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.

The Good, the Bad, and the Ugly: When Employees Ask for a Raise

We hear a lot about how critical it is for women to ask for raises. But, asking is only the first step. Most businesses require managers to exert effort to fund even the most well-deserved employee compensation increases. I’ve been managing employees since 2006 (longer, if you ask my younger siblings!) Here’s the good, bad, and ugly I’ve experienced when my employees have asked for a raise.*

Let’s start with the bad. “Allison” worked on my team during the economic downturn in the late 2000’s. Allison was a detail-oriented employee who was meeting the expectations of her entry-level job. She wasn’t a rock star, nor was she dragging the team down. However, at that time our company was struggling as the housing market and banking sectors were imploding. Allison requested a salary increase, after receiving a passable performance review.

There were at least three things that Allison messed up:

  • Her request was really a demand. How you ask for a change in compensation matters. Allison’s tone was, “Pay me more or else.” A more productive, fact-based tone would have started the discussion off without sounding like an ultimatum.
  • She didn’t have the performance to back it up. Allison had just received a review that identified her as adequately meeting her performance standards. Focusing on her areas for improvement, and building a plan to improve those in pursuit of a salary increase, would have been more effective.
  • She asked for salary (and only salary) at a very difficult time for the business. This was the late 2000’s. Businesses like Lehman Brothers, which was founded in 1850, were going bankrupt! Allison didn’t bring any other negotiables to the table, and I certainly wasn’t inclined to suggest any to her.

Allison didn’t get the raise she demanded at that time. Instead, we focused on her development plan and ensuring she was getting the feedback and opportunities to improve her performance in her current role.

Now, the ugly. “Heather” was a lower-than-average team member who seemed to excel in getting in her own way. Her work was inconsistent in quality, and team members struggled to work productively with her. She was constantly comparing her performance to others that joined the business at the same time, and would regularly bring up the expenses and lifestyles of others.

When Heather approached me for a raise, it was in a rambling speech that included remarks like, “...everyone in DC was born with a silver spoon in their mouth,” and “I can’t afford to live the lifestyle I want on my current salary.” Her reasoning seemed to be that given the excess she saw around her, and the cost of living in downtown DC, our company owed her a raise.

Anchoring your request for a raise on your own personal financial situation or lifestyle is a huge mistake. First, it isn’t germane to the conversation - which should be performance and business based. Second, it’s likely to backfire. In this situation, I saw Heather’s negative attitude in a very unvarnished manner, and we later had a candid career discussion that resulted in her resignation, which I happily accepted.

Finally - the good. “Nia” was a strong performer who pro-actively managed her career, by asking for feedback on how she can improve, seeking additional responsibility, and supporting her peers. In a conversation before her upcoming performance review, Nia shared her salary history and compared it to her current responsibility set, which had expanded since she accepted the role. She also compared her salary to more junior hires on her team. They were certainly making less than she was, but not that much less given their difference in responsibility.

I told her I understood her request and would do some research on her behalf. First, I asked HR to benchmark her salary to other higher-performing employees in her role. Next, I met with the other decision makers that would need to weigh in on the decision, and with their support negotiated an increase with our company’s compensation team. Nia’s request required me to do work on her behalf, but her clear and well-reasoned case inspired me to expend the effort and political capital to support her.

You can tell what Nia did well; she was a stronger performer who came in with a business-grounded request. For example, I had access to her salary history, but she brought me the data and presented it in compelling contrast to the more junior team members. She concisely summarized the added responsibilities she had taken on in one summary document.

After this effort, Nia received a sizeable salary increase. This helped her in two ways - obviously, her regular take-home pay increased. But, because she had a bonus available where she could earn up to a certain percentage of her salary, her overall compensation pool increased.

Wouldn’t you prefer to be Nia, compared to Allison and Heather? Even Nia could have improved her ask by identifying more negotiables (beyond salary). But, she created the case that compelled management to take action. Have you had an employee ask you for a raise? Were they the good, the bad, or the ugly? Or, have you been the asker? (In which case I hope you were the good!)

xoxo, Ms. Financier

*Names and identifying details have been disguised, but each story is real. You seriously can’t make this stuff up.

How to Ask for a Raise in 4 Steps

Many of us assume that if we work hard and are effective, salary increases and career opportunities will follow. However, the reality is that doing well in your current position is necessary but not sufficient to grow your wealth.

In this post, we’ll explore the four steps to asking for a raise. This is particularly important for women, who face a pay gap relative to men. Growing income is one of the two levers to building wealth, so let's do this!

First, define your business case. Do not pass go, do not collect $200 until you have clearly defined why your achievements merit a raise. If you’re gunning for a pay increase, you need to document the heck out of the business value you deliver to your employer.

Your comparison point is your current salary. What and how have you earned more than that? Consider things like extraordinary effort, taking on new processes or tasks, implementing solutions that saved the company money, or introducing services that result in more repeat purchases.

Don’t freeze up in this first step. Don’t minimize your achievements. Reflect on the value you contribute and think creatively. If you're unsure about the quality of your business case, a savvy friend, family member, or mentor can pressure-test your thinking. They may see more impact in what you’ve done or help you think about it differently.

Use the “Situation, action, result” format to create your business case. For example, “The new client survey process I designed helped client service levels,” isn’t specific enough.

Try: “In 2016, client service satisfaction was 5% lower than 2015, which hurt Alpha Company’s revenue and reputation. I designed a new client survey, trained our customer service staff, and implemented the measurement system in order to capture client feedback in the first 30 days of their contract. This allowed our client service teams to identify service risks earlier, which improved client service satisfaction scores by 15%. This improvement contributes an estimated $1.2M in annual revenue.”

The first sentence describes the situation, the second describes the action, and the last sentences describe the result. Do your best to quantify results, and be okay with making informed estimates. Businesses are built usin estimates and models to inform decisions! Your case for a raise is no different.

Second, identify your negotiables. You've got the case for your pay raise. Now what? You need to come to the table with what you want. The good news is that technology is your friend in this effort. Just a few years ago, we had to rely on general industry studies, government data, or asking colleagues (yikes!) to benchmark our salaries. Today, pay data is increasingly accessible. Online sources like the Fairygodboss salary database provide more precise data on what your role is worth.

Decide the exact amount you’re asking for, and then increase it by at least 10%, because women don’t ask for enough. Then, prepare at least 3 other non-salary items that you will negotiate for, in addition to your pay increase. I recommend asking for the salary increase and one other item at a minimum as your “first ask.” Then, you’ll have 2 other items in your back pocket to introduce if you don’t get the full increase you’re requesting.

What else could you ask for? More paid time off; Better expense account - things like taxi service to/from work, flight upgrades, airline lounge memberships; Administrative support or a summer intern; Funding for conferences or classes for ongoing education; Working from another office location on a regular basis (say, you’re based in DC and you want to work from the London office once a quarter).

Next, practice! Once you have your business case and negotiables, practice with a savvy friend who can role-play your boss’ reaction. Prepare for objections like:

  • “We don’t have budget at this time.” Ask follow-up questions to understand when and how budget could be freed up, and confirm that budget is the only barrier.
  • “I’ll need to speak about this with my boss or HR.” Ask what your boss’ boss/HR needs to see, and how you can help prepare that case. Suggest speaking directly with other decision makers.
  • “Your last raise wasn’t enough?” Clarify that this ask doesn’t come from a place of ungratefulness, but business value. Reiterate your business case and understand whether your boss supports your request.

Your goal in the discussion with your boss is to understand if she agrees with and supports your case. If not, confirm what she needs to see in order to support you in the future. Practice “closing” the conversation to ensure you leave with clear next steps to continue the discussion.

Finally, ask (and ask again). Set time with your manager and ask! Don’t wait for the next review cycle. When your case is ready and you’ve practiced your pitch, confidently approach your boss with the business case for why you have earned a raise. Take careful notes and be prepared to continue the conversation - I find it is rare to come to an agreement in just one discussion. Follow-up in writing with a summary of the discussion and next steps, to ensure you and your boss are on the same page.

A “no” or “not right now” with defined next steps is progress. A study of Australian workers found that women were 25% less likely to receive a pay raise when we asked for it. I’m not convinced this study is globally representative, but be prepared to persist with your case. You will need to own the next steps to secure that raise over time, if need be.

With that, I wish you very good luck. And, I look forward to sharing my experience on the other side of the table - when my employees have asked for a raise. I’ll share the good, the bad, and the ugly! What other advice do you have for securing a raise? If you used this approach, how did it work for you? I look forward to hearing from you.

xoxo, Ms. Financier


Resources:

Women Don't Ask: Negotiation and the Gender Divide, by Linda Babcock and Sara Lashever

Ask For It: How Women Can Use the Power of Negotiation to Get What They Really Want, by Linda Babcock and Sara Laschever

High Performance Negotiation Skills for Women, Lecture featuring Professor Leah Thompson, Kellogg School of Management

Grow Your Income: Step 2 of 5 Fabulous Steps to Financial Freedom

Who doesn’t want more money? If managed effectively, more money won’t create more problems, but real wealth.

What's the goal of this step? Plan to increase your income over time (and understand your current sources of income) to build wealth at a faster rate.

Why is this important? There are two big levers to creating wealth - money in and money out. A plan to grow your income over time covers half of that equation. This concept is particularly important to women, as we generally face a wage gap relative to our male counterparts. Women are also more likely than men to take time out of the workforce - often to serve in highly valuable but non-paying caretaker roles for children and parents.

When and how do I do it? Decide now which path you’d like to prioritize to grow your income, and start pursuing it today.

There are many, many ways to grow your income, and we’ll continue to explore this topic together over time. To get started, let’s explore a few common options:

Get more from your current job. If you’re currently working outside the home, a pay increase and / or promotion in your current job is a logical place to explore. With pay data increasingly available on sites like Payscale and Salary, you can have a more informed view on what your role is truly worth. Asking for a raise requires both research and preparation; here's how to ask for a raise in four steps.

Create a side hustle. Today’s technology gives us access to many potential side hustles. This post lists 99 ideas for your consideration! Simply put - applying your skills to the hours in which you’re currently not working creates an additional income stream.

Pursue a job or career change. Your position today might not be ripe for income growth, or you’re ready to move on. Whatever the case may be, changing jobs can result in bigger income increases than sticking with your current employer.

Improve returns on your money. This is applicable to those of you that have money invested or saved that isn’t giving you as much income as it could be. For example, do you have a mutual fund you inherited but don’t understand? Or, have you been sitting on more cash than you need because you’re unsure how to invest it? Put your own money to work for you more efficiently!

Each idea to grow income will take time and planning - but step one is to decide which is right for you.  So - which are you going to prioritize to grow your income over time?  Or, is there another approach you’re going to focus on?  I’m curious to hear from you.

xoxo, Ms. Financier

A version of this post with additional details also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.