I live in a home that is quite generously sized for two people. I’ve shared the ridiculous terms of my first mortgage and I’ve occasionally considered selling, downsizing, and investing the balance.

However, my partner and I have created a home that provides us with plenty of space to enjoy a variety of different experiences without leaving our property. We have a library where I can curl up and read, a theater room to enjoy our favorite movies, a dining room that we use regularly, a basement bar to serve wine and mixed drinks, and an outdoor space that allows us to explore nature.

We’re lucky to have these experiences at our fingertips and while a tinier space in a lower-cost location would make financial sense, I’m quite certain we wouldn’t be as happy. Mr. Financier and I enjoy socializing, but both of us are introverts, so having a space that is truly ours to retreat to is our biggest luxury.

Giving. This is an area I aim to increase over time. Ever since I started working, I’ve been contributing regular, automatic donations to a few of my favorite nonprofits. With each raise or bonus I earn, I always set aside a portion for these groups. Many that I support are related to nature and conservation, as well as supporting and enabling women. One of the most exciting things about increasing my household income has been the ability to donate even more meaningful sums to the causes I care about.

My giving strategy is to engage more deeply with fewer causes; this can be difficult because there are so many amazing groups doing powerful work. However, I enjoy getting to know the leaders of the nonprofits I support, understand their short- and long-term objectives, and connect them to valuable resources. I aim to spend even more time (and money) with these organizations once I reach financial freedom.

Those are six expenses I’ll never cut back on, which means I need to work longer and grow my income consistently in order to fund them. I’m curious to hear if there are expenses that you’ll never cut back on? What are the things you happily spend more than the bare minimum on?

xoxo, Ms. Financier

Three Ways I Live Frugally

Being frugal gets a bad rap. It is often confused with its less forgiving cousin, being cheap. I love the distinction between the two in this article by Stefanie O’Connell: “Being cheap is about spending less; being frugal is about prioritizing your spending so that you can have more of the things you really care about.”

I experienced this in a recent conversation with my girlfriends; I mentioned something I didn’t purchase because I’m too frugal. My friend replied, “With those shoes!? You are NOT frugal!” But, frugality isn’t about always buying the least expensive item. Here are three ways that I live frugally:

Identify low-value budget categories to reduce (or eliminate). As I became more mindful about my spending, I identified several expenses that cost more than I was willing to pay. Your categories may differ; here is where I decided to reduce (or eliminate) spend. These changes freed saved me $540 monthly, creating another $6,480 annually to invest in financial freedom.

  • Cable Television: My television bill was over $100 and provided plenty of channels; In order to save money and give myself more free time, I cut the cord. I now watch far fewer shows, most of them on Netflix.

  • Dining Out: Restaurant meals had ballooned to nearly $400 of my monthly budget. I decided to break the habit of eating out regularly and instead treated restaurant outings like an event. Planning meals and creating easy options for breakfast and lunch contributed to my savings.

  • Housekeeper: My weekly housekeeping service was convenient but costly. My partner and I decided that we could roll up our sleeves and keep our own house tidy, investing a little extra time each week and saving significantly. I will occasionally splurge for their services, but not on a scheduled basis.

  • Expensive Cell Phones: Switching from a traditional cell provider to Republic Wireless allowed us to keep great connectivity, without confusing contracts and expensive plans. There’s a misperception that pay-as-you-go plans are less reliable; in fact, many run on the exact same networks as the big guys. Like all cell services, your coverage may vary, but I’ve been a very happy customer for years.

Optimize entertainment expenses. For anyone near a large city, the wide availability of shows, events, speakers, and entertainment can be a huge benefit. I really value these experiences and in DC area we are fortunate to have amazing entertainment venues alongside Smithsonian Institution museums that are completely free (though they welcome donations). Every now and then, I’ll splurge on tickets to an amazing Kennedy Center performance, but I’ve found that free and low-cost events fill my entertainment need without breaking my budget.

I’ve nearly eliminated some entertainment costs; I am a huge reader and intentionally use the services at my local library to reduce my spending on books and magazines. My library also offers great programming and workshops. I’ve taken free classes on everything from gardening to personal finance.

Local wineries in the metro DC area are also of increasingly high quality. Wine Enthusiast covered some of the leaders in Virginia’s wine scene and visiting local wineries is one of my favorite lower-cost outings. Many wineries allow you to bring your own picnic lunch, and after a few dollars enjoying a tasting, I select my favorite bottle and enjoy it with a homemade charcuterie platter.

Finally, I live frugally by learning new skills. There are two areas where this has helped me save money. First, I learned to cook! I actively rejected learning to cook for years because I had an irrational fear that it would make me too domestic. This all changed in 2015 when I got fed up with boring dinners and tried Blue Apron after a colleague’s encouragement.

My first recipes included Chicken Rollatini alla Cacciatore with Radiatore Pasta and Chicken Mole with Sweet Potatoes, Avocado, and Queso Fresco. These recipes intimidated me and initially took me forever to prepare. However, they were incredibly delicious and I kept customizing my deliveries and enjoying the satisfaction that comes with creating an amazing meal. Over time, I improved my confidence in the kitchen, became more skilled, and invested in a few key kitchen gadgets that made cooking a lot easier.

Learning to cook allows me to enjoy amazing meals at home, which means if I get a hankering for an amazing meal, I can often make it myself. My partner is a great chef but doesn’t enjoy eating out as much as I do, so it works out well that he can pitch in as sous chef (and do the dishes).

Additionally, my partner and I have developed our do-it-yourself skills. I grew up in a house where my parents tried to outsource as little as possible - so I was used to things like painting, wallpapering, landscaping, and installing tile. Mr. Financier often says the most valuable class he took in high school was a home improvement course, which culminated in each student building their own bathroom project, which included plumbing, electrical, and drywall.

When we moved into a house that we simply couldn’t afford (but bought anyway), being able to DIY saved us a tremendous amount. With so many fabulous resources available, we regularly build the knowledge and confidence to try ambitious projects. You can find a step-by-step tutorial for nearly anything. One of my favorites is House-Improvements, a YouTube channel and website run by an experienced contractor, Shannon, who is an excellent teacher.

When a home improvement project or repair doesn’t require the cost of labor, you can immediately pocket the difference, which can result in huge savings over time. You also get the priceless feeling that results from your own handiwork, something I feel anytime I look at the myriad of projects that Mr. Financier and I have completed around our home!

Those are three ways I live frugally, by reducing or eliminating low-value expenses, optimizing my entertainment spend, and learning new skills. I’m curious if you call yourself frugal...or if that’s a label you reject? If you are frugal, what tips would you share?

xoxo, Ms. Financer

“Why Should We Hire You?” How to Answer This Key Interview Question

Last year, my friend was interviewing for an amazing job at a great company. In her final interview, she was asked, “Why should we hire you? We get hundreds of applicants for each position - why should we offer you the job?” Normally quick on her feet, this question made her freeze.

She thought about her previous positions, the other candidates, her skills, the experiences she had managing teams...she said, “I don't know the qualifications of the other people you're considering, I'm sure they have similar credentials, and I know you wouldn't interview them if they didn't meet the criteria, but I also meet most of what the job description asks for.” She didn't get the job.

In her quest to be fair and accurate, my fabulous friend flubbed this critical interview question. When she asked the recruiter for feedback, her poor answer to that question was cited. The recruiter shared, “Our interviewer was concerned that you couldn’t sell yourself; therefore, we worry about you being able to sell an idea to clients or management.” Ouch.

The interview process boils down to the question my friend was asked. Hiring managers scan resumes, conduct assessments, check references, and do interviews to find the right candidate. They want to understand why they should hire you over anyone else. I’ve interviewed hundreds of candidates, and ask this question in every interview. Make it easy on hiring managers by nailing your answer; here's how.

 The question, “Why should we hire you?” is testing both how you respond and the content of your answer. In my friend’s quest for an accurate response, she unfortunately, missed both elements. Her focus on the other candidates didn’t help her, and her lack of preparation for this question meant she was caught unprepared and didn’t come across as confident in her fit for the role.

First, let’s address how you respond. When this question is asked, your reply should be delivered with confidence, include specifics, and be succinct. I recommend signaling that you welcome the question, with something like, “I’m so glad you asked; as you can imagine I’ve been thinking about that question a lot myself.”

Practice your response with a savvy friend. Ask her if you used too much jargon, whether you were convincing, and explore how to improve your reply. Conveying confidence in your answer will put the interviewer at ease and demonstrate that you have put serious thought into why you would succeed in this specific role.

The content of the response is also critical. When crafting your reply, prepare to address three things: your skills, the company’s goals, and your interviewer.

First your skills and experiences; this is the area you know far better than your interviewer. Prepare a simple explanation of how your capabilities will be a unique asset in the position. Three to five examples that you can relate directly to the role will suffice.

Here’s what this might sound like, “I bring four unique skills and experiences to this role; I’m experienced in managing difficult clients, am an effective presenter, have worked in the tech industry for several years, and have a degree in history. That combination means you’ll have an employee that performs well under client pressure, will be comfortable and effective in client presentations, understands the software space, and can bring historical perspective to modern-day challenges.”

Next, you need to address company goals. This demonstrates that you understand the business and makes it easy for your interviewer to connect your skills to the company’s objectives. Usually, you can find the company’s goals on their website, press releases, or earnings reports (for public companies). Clearly link these goals to your experiences. For example, “Your CEO cites client retention as a critical business goal for this year; the skills I just discussed are important to retain both happy and challenging clients in the tech industry.”

Conclude with something personalized to the interviewer. Research your interviewer - many have public social media profiles or have been mentioned in articles. Perhaps your interviewer was recently quoted discussing the importance of customer service - acknowledge that in your reply. You could share, “I also saw you were recently quoted about exceptional customer service - as you’ll see at the bottom of my resume, I received the highest customer service scores on my team last year, which will contribute to my success on your team.”

For bonus points, consider any proof points or references that might reinforce your candidacy. For example, do you have a manager from a prior role that has agreed to serve as a reference? Cite their qualifications and offer to make an introduction. Did you go to the same university? Mention a professor that provided a glowing review of your senior thesis, if relevant to the role.

If you practice both the content of your response and how you convey it to the interviewer, you’ll be far ahead of many candidates. I’m often surprised by how many applicants appear to be unprepared for this question, or even signal to me they haven’t thought about it. I’ve heard replies that begin with, “That’s an interesting question, let me think about it,” and “Hm, I’m not sure…” Those replies do not express that you’re taking this position seriously.

Walk into your next interview ready to nail this question. If your interviewer doesn’t ask it, offer your perspective during your discussion. You can say, “I've put some thought into why you should select me for this position,” and share your reply. This will demonstrate your confidence, understanding of the position, and help the interviewer better understand your skills. After all, if you can't make the case for why the interviewer should hire you - how can you expect her to?

I’m curious if you’ve answered this question in interviews. How did you respond? What tips would you suggest?

xoxo, Ms. Financier

This post also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.

Health Insurance Basics

Health insurance, something that is designed to reduce risk and mitigate costs, can be a source of stress and anxiety. Expensive plans, confusing coverage, and plenty of acronyms might cause you to throw your hands up in frustration, thinking you’ll never wrap your head around insurance.

Many Americans do just that. A 2016 survey indicated that only 4% of Americans can define the key terms that dictate how much they must pay medical costs; deductible, coinsurance, copay, and out-of-pocket maximum. That same survey found only a small difference (3%) between the knowledge of men and women; all of us struggle to wrap our heads around this topic. There is some good news: if you can grasp the very basics around health insurance, you can make big strides in your confidence in tackling this topic. The ladies at theSkimm, who produce a daily newsletter that makes it easier to stay informed, have put together a thoughtful, succinct guide on healthcare policy.

Currently, you must get health insurance in the US via your employer or independently during open enrollment (in 2017, this is from November 1 to December 15). However, if you become pregnant, or have another significant life event, and do not have health insurance, you are eligible to apply for a “Special Enrollment Period” that can allow you to add insurance at times other than open enrollment.

Once you have insurance, it is critical to understand is exactly how your policy works. I recommend using at least three sources to gather your information: your insurance provider, others that have the same plan (for example, your peers at work), and your medical providers (your doctors and preferred hospital).

Here are the questions you should answer; ask for documentation from medical providers and your insurer to confirm the details of your plan.

What type of insurance do I have? There are many types of health insurance. For example, Health Maintenance Organization (HMO) plans provide better coverage if you visit providers that are in their network but can cost you dearly if you go outside the network.

How does my insurance work, exactly? What health care costs are your responsibility, and which are covered by the insurer? Plans vary heavily and can include copays (where you pay a flat fee for certain services) or may require you to first spend a certain dollar amount on health care before insurance coverage kicks in.

What information can I access online? Today, many insurance providers have portals that will help you find doctors, examine your current coverage, and see how much you’ve spent towards your deductible (the portion of your health care costs that you are responsible for paying for). Taking time to understand the information you can access can save time and empower you to better manage your care.

Among the common insurance types – HMOs, PPOs, EPOs, high deductibles – what’s most likely to keep out-of-pocket costs down? What may come with hidden risks?

Health Maintenance Organization (HMO) plans are tightly linked to the network of providers that they have agreements with. If you have an HMO plan, your costs will be lower if every provider you visit is within the network. HMO plans usually require you to have a Primary Care Physician who acts as your health “quarterback” and refers you to other doctors/specialists. Speak with (and get documentation from) your healthcare providers about what happens in an emergency situation – is there any risk of you ending up being served by a provider that is outside the network?

Exclusive Provider Organization (EPO) plans generally do not require you to have a specific Primary Care Physician. However, similar to an HMO, they restrict coverage to providers in their network. Costs incurred out of network are often the patient’s full responsibility. There are some exceptions for emergencies, but each plan varies. EPO plan premiums are usually less expensive than HMO plans.

Preferred Provider Organization (PPO) plans generally have higher premiums than both HMO and EPO plans, but offer the patient more choice in health care providers. PPO plans rely on a network of healthcare providers; your costs (co-pays) are lower and coverage is better when you are served by providers that are in the network. However, unlike HMO plans, PPO plans may provide some level of coverage for non-network health care. I generally prefer PPO plans to all other options, if I can afford the premiums. PPO plans create cost savings through the network of providers, but aren’t as restrictive as HMO or EPO plans, nor do they require the highest deductibles.

High-deductible health plans (HDHP) incur the highest out-of-pocket costs, which mean you run the risk of paying more than other plan types. These are often intended for catastrophic situations, but I find many that select these plans do so for two reasons: HDHP plans have very low premiums and are often associated with a tax-free health savings plan. Health savings plans are often marketed as a fabulous way to save money, tax-free, for healthcare. However, there is no such thing as a free lunch and these savings plans are often paired with HDHPs because of the significant costs that are the patient’s responsibility. To be clear – a HDHP is far, far better than no insurance coverage. However, if given the option, I would strongly encourage new parents to invest in plans that they can afford with lower out-of-pocket deductibles.

In addition to the insurance options outlined above, Medicaid is available to provide health coverage to low-income citizens. Medicare serves a different community; focusing largely on senior citizens and providing support to disabled.

There’s certainly much more to explore on this topic, but I hope this helps you get started. What other health insurance resources do you recommend? I’d love to hear from you.

xoxo, Ms. Financier

How to Manage Money with Your Partner: Six Questions You Need to Answer

If you’re in a serious relationship and regularly share significant expenses, this post is for you. Money can be a major source of friction in partnerships and if you aren’t financially intimate, it is difficult to achieve your goals. Sharing financial details is a powerful start to financial intimacy. Next, you need to determine how you will manage money together.

Every couple manages their money differently and there’s no “one size fits all” answer. Further, the money management approach that works for your relationship today may need to evolve as responsibilities shift at work and at home in the future. That said, there are six questions partners can answer to determine the right approach for them. I’ll start with the more strategic questions first; answering these makes the tactical questions easier.

1. What are our biggest financial goals? Defining your top three joint financial goals provides motivation and clarity. I recommend identifying at least one goal with a short timeline (within the next six months). Record your financial goals, discuss them, and celebrate the progress you make. When you achieve a goal, replace it with a new objective to continue your momentum.

Start this conversation with your partner by defining your joint values, if you haven’t already. This is a common approach that financial planners and experts like David Bach recommend, because aligning your money with the things you value is powerful. For example, if you and your partner value security, you could focus on paying off debt or purchase a home you can afford to increase the security in your life.

2. How often should we check in on our money? Progressing against your goals is easier when you’re keeping an eye on your finances. Your money doesn't sit still when you ignore it. This can be wonderful (automatic investing growing your wealth faster than expected) or stressful (unattended credit card debt generating late fees and interest charges).

You should regularly check in on how you’re progressing towards your financial goals. Scheduling recurring “money dates” with your partner (at least once every three months) ensures you address problems and celebrate progress. Keep a running list of what you need to discuss; your top three financial goals should always be on the agenda. 

If the idea of a money date sounds painful, use the concept of Temptation Bundling in your favor. Temptation Bundling is when you link two activities together - one you enjoy and one you’d prefer to avoid. In this example, you may choose to reward yourself after a money date with a meal at a favorite restaurant.

3. How will we pay for joint expenses? Paying for expenses like housing, utilities, travel, and vehicles should be done equitably, so one partner doesn’t feel beholden to the other. 

First, define joint expenses. Some couples label anything spent by either partner as a joint expense, others put a certain limit in place where they need to “clear” the expense with their partner (say, over $200), and some decide that only certain expenses are joint responsibilities. My partner and I do the latter; we consider utilities, housing, maintenance, groceries, and life insurance to be joint expenses. In contrast, my shoes, evenings out with my friends, and conferences I attend are my responsibility.

Next, determine how you’ll fund joint expenses. My recommendation is to split joint expenses in proportion to income. Here’s an example: Ava is a journalist with a salary of $57,500; she recently married Dinah, whose job as an engineer brings in $125,000. Together, they enjoy $182,500 in gross income. Ava’s income is 32% of their household total, while Dinah’s contributes 68%.

Therefore, to pay their monthly mortgage of $2,500, Ava contributes 32% ($788) and Dinah contributes 68% ($1,712). They’re savvy women, so they signed a prenuptial agreement beforehand that outlines how they’d divvy up these joint assets in the event of a divorce.

4. How will we save and invest together? Investing and saving are critical to building wealth. As a couple, you should decide how much to save and invest. Your emergency fund is critical, but once that’s funded you should focus on retirement, save-to-spend accounts, college (for those with kids), and then investing beyond retirement. Here’s a four-step guide to getting started with investing.

Consider how evenly you are funding investment accounts. I’ve often heard women say, “My partner makes more, so we max out their 401(k) contributions. I can only afford to contribute a little.” If this is your situation, I urge you to consider a more equal strategy. Unequal investing can result in very different account balances; in the unfortunate event of a divorce, you may not receive a financial outcome you’re happy with. Even partners that don’t work outside the home are eligible for a spousal IRA to save for retirement.

5. Where will our money live? Managing your money becomes easier with fewer banks and accounts. When you address this question, consider where you’d like to keep your savings, daily checking, and investment accounts. For investing, I always recommend Vanguard; they have a low-cost strategy and are investor-owned.

Since my partner and I manage our money with a “yours, mine, and ours” strategy, our bank accounts mirror that. Mr. Financier and I have separate checking accounts for individual expenses. We also have a joint checking account for joint household expenses. Our savings and investments are set up the same way; some are jointly held (like our emergency savings account) and some are individual (like my investment account that I started before we were married).

6. Who manages the bills? Deciding who pays which bills will reduce bill-paying stress and ensure you’re not blaming one another for any late fees. Consistency can also help you catch errors. A few months ago, my internet bill unexpectedly increased by $15; I noticed the change because I always pay that bill. I called customer service and immediately received a correction.

It is important for both partners to provide transparency around joint bills. In our house, I am responsible for any joint bill (the mortgage, utilities, auto insurance). However, Mr. Financier knows how to access our mortgage account at any time and we review the statements together. This ensures we’re both aware of jointly-held debts and accounts.

You may elect to pay many of your regular bills automatically. I recommend that if you can schedule the payment from your bank to the service provider, versus giving the service provider permission to pull payments from your bank account. Your comfort level may differ, but I avoid giving my bank information to the cable company, mortgage company, or insurance provider.

Those are the six questions partners can answer to determine their money-management approach. It will take some time to create the right guidelines, but you’ll benefit tremendously when you find the methods that work for your relationship. I would love your feedback; which question was the most difficult for you and your partner to answer? Do you have any other big questions that you recommend couples address?

xoxo, Ms. Financier

Five Signs You Aren't Financially Intimate With Your Partner

In a strong relationship, you often feel compelled to share just about everything with your partner – your fears, goals, interests, and passions. As your relationship develops, your connection deepens, and you become even more intimate. But does your intimacy include the topic of finance?

Being financially intimate means sharing your financial status, goals, and struggles with your partner. Money is a tremendous cause of friction in partnerships and fighting about money is a top predictor of divorce in married couples. Many of us are raised not to talk about money or have shame about some aspect of our financial situation. But hiding information does not strengthen a relationship.

There’s some good news; one survey conducted by MONEY found that, “…couples who trust their partner with finances felt more secure, argued less, and had more fulfilling sex lives.” That sounds pretty good, doesn’t it? How open are you with your partner? Here are five signs that you aren’t financially intimate with your partner, in order of increasing intimacy.

You don’t know whether they save or invest. Do you know if your partner has an emergency fund? Are they investing in a 401k or other retirement plan? Saving and investing are necessary to build wealth and create financial stability, so you should know whether your partner is doing so on a regular basis. If you’re in a very serious relationship or married, you should have an understanding of how much is in their accounts.

You don’t know if they have debt. Does your partner have credit card, student loan, auto, real estate, or other debt? How do they feel about this debt; is it under control or is it a source of stress? Are they actively paying it off? How much debt is does your partner owe, in total? Debt is something that many of us take on to achieve other goals, but it can hamper financial freedom if not managed effectively.

You don’t know their credit score. How healthy is your partner’s credit? If it is weak, what steps are they taking to strengthen it? Before you merge finances, move in together, or get married, you should see your partner’s full credit report. Many of us have had credit issues; I’m no stranger to credit card debt myself. However, credit affects a wide range of financial decisions – credit card and loan rates, housing decisions, and even hiring decisions. Sharing credit reports can help you make better joint financial decisions and work together to strengthen them if needed.

You don’t know their salary and compensation. What is your partner’s base salary? What other forms of compensation are they eligible for (bonuses, company stock, profit sharing, etc.)? Women can struggle to address this topic with their partners because of the damaging and outdated “gold digger” stereotype. However, starting and maintaining an open dialogue about compensation ensures you can address joint finances productively.

You don’t know where their accounts are. Where does your partner bank? Where (and how) is their 401k invested? Which credit cards does your partner have? Yes, you should know where your partner banks. You might not have access to the funds in each account, depending on how you’ve set up your joint finances, but knowing where the money is located can be important in an emergency and promotes transparency between partners.

If any of these are knowledge gaps in your relationship, I suggest starting the conversation with your partner as soon as possible. Each couple addresses the topic of finance differently and to open the conversation, you can share this post, schedule a money date, or bring the topic up in the course of regular conversation.

Approach your partner with authenticity and remove all judgment. If you’re nervous about talking about your student loan debt and don’t know if your partner has debt, you could say: “I’m nervous to talk about my student loan debt, but it is very important to our relationship that we can openly discuss money and personal finance. I haven’t shared the details with you, but I have $52,300 of student loan debts to pay off. I’m working hard to get my smallest loan paid off in the next few years. I’m curious - do you have any student loan or credit card debt?”

By sharing your emotions about the topic, giving your partner information about your status, and then asking a neutral, non-judgmental question of your partner, you’re starting the dialogue in a productive manner. Give your partner some slack; they may be nervous, scared, or worried to talk money. On the other hand, your partner may be relieved about the chance to share what they’ve been working on, or a secret personal finance nerd that has a lot of knowledge to share.

Good luck in building even more financial intimacy with your partner. I’m curious about what topics you and your partner have tackled together to build your financial intimacy; let me know!

xoxo, Ms. Financier