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Whatever your financial situation, there are several ways to improve your financial outlook by investing your time and funds wisely. And while, yes, investing in the market is one way to achieve this, it is not the only one. In today’s âFinancial Smart Womanâ column, we chat with Carly Hensley, CFS, a financial advisor at Merit Financial Advisors in Charlotte, North Carolina, on some of the ways every woman should invest in herself.
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Invest in an emergency fund
Before you invest in anything else, invest in an emergency fund – money that you have set aside âjust in caseâ.
âSomething that I think is a good place to start, just from my personal experience, [is] an emergency fund, âHensley said. âWhen you don’t have one and an emergency strikes, you’re stuck with credit. This can really be a problem, especially as you approach retirement. You don’t want your emergency fund to be your credit card.
Ideally, you should set aside three to six months of living expenses in a cash account.
âWe know money doesn’t pay off today – that’s okay,â Hensley said. “It’s good to have three to six months of cash that doesn’t pay off because that [emergency fund] is important to have. You probably don’t want to have more than that because of the fees you pay based on inflation, but you definitely want to slowly build up those three to six months. [fund]. Even $ 1,000 is a good place to start. “
If three to six months of spending seems daunting, Hensley suggests starting small.
âAt first, put $ 25 to $ 50 per cash paycheck so you can access it in an emergency,â she said. âJust accumulating that first $ 1,000 is the first key point to get started. “
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Invest in your earning potential
Invest your time in ways that increase your earning potential, whether that’s learning new skills on your own, taking online courses, or getting additional certifications. Not only will it pay off in the short run when you get that higher salary, but it will also help your future self.
“If you think about saving a percentage of your salary in your 401 (k), that salary [amount] is a huge piece of this puzzle, âsaid Hensley. âThis income makes a huge difference, because the more the income, the more money there is. You think of someone making $ 40,000 versus $ 80,000 a year, that’s double what you invest.
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Invest in your retirement
Even if you are still decades away from retirement – and especially if you are nearing retirement – investing funds in a retirement savings account is a must. The easiest way to do this is to set up automatic payments into an employer sponsored retirement plan, such as a 401 (k) or 403 (b).
âYou have to turn on that autopilot,â Hensley said. âGive the allowances and get started. Once you set it up, it’s on autopilot – it’s slow and steady winning the race. It’s amazing how much that can grow and how it lets you see that you are doing something for your future.
Hensley also recommends setting up your plan to automatically increase your contribution percentage each year. It also emphasizes the importance of renewing your 401 (k) if you change jobs.
âIf you change jobs, make sure you move on to the next plan,â she said. âYou don’t have to start over every time.
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Invest in an IRA or brokerage account
In addition to your employer-sponsored retirement account, you may want to invest additional funds in an external account.
âOften with a 401 (k), there isn’t a lot of choice,â Hensley said. âYou normally can’t buy individual stocks, so a lot of times you’ll be doing it outside of the plan. If you have a short time horizon you would do a brokerage, but if it’s something for retirement that you want to do outside of your 401 (k) then you would probably do a Roth IRA. These two buckets can hold individual stocks.
When it comes to choosing individual stocks, Hensley recommends “buying things that you know, love and use, and things that you think are opportunities for long-term growth.”
âIt’s fun to see what he can do in regards to setting up a separate account which is really your thing,â she said. “[It can be] a way to feel more engaged and involved.
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Invest in your financial knowledge
Investing in an individual account often sparks a desire to learn more about finances, Hensley said.
âI see women starting to ask me, ‘What books can I read on investing? Then they really want to know more about what they can do.
But you don’t have to take this step to start investing your time in improving your financial literacy.
âThere are books, there are a lot of great podcasts today, there are blogs,â Hensley said. “LPL has a search page that anyone can access, and they post a new blog every day about what’s going on in the market. There’s a lot of it out there – you don’t always know it’s there.
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Invest in professional help
Building a team of finance professionals can be a worthwhile investment. Hensley recommends having a financial advisor, tax professional, and estate planning lawyer you can count on.
âThese are the three professionals in our world that we think it’s good to have,â she said. “These are the three professionals who would truly be able to help you with anything that arises in any financial area in your life.”
GOBankingRates wants to empower women to take control of their finances. According to the latest statistics, women hold $ 72 billion in private wealth, but fewer women than men consider themselves to be in “good” or “excellent” financial position. Women are less likely to invest and are more likely to take on debt, and women still earn less than men overall. Our âFinancially Savvy Womanâ column will explore the reasons for these inequalities and suggest solutions to change them. We believe financial equality starts with financial literacy, so we offer tools and advice for women, by women, to take control of their money and help them live richer lives.
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