Ways Women Avoid Tackling Financial Responsibilities
When it comes to managing money, I've noticed that many women tend to put off dealing with their finances. I've even done it myself. Even when we know that certain financial matters can be resolved quickly or that they are in our best interest, we often find ourselves choosing to focus on anything but our finances. It's as if we'd rather engage in frantic cleaning or other activities that provide a sense of progress, even if it's not the progress we truly need.
Sometimes, we make progress in our financial journey, but it may not be the most optimal or suitable progress for our individual circumstances. We face various money choices, such as saving versus investing, saving versus paying off debt, deciding when to hire a financial planner, and finding the time to complete money-related tasks. Here are 4 common mistakes I see women make, and how to fix them.
SAVING, INSTEAD OF INVESTING YOUR MONEY
I know many women who have amassed $40-80,000 into a low-yield savings account. I commend the discipline and applaud the accomplishment, but this money move becomes an Achilles heel once you have more than 3-6 months of income in savings as an emergency fund.
Additionally, the emergency fund in savings should be wisely positioned. Many women open a savings account at the same bank where checking is done versus utilizing a high-yield savings account at Lending Club, PNC, ALLY or a money market fund, like Vanguard's VMFXX.
POSTPONING DEBT REPAYMENT TO INVEST ELSEWHERE
It's not uncommon to come across women who, despite having debt, including high-interest credit card debt, choose to make only minimum payments while directing their remaining funds towards investments. It's tempting not to miss out on potential investment opportunities.
However, it's important to recognize that every dollar you allocate towards reducing debt's principal essentially provides a return equivalent to the debt's interest rate. For instance, paying down a credit card charging 20% APR is equivalent to earning a 20% return. The potential returns from investments are unlikely to match such high percentages.
If you have low-interest debt, like a mortgage, you can balance debt repayment and investing concurrently, as the long-term returns on investments should ideally outweigh the interest rates on your debt. Nevertheless, it's crucial to prioritize eliminating high-interest debt before venturing into investments.
DELAYING ON HIRING A FINANCIAL PLANNER
It's not uncommon to question the necessity of hiring professionals for tasks we believe we can handle ourselves. However, enlisting the expertise of financial planners, accountants, or other professionals can actually save both time and money in the long run. Your time has value, and financial responsibilities such as tax filing and financial planning can be time-consuming.
Financial professionals often pay for themselves by not only saving you time but also helping you identify opportunities to reduce expenses and taxes. They can run projections to provide insights on realistic retirement timelines, potential shifts in your tax obligations as your circumstances change, and more.
POSTPONING EVERYTHING DUE TO LACK OF TIME
In addition to the monetary value of your time, it's challenging to focus on long-term financial goals when numerous short-term tasks demand your attention. Breaking down significant financial goals into smaller, achievable tasks can be helpful. For instance, a vague goal like "start investing" is less likely to be accomplished than opening an online brokerage account (which can be easily achieved in just a few minutes). (Popular options include Vanguard, Schwab, and Fidelity). Tomorrow, you can link your checking account to your brokerage account to facilitate money transfers for investments. On another day, you can select a few low-fee index funds to allocate your investment dollars.
Ultimately, my aim is to help you make the most of your money and enable you to live an extraordinary life. I can partner with you to help in the savings versus investing versus paying off debt decisions. I can help you assess if you're ready to work with a financial planner. Lastly, having a conversation with a financial professional is a quick win which starts you down the path of taking action on your money-related tasks and helps you stop procrastinating. If you're ready to work with a financial planner, I'm here to assist you. Remember, taking control of your finances empowers you to live the life you desire.