Financial Self-Care

Self Care
 

 

What’s your number one stressor?  Most of Americans would say “money,” outweighing personal relationships and work combined¹.  Conversely, studies show that women’s greatest source of confidence in the future comes from taking positive action and using their money for their financial goals². Self-care is not just about treating yourself now, but also in the future. Financial self-care can help you get organized and gain momentum for your goals.   

Unfortunately, we have some roadblocks to navigate.  As women, we have more demands on our money3, we live longer4, are paid less5, and we invest 11% less than men6.  This hurts us by contributing to the wealth gap.  71% of women’s wealth is in cash, which means it’s depreciating against inflation.  The investing gap is real and costs women millions collectively over time. 

But there is a way forward. 

Don’t leave money on the table.

If you work for an organization that matches your 401(k) contributions, contribute at least the percentage that your company will match.  A company match is free money; don’t leave it on the table.

Pay yourself first.

Set automatic contributions to your retirement, investment and savings accounts. The amount left in checking is free to be spent – no budgeting (or guilt) required. Bonus: increase your savings when your income increases. For example, increase your savings by 1% when you get a 3% raise. Prioritizing your future brings a peace of mind like nothing else. 

Anticipate financial emergencies. 

A good rule of thumb is to have a liquid savings account that would cover 6 months of your expenses if an emergency arises. Buying a car is usually not an emergency, so be sure to regularly contribute to a separate account to fund larger purchases. 

The other side of risk management is to make sure you are adequately insured. Especially if you have children or other dependents, they will need assets to fund their needs if you pass away early or are permanently disabled. Insurance can be a relatively low-cost way to protect your family – but please speak with someone who is required to act in your best interest before buying insurance. 

Carefully incur debt.

Not all debt is created equal. Mortgages and low interest rate car loans aren’t necessarily bad (particularly in this current low interest rate environment) but carrying a hefty credit card balance can hurt you. If you have high-interest debt, work to pay that off first. The faster you pay it down, the more you’ll save in interest and be able to invest. 

Set a diversified asset allocation and rebalance periodically.

In your investment accounts, you want a mix of stocks and bonds that match your time horizon. You also need to be able to stomach the ups and downs of the market without selling out. Returns comes with risk.  You could sprain your ankle working out, but you don’t skip the gym because of what could happen. Be smart and you’ll come out looking and feeling good, without injury. 

While we do not recommend looking at the market trends every day (we are trying to reduce stress after all!), don’t ignore your investments for years to later realize you’re not allocated properly for your timeline and goals. Rebalance your portfolio at least annually.

Hire a fiduciary. 

This stuff can get complicated! Fiduciaries, like the CERTIFIED FINANICAL PLANNER™ professionals at Pathfinder Wealth Consulting, are required to (and happily!) act in your best interest. You hire a professional to assess your physical health; take your future financial health seriously too! 

Financial self-care isn’t selfish – it’s a gift to your family, friends, and future. It ensures your money aligns with your goals and values. Use your finances to treat yourself now and in the future.  And maybe enjoy a glass of wine or a nice candle while you’re at it. 

This article was originally published in the April 2020 edition of WILMA Magazine7.

Sources:

  1. https://news.northwesternmutual.com/planning-and-progress-2018
  2. https://www.ellevest.com/magazine/disrupt-money/money-is-power-how-women...
  3. https://www.sciencedaily.com/releases/2014/08/140819082912.htm https://time.com/3153490/women-aging-parents-better-than-men/
  4. https://www.who.int/gho/women_and_health/mortality/situation_trends_life...
  5. https://www.wilmamag.com/women-finance-and-the-pink-tax/
  6. https://www.thinkadvisor.com/2016/03/08/blackrock-women-and-men-look-at-...
  7. https://issuu.com/wilmbiz/docs/issuu_wilma_4-20?fr=sZTA4ZjMyOTE4OA