For women, having a strong knowledge base in finance is incredibly important. However, only 44 percent of women participate in a retirement plan. In order to properly work toward a life of financial freedom, women need to prepare for their futures by investing their money.
Though my knowledge on financial topics has grown exponentially in the years I have worked for Advicent, I was not always knowledgeable in finance. As someone who initially thought finance was overwhelming, I wanted to share a few tips that may help women who may not know how to start investing.
Get comfortable with risk
There will always be some risk involved when investing in the stock market. However, the key is to figure out how much risk you can handle and go from there. I was lucky enough to have my mom as a finance role model, but some women may not have witnessed a female who took charge of their family’s financial situation.
Both of my parents were actively investing their money, and my mom would talk about different stocks in which she and my father invested. I do not come from an extremely wealthy family, as both my parents were hard-working individuals from the middle class. However, it was their intelligent saving techniques that made them my financial role models.
One thing I vividly remember about my mother’s investments is that she was extremely worried about market fluctuations. But with investing, there is always a certain amount of risk. A risk tolerance questionnaire is a great way to discover how much risk you can handle. Reach out to a financial advisor to develop your risk tolerance profile. Discovering your risk tolerance will likely dictate how you choose to invest.
You also need to realize that your investments will fluctuate value on a daily basis. When I first started investing, I used a smartphone app and deposited a mere $30. I would check on my investment daily, celebrating small gains and being crushed at marginal losses. Now, I only check in every other month. This allows me to take a step back and look at general trends instead of virtually-meaningless daily variance.
Investing does not need to start with a big, life-changing decision. As stated earlier, I started with an initial investment of $30 and invest roughly $5 a month. While this certainly will not be enough to retire, it is a start. Even saving a small amount can quickly compound. Saving $50 a month and earning 4 percent annually will earn you more than $25,000 in 25 years. Compound interest is your friend!
There are also programs out there that will round up your purchases on credit cards and debit cards and invest those amounts for you. This is ideal for me because it is automatic; this does not require the user to make the difficult decision to spend money or save it.
Participate in programs at your work
Participating in your programs at work is arguably the easiest way to get started. Taking a portion out of my paycheck each month automatically drastically increased my retirement savings. This was a no-brainer, as money is deposited into my retirement account before I even have a chance to look at my paycheck. This made saving easy, because once I made the decision to save every month, I was able to forgot about it.
Outline your goals
Before working at Advicent, I did not have anything resembling a financial plan. I knew I needed money for the future, but that was about as far as I got. In my mind, saving for the future was something that older, more responsible adults did, not recent college graduates.
I knew I wanted kids, and that I would need money for their education. I did not know how much I would need to save or when I should start savings, but I knew I would need money.
Coming up with a general plan for your future is important! You can build a basic version independently or you can contact a professional for more personalized, hands-on assistance. Either way, it is incredibly important to get a plan together.
The most significant difference I have seen in myself since I started working at Advicent is how much I have learned about financial matters. Since beginning to work in the FinTech industry, I have learned so much, which has positively affected my financial health in a profound way.
The only way to get started is to do some research and get your feet wet. It may seem silly, but going on a website that explains basic financial vocabulary and strategies boosted my own knowledge significantly. At first, it was tedious and a little overwhelming, but after a while, I noticed that I was speaking up in conversations with my parents and their friends about investment vehicles and their preferred investment strategies.
Remember that no one else is responsible for your financial health; no one else is going to force you to save money or plan for your future. I still make mistakes, and I am still not where I want to be, but I can say that I am much more prepared because I took the time to educate myself.
Start as soon as possible
Given the power of compound interest, it is important to start investing as soon as you can. Though the markets will vary, investors have typically seen significant growth on investments over a long timeline.
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