Financial health starts with getting real about your goals. A no filter, no Facetune, long-hard look about where you are, where you want to be, and the realities of getting there. So we asked Colleen Wilson, goal setting and finance nerd, and founder and CEO of Collaborate Chicago - a consulting, coaching and advisory company dedicated to helping women build profitable companies and have impactful careers, for her tips and career advice.
Colleen says, “It starts with getting real about goals, setting a good foundation and putting a plan in place to get you there. The end of the year is the perfect time to re-evaluate where you are versus where you want to be, reflect on lessons learned, and think about how to move closer to your goals.
Ask yourself: what would my future self do?”
Here are her six steps to healthy financial future.
1. UNDERSTAND YOUR FINANCIAL GOALS AND SET THE FOUNDATION NOW
Investing in your future isn’t only about securities; it all starts with goals. A Harris Poll survey reports that roughly 76% of millennials believe they need a financial plan to achieve their financial milestones, however they are also more likely to worry about never achieving traditional milestones. So what’s your plan?
With so many resources available (many free) on personal finances and financial goals, take the time now to get clear about what your financial goals are. Maybe a house is one of them or that dream wedding. Maybe it's to retire at 50. Maybe working part time when you have kids is on the list. Maybe it’s as simple as having enough in the bank to not worry about emergencies throwing you off your game. Get clear on what those goals are.
Get them on paper and research how much they will cost. Applied knowledge is power...and much of it is free. There are several great goal visualization softwares available that can help you see how much you’ll need and how much you’ll need to save for each based on your age and risk tolerance levels. A good personal financial advisor or financial planner can be instrumental in the process as well.
Small changes create options.
2. CREATE AN EMERGENCY SAVINGS
If you don’t have an emergency piggy bank to break into, you might end up broke. Lots of financial advisors will refer to emergency funds as rainy day funds-- things that you need to prepare for “just in case.” You can't always control when a rainy day hits and you have that emergency expense. But what you can do is have a rainy day fund to make that bump in the road a bit easier to navigate.
In 2015, the national average personal savings rate in the US was 5.7%. That’s not high. Ask yourself: how much of each paycheck am I setting aside for things like parking tickets, the car breaking down, or the dog getting sick? Most millennials largest fear is living paycheck to paycheck. Take control and start saving a bit today.
WHAT YOU CAN DO NOW:
- Put down (again, on paper) what you need for 3-6 months of living. Start there.
Consider setting up a high-yield savings account with 3-6 months living expenses. Make sure that if something happens you do not need to resort to putting those emergencies on a credit card that you can’t pay off right away.
The more you save, the more you’ll want to save.
3. IT SEEMS A LONG WAY OFF, BUT YOU NEED TO CONSIDER RETIREMENT
While most millennials say they expect to retire, only 22% of millennials say they are currently saving for this common financial goal. When you are young time is on your side, and retirement savings vehicles like IRAs and 401ks offer the advantage of tax-deferred savings. The more you save earlier, the more realistic this goal becomes; you put time on your side.
WHAT YOU CAN DO NOW:
- Contribute to a company-sponsored 401k - especially if your company offers a match.
- Open and fund an IRA - any financial advisor, broker dealer, or financial planner can help you get started.
Our generation will want to retire, but we’re not used to thinking about our future; we’re used to thinking about the here, the now, and it could cost us in the long run.
However, time is on your side when you are earlier in your career and as you get older, your needs may change. Starting sooner rather than later pays off. You know what makes it easier? Knowing WHY you are making small sacrifices here and there (see #1...get those goals!)
4. BUILD BETTER HABITS
You can’t always control how much you make, but you can usually control how much you spend (again, see #2 about rainy day funds). Can’t save what you want? It’s time to look at that spending. Where is your money going each month? And how is that serving your goals?
Shortly after getting my first job after college, I remember working with my dad to build a spreadsheet to see how much I could spend given how much I was making. We calculated necessities like taxes, health insurance, car payment and rent. It was sobering to see that given my salary I could only spend $50 on “entertainment” per month! I could spend that in ONE night out!. Even in 2006, that terrified me. But it also empowered me. What could I move around? Should I be shopping at Pottery Barn or asking my family for hand-me-down furniture? Knowing what my goals were even when I was only making a small salary, helped me prioritize. Even today, after getting married and making more money, I still review my spending each week to see where I am getting off track. It also helped me carve off larger and larger portions of my income for savings versus constantly upgrading my lifestyle with each promotion. Why shouldn't you automatically do this? See number 2 :)
WHAT YOU CAN DO NOW:
- Use a tool like mint.com or your bank transactions/credit card statements to review if your spending is in alignment with your goals. Are there any categories that are getting too big? Too many big dinners with friends? Too many Amazon Prime purchases?
- What about subscription services that you rarely use? Look for opportunities to cut out some of the unnecessary expenses and immediately funnel that money each month (automatically) into an emergency fund or towards one of your financial goals.
You owe it to yourself to know your numbers and know where your money is going.
5. THERE IS NO WEALTH WITHOUT HEALTH
Anyone else concerned about rising healthcare costs? One of the best ways to make this less of a future burden concern is to prioritize your health now. Just like building strong financial habits now, take your health seriously and be proactive.
Proactive = Preventative
Ask yourself some of the below questions and get into action. Often there are many resources at our fingertips, we simply have to look.
WHAT YOU CAN DO NOW:
- Are you using your company or self-funded health benefits to their fullest?
- Do you get a gym membership or health stipend through work that you are not using
- What about access to nutritional coaches or EAP programs?
- Does your employer offer an Health Savings Account or Flexible Spending Account that makes saving for medical expenses even easier?
- Are you getting your well woman exam each year?
- Getting those teeth cleaned? Do you know the cost difference between a cleaning and a root canal?!
Small changes when you're young can make a world of difference in how you think, act, feel and live. While you can’t always calculate the exact cost, bank on the saying “your health is your wealth” being true.
6. LOOK AT YOUR CAREER & ASK YOURSELF, WHAT MORE CAN I DO?
I’m not talking about taking more classes or going to get a master’s degree. I’m talking about re-examining your salary and compensation. When was the last time you took a look at how your salary compares in the market place? Are you wanting a new role or position that comes with a higher salary?
WHAT YOU CAN DO NOW:
- Identify where you want to be and investigate what it takes to get there. Simple.
- Consider if you need a new skill or leadership experience. You don’t need to invest in a degree, but there are many weekend courses that will teach you new, relevant skills that place you at the head of marketplace. Don’t know InDesign? Take a class. Feel a little shaky on best new social media practices? There are courses.
- Are you qualified now but have not had those conversations with your leader?
- Make it a priority to look for a job where employers 401k match, offer paid leave, or have great health care that can save you money.
Ensuring you are properly compensated is a cornerstone of financial health. These are all decisions you need to look at when you take a job. Make sure you feel good about where you are and if you don’t, know what your options are and have a plan to get there. This is where a great business coach, advisor or mentor can come in handy.
Disclaimer: This content in this communication is opinion and for informational purposes only; it is not intended as financial or legal advice. For specific guidance on your financial situation please consult a qualified financial professional.
Colleen Wilson is a speaker, business coach and consulting, and the founder & CEO of Collaborate Chicago - a consulting, coaching and advisory company dedicated to helping women build profitable companies and have impactful careers. Prior to creating Collaborate Chicago, Colleen held several leadership roles at Edward Jones and most recently led product marketing for the Square Capital platform at Square. Collaborate Chicago is a culmination of her professional experience, business school and consulting work, and is the resource she wish she had as she navigated her career and launched her business.
Colleen is a obsessed with women empowerment, whiteboarding, product development, and finding the perfect shade of lipstick. Contact Colleen at firstname.lastname@example.org