5 Numbers to Consider When Launching a Coaching Business
Set yourself up for success.
Photo: ColorJoy Stock
The coaching industry is one of the fastest-growing sectors with the market size predicted to surpass $20 billion by 2022. (Calendar check, it’s already August.) And while this has left many frustrated and floundering in an overcrowded market, it has also jump-started thousands of budding entrepreneurs’ coaching careers.
And as with any new career trend, along with all the commotion, there is a lot of information (and misinformation) floating around the internet. While click-bait Facebook ads often depict building a coaching business to look like a walk in the park and endless traveling, the reality can often look a bit different.
Rather than sitting on a beach, spicy margarita in hand, glancing down at your phone while yet another effortless sale hits your bank account, new coaches and coaching side-hustlers are often found drowning amongst a sea of other coaching connoisseurs, endless freebies, masterclasses, and promo threads.
If you are coaching curious, a coaching side-hustler, or looking to launch (or re-launch) a new coaching business, here are five numbers to consider to ensure that you’re setting yourself up for success, and profit, from the get-go (so that dream of sitting on the beach is a much closer reality.)
Number 1: Your Net Income
How much do you want to make per year?
Have you ever taken the time to really think through the income that would sustain and fund your ideal lifestyle? If not, now’s the time!
This number will largely differ based on where in the world you live, and what constitutes a dream lifestyle for you. For some, it encompasses travel. For others, it’s as simple as being able to afford childcare. Either way, the first number to get clear on, is how much money you need in your bank account in order to thrive.
Example: I need $75,000 a year in my personal bank account to live my dream lifestyle.
Quick definition from Investopedia: Net income (NI), also called net earnings, is calculated as sales minus cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes, and other expenses.
Number 2: Your Total Cost of Doing Business
What will your expenses and taxes look like?
How much does it cost to run your business? If you have no idea what these numbers are, it’s time to PAUSE and do a little research. For business expenses, outline one-off costs, such as building a website build, and reoccurring costs like accounting software.
For taxes, it’s going to largely depend on the type of business you file and what state you live in. However, for example, expect around 30% of your profits to go to the government. So, multiply your desired net income by .30 to get this number.
Once you know your one-off costs, your recurring expenses, and your estimated tax payouts, you can add them together to get to an estimated “total cost of doing business.”
Example:
One-off costs: $4,000
Recurring monthly costs: $2,000 ($24,000 annually)
30% of 75,000 (net income): $22,500 (taxes)
Total cost of business annually: $50,500
Number 3: Gross Annual Sales
How much does your business need to make?
Now that you have your goal net income, and your estimated total cost of doing business annually, we can add them together to determine what your business needs to generate in gross sales annually in order to support your net income.
Example:
Total Cost of Business ($50,500) + Net Income ( $75,000) = $125,500 = Gross Sales
Quick Definition from Investopedia: Gross sales is a metric for the total sales of a company, unadjusted for the costs related to generating those sales. The gross sales formula is calculated by totaling all sale invoices or related revenue transactions. However, gross sales do not include the operating expenses, tax expenses, or other charges—all of these are deducted to calculate net sales.
Number 4: Gross Monthly Sales
How much do you need to gross per month?
If you were to work for a company, there are generally 52 pay periods in a given year. When you own your own company, you can either payroll yourself OR pay yourself out via owner’s draws. For “Number 4,” you can either divide your total annual gross sales by 12 months OR by 52 pay periods.
When you’re starting out, let’s say as an LLC or sole proprietor, it’s more common to look at your expenses and sales monthly, thus we’re going to use 12 for this example. You want to know how much your company needs to gross monthly in order to deliver you your desired net income. So, simply divide your gross annual sales by 12 to learn what you need to gross monthly.
Example:
Gross Annual Sales Needed = $125,500.00 / 12 = $10,458.33
$10,458.33 = Gross Monthly Sales Needed
Number 5 (Option 1): Total Client Load
How many clients do you need to take on to hit your income goal?
There are two different numbers you can choose to act as your key fifth number (a.k.a. Number 5). The first is your total client load. In this scenario, ask yourself, how many clients do you want to work with at any one given moment? Do you want to only work with three clients annually? Or do you want to work with 30 new clients a month via a group program? You might not immediately know, but pick a number to start out.
From here, you will be able to determine how much you need to charge per client per. For example, if you identified you only want to work with three clients annually, then that means those three clients need to produce $10,458.33 of gross monthly sales for you. That means each client needs to be on a $3,486.11 monthly retainer.
On the flip side, if you have identified you want to go after a volume model, and you’ve identified you want to work with 30 clients a month every month, each client will need to pay $348.61 monthly in order to hit your gross monthly sales goal ($10,458.33 / 30 clients a month = $348.61). However, also consider that this means you need to sign a total of 360 clients annually (30 clients monthly x 12 months).
Number 5 (Option 2): Pricing First
How much should you charge for your services?
If you already know that you’re looking to create a very specific product at a pre-identified price point, then you can back your way into knowing exactly how many clients you need in order to hit your gross sales goals. For example, if you want to sell a $100 online course, then take your total needed gross sales and divide that by $100. This will indicate that you need to sell 104.16 (round it up to 105) courses a month to hit your sales goals.
The Bottom Line
Ultimately, these five numbers are what you need to know in order to identify your ideal business model. Numbers 1-4 inform us of what we need in order to “play around with” Number 5. If you’re feeling stuck between high volume or high ticket, consider asking yourself this, which business model and workload is most conducive to your dream lifestyle? If you need a little more help breaking this down, check out our free masterclass here.
We’ll leave you with this, “living your dream life shouldn’t be just a dream.”
About the authors: Lexie Smith (pictured left), named “Brilliant PR Expert” and “Trailblazer Women Leaders in 2021,” is a PR coach, host of the “Pitchin’ and Sippin’ Podcast,” co-founder of Ready Set Coach, and the founder of THEPRBAR inc., an online coaching brand that empowers entrepreneurs to increase their influence, impact, and revenue through relationship-driven marketing and PR.
Emily Merrell (pictured right), as featured in Refinery29, Girlboss, Forbes, and Huffington Post, is the founder and community curator of Six Degrees Society, a professional speaker, host of the “Sixth Degree Podcast” business coach, and co-founder of Ready Set Coach.
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Permission to Spend: Why A Budget is This Couple's Secret To Reaching Their Goals
Your budgeting game is about to change.
Whatever it is, the way you tell your story online can make all the difference.
Welcome to this special episode of WorkParty titled Money Talks, a Budget Broadcast Series in partnership with You Need a Budget (YNAB), designed to educate everyone on the power of building a budget.
Whether it’s starting the business, going on the trip, or renovation projects at home, a budget (of all sizes) can help you accomplish those dreams. YNAB is the leading personal finance platform that has helped hundreds of thousands of people take control of their finances–including our guests today.
In the second episode of the WorkParty and YNAB Budget Broadcast Series, Jaclyn sits down with Chris and Julia Marcum, the duo behind the dreamy home renovation, DIY project and lifestyle blog, Chris Loves Julia, to chat about how to use a budget to plan, prioritize, and not only set–but actualize–your financial goals, and why you should start today.
Get your notepad ready and press play on episode one! Your budgeting game is about to change. Join the party on social @workparty and stay in-the-know at workparty.com.
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A Millennial's Bucket List for Achieving Financial Freedom (Step 1: Start ASAP)
Early retirement? Yes, please.
Photo: Smith House Photo
If you’re a millennial who wants to achieve financial freedom sooner rather than later, there are several important money moves you should be making now. If you wait too long, you’ll spend your later years catching up rather than going on vacations, upgrading your house, or taking early retirement.
Ideally, you want to start making these money moves while you’re in your 20s and 30s, so you’ll be able to reap the benefits of your financial strategy for a maximum length of time. Here are the bucket-list items you should start checking off to set yourself up for financial freedom.
1. Create a budget.
A budget is essential. Make a list of all your income and expenditures, and add them up to see how you’re making out, monthly and annually. If you’re seeing a surplus, that’s great—but if not, you’ll need to tighten your budget by figuring out the amounts you need to make, save, and spend in order to make ends meet.
Even if it looks like you’re doing okay balancing your monthly budget, if there is room to scale down your spending, you should. Save a little extra and reroute that money into an investment.
2. Build an emergency fund.
One major car repair, injury, appliance replacement, or other big-ticket items can really set you back financially. Create an emergency fund against these possibilities and only dip into it when absolutely necessary. This way, you aren’t maxing out your credit cards or depleting your other funds if something unexpected pops up.
If you struggle with building up your fund, have extra money deducted from your paycheck so you’ll get a refund at tax time, then funnel that money into your emergency fund. And think of it this way: If you’re fortunate enough not to need your emergency fund, then you’ll be ahead of the game financially when your 50s arrive.
3. Set up a retirement fund.
Too many people wait to start saving for retirement until they reach middle age, which is way too late. Many millennials are tracking to follow suit, with two-thirds of them having saved nothing yet, despite the fact that they see retiring around age 61 as a reasonable goal.
Experts typically recommend that young adults should open an IRA or other retirement accounts, and definitely should invest in their 401(k) accounts, especially when employers offer matching funds. In fact, many Americans, in general, are missing out on this financially smart benefit. A solid rule of thumb is to put about 15 percent of your pay annually into a 401(k).
4. Think big.
A savings account is a smart idea; however, it’s not going to yield a big return via interest nor ferry you to early retirement. But if you do have money saved, then you have the option to make significant and potentially lucrative investments.
For instance, you could buy a rental property. You can list your home on vacation rental sites, collect rent, pay your mortgage, stash away the remaining funds, and build some equity. Over time, you might even want to add a property or two to your portfolio.
Or start your own business. Got an idea, passion, or golden opportunity? Take an entrepreneurial leap! Many businesses can be launched right from home on a shoestring budget. Put a plan together, get the word out on social media, then attend trade shows and other networking events to promote yourself and build your company.
These two options or similar ones put your wallet to work, and can eventually position you for solid financial footing down the road.
5. Take a few investment risks.
Even if you're risk-averse, it’s not a bad idea to know how the world of investment works. Done right, it’s a venture that can be quite lucrative. Look into investing just a little at first, whether in stocks, bonds, commodities, real estate, your sister’s promising business, or another opportunity. Then watch your investment carefully to see if and when it pays off. If it doesn’t, look to shift into another type of investment.
6. Rethink your location.
If you’re living in an expensive city, consider a change of scenery. These younger years are a perfect time to try out new places, anyway. So why spend thousands a month on sky-high rent or property taxes? By moving to a more affordable city, you could save loads on rent and living expenses. For example, Omaha is a cheaper market than Los Angeles. Take your savings and put them to work toward your financial goals.
7. Watch your credit spending.
As millennials, we are firmly a part of the digital spending revolution, which is convenient but makes it easy to overspend. When you can’t pay off your credit card bill every month, you’re charging too much.
To avoid accumulating credit card debt, pay close attention to your spending, delete shopping apps off your phone (or at least keep yourself logged out), and track your receipts. If you’re already in debt, consider debt consolidation so you can get back on track. (And speaking of debt, if you’re still carrying student loans, look into loan forgiveness programs or refinancing.)
At this point in your life, you’re young enough that small moves can make a big difference to your financial future. While age 60 might sound far off, the passage of time can surprise you. If you’re looking to get on track toward fiscal stability, now is the time. Check off these bucket list items and watch your financial freedom begin to become a reality.
Written by Molly Barnes, Digital Nomad Life.
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This post was originally published on June 5, 2019, and has since been updated.
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How to Stress Less, and Find Joy in Your Finances with Ashley Brooke
Your budgeting game is about to change.
Welcome to this special episode of WorkParty as part of our Budget Broadcast Series in partnership with You Need a Budget (YNAB), designed to educate everyone on the power of building a budget.
Whether it’s starting a business, saving for a trip, or taking control of your finances once and for all, a budget (of all sizes) can help you accomplish those dreams. YNAB is the leading personal finance platform that has helped hundreds of thousands of people take control of their finances–including our guest today.
In this third and final episode of the WorkParty and YNAB Budget Broadcast Series, I’m sitting down with Ashley Brooke to chat about money mindset–how to overcome common obstacles, manage money stress, and budget for fun–not just for fear. Join the party on social @workparty and stay in-the-know at workparty.com.
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How to Take Control of Your Finances and Cultivate Confidence Around Money
Your budgeting game is about to change.
Welcome to this special episode of WorkParty titled Money Talks, a Budget Broadcast Series in partnership with You Need a Budget (YNAB), designed to educate everyone on the power of building a budget.
Whether your financial goals are aimed at booking the vacation in Europe you’ve been dreaming about pre-lockdown, paying off your high interest credit card debt, or simply starting to save for the future—a budget (of all sizes) can help you accomplish those dreams.
To kick off our first of three Money Talks episodes, Jaclyn is joined by Jesse Mecham, the founder of YNAB, the app designed to be your best money-saving friend.
Get your notepad ready and press play on episode one! Your budgeting game is about to change.
Try YNAB Free for 34 Days
Subscribe to WorkParty and never miss an episode.
Vision Boarding Your Future: A Creative Approach to Planning Your Finances
How power of visualization can help you get your finances in check.
People who can visualize themselves accomplishing something are more likely to make them happen. This technique, called visualization, is the practice of creating a mental image of a future event or outcome and envisioning the process of how to make it happen. Used correctly, visualization can be a powerful, creative tool to help you accomplish your goals in life – especially your financial goals.
Visualization works by training the brain. By rehearsing your future behavior and the actions you will take to make your desired goal a reality, you prepare yourself to effectively carry that thought into action. Just like exercise, the more you visualize something, the stronger that vision becomes and the more confident you are to follow through on that action and turn your goals into reality.
Finding success with visualization takes commitment. You need to set aside time every day to visualize yourself hitting your goals if you want them to become a reality, which is why creating a vision board can be such a useful tool to create a consistent visualization practice, and help you (finally!) get your finances in check this year.
Personal financial educator, Tiffany “The Budgetnista” Aliche teamed up Ally to share a creative approach to planning your finances through vision boarding during her workshop at the recent Future You digital festival. An award-winning teacher of financial education, “The Budgetnista” is an Amazon #1 bestselling author of The One Week Budget and the Live Richer Challenge series. She's also a contributing editor for Next Advisor.
Read on for Tiffany’s tips to create your own vision board to help you plan for your financial future. Because it’s not just enough to decide on a goal – you have to take action to fund it.
Tips to Create Your Vision Board
Tip #1 – Define Your Goals
It's very difficult to get to a place unless you have a specific destination in mind. If I were to give you a plane ticket and tell you to use it wherever you want it to go, it's going to be very difficult for you to enjoy that plane ticket without choosing a specific destination.
Tip #2 – Your goal should be positively aligned
Steer away from what ‘not’ to do. If you speak in the negative, you see the negative. Instead, speak in the positive and use affirmations to articulate your goal. For example, rather than say ‘don't work so much’ or ‘work less,’ instead say ‘spend more quality time with family and friends.’
Visualization in the form of positive-outcome predicting can have a huge impact on how we shape the course of our lives. A 2016 study shows that this type of thinking drastically reduces unproductive worry-mentality and decreases stress.
Tip #3 – Be Specific
Visions start in your head, then come out through words, and then actions, which is why it’s important to be specific.
For example, let’s say you want to start setting aside money. For what? Where are you going to put it? How much at a time will you save? At what frequency or cadence will you set the money aside to save (weekly, monthly, with each paycheck, etc)? How will it be transferred or put aside? For how long or until when?
Include all of these steps on your vision board to really solidify your goal, so you can then take action towards that vision.
Tip #4 – Find Your Inspiration
Look for things that inspire you – or even people who inspire you – and what will keep you inspired. Look for images that are aligned with your goal, write down affirmations, and again – be specific!
Get creative! Your vision board is a visual representation of who you are creatively, so consider cutting out magazines, using stickers, etc. Use elements and stimulus that will inspire and empower you long term.
Tip #5 – Lay it Out
You might look at your board and realize you want to be able to see the inspiration that is directed towards one area of your life. Consider segmenting your vision board (i.e. a ‘personal’ section and a ‘professional’ section) to keep yourself inspired by the goals you’re working towards in that particular area of your life.
Tip #6 – Keep it in Sight
Place your vision board somewhere that you will see it regularly – your office or workspace, your dining room, or even a hallway or a bathroom. You need to be able to SEE it often. Being reminded of your goals every day helps create the motivation to achieve them.
Savings Tips to Fund Your Vision
Tip #1 – Emergency Fund
In order to fund your big goals, you must have security and a financial cushion. Your first line of defense is always, always your emergency fund. It's very difficult to leap from an unsafe space. If you're not feeling comfortable and safe, it's going to be very hard for you to level up closer to your goal. Leverage technology, like Ally Bank’s smart savings tools to create an emergency fund. Knowing that you have a safe space to land will help lead you towards your dreams more boldly.
Tip #2 – Charitable Giving
Give your money purpose. I truly believe that giving activates abundance. Charitable giving is doing something for no return for someone else – that's it. So, whatever that looks like for you. Because what you're really saying is I am giving from the overflow of my life, and acknowledging I have overflow is acknowledging that I have excess. And sometimes that's also just giving time and energy!
Tip #3 – Use Your Vision Board
Using the tips above, revisit your vision board often and update it as you (and your goals!) begin to grow. When you are actively working towards your goal – which oftentimes means funding that goal – it makes it seem real and more attainable.
To learn more about Ally, visit ally.com
Ally Bank, Member FDIC
How the Create & Cultivate Team Is Putting Financial Resolutions First in the New Year
This year didn’t turn out the way many of us had planned. The good news is: 2021 is the fresh start we’ve been looking for.
Photo by Karolina Grabowska from Pexels
This year didn’t turn out the way many of us had planned. It feels like our 2020 resolutions have been put on hold, while we wrestle with how to reconcile our personal, professional, and financial goals for the new year. The good news is: 2021 is the fresh start we’ve been looking for.
The promise of new beginnings not only lends a much-needed dose of optimism relative to the rhetoric of this past year, but it also helps propel us back into a goal-setting state of mind. A recent survey reveals an estimated 188.9 million adult Americans (74.02% of the population) are determined to learn something new, make a lifestyle change or set a personal goal in an effort to better themselves in 2021, a 15.17% increase from 2019. Furthermore, 33.69% of Americans plan to set a money-related goal. That being said, now is the perfect time to begin planning your financial resolutions for the year ahead, and we’ve partnered with Betterment to help you spend, save, and invest your money better.
2020 has challenged many of us to rethink our values and global impact, particularly when it comes to spending. The way we live, the career we choose, and the people we care about align with our personal values; shouldn’t our investments do the same?
The practice of aligning your investments with the values and social ideals that shape your worldview is known as impact investing, or socially responsible investing (SRI). Betterment defines SRI as “an approach to investing that reduces exposure to companies that are deemed to have a negative social impact—e.g., companies that profit from poor labor standards or environmental devastation—while increasing exposure to companies that are deemed to have a positive social impact—e.g., companies that foster inclusive workplaces or commit to environmentally sustainable practices.” With Betterment's Social Impact Portfolio, you can invest globally in companies that align with what you care about most, without sacrificing portfolio performance.
How we spend and invest our money has the potential to change the world. And while the road to radical change much resembles the stock market – unpredictable, long, and not always forward – the future of our world begins with how you choose to invest for better, starting today.
Read on to hear how three members of the Create & Cultivate team are putting financial resolutions first in the New Year.
I hope to adapt an approach to investing that supports our community and our planet, utilizing one of Betterment’s SRI portfolios that focuses within the realm of Environmental, Social, and Governance (ESG) investing. Betterment's Social Impact Portfolio invests in ETFs that support minority empowerment and gender diversity, and is committed to offering investment funds that do better for our communities and the planet.
In order to pay off some outstanding debt, I plan to limit the amount of "stuff" I accumulate and bring into my home and be more conscious of my spending habits – which includes putting a limit on the amount of nights I order takeout.
My husband and I have a goal of owning our own home in 2022 and are working to pay off our debt in 2021 as well as save up for the down payment. We’ll be sticking to a stricter budget and doing things like making more meals at home versus ordering take out. We also plan to start a new savings account set up for this, specifically, with a monthly goal number to hit for savings.
The above article is sponsored by Betterment. Any links provided to other websites are offered as a matter of convenience and are not intended to imply that Betterment or its authors endorse, sponsor, promote, and/or are affiliated with the owners of or participants in those sites, or endorses any information contained on those sites, unless expressly stated otherwise.
Finances Have you Frustrated? Have No Fear, Podcasts Are Here!
Money matters.
Written by Jackie Sedley.
Money. It’s a short word that stands for one of the most nerve-wracking aspects of our day-to-day lives. There is no denying that some of us are more money-minded than others, but by no means should anyone feel guilty or ashamed for having trouble with their finances. Thankfully, those of us who are more financially educated and experienced have taken to the oh-so-convenient world of podcasting to share their tips and tricks. From financial advice to financial slip-ups, these podcasts can inspire and motivate you to feel less ashamed and more capable.
Photo: Courtesy of Create & Cultivate
The Podcast: The Real Female Entrepreneur
Why We Recommend It: This podcast really hones in on the less-glorifying aspects of the business. Host Lauren Frontiera brings about conversations of failures, fears, triumphs and struggles, all packed into hour-long episodes. This podcast is great for anyone who feels insecure about their financial struggles, as it brings about a sense that you are not alone.
Best Money Tip: Prioritize passion over a paycheck. On TRFE 218: Follow Your Passion, Not the Paycheck with JJ Anderson they discuss the consequences of putting money on too high of a pedestal. “People prioritize monetary gain over enjoyment… especially as entrepreneurs” she told TRFE. “ I know the end goal is to make money, and it will come if you’re consistent and you’re strong in what you’re doing. But if your sole focus is making money, it’s not going to get you out of bed. What’s going to get you out of bed is your passion and your happiness in what you’re doing.” But this is our favorite JJ Anderson quote from the episode: ”The amount you’re being paid does not validate you.” Preach.
The Podcast: WSJ Secrets of Wealthy Women
Why We Recommend It: Every Tuesday, host Veronica Dagher enlightens listeners with empowering conversations revolving around finance and professional success. This women-centric podcast brings up a wide array of female success-stories, from self-made entrepreneurs to philanthropic advocates. With such a diverse assortment of guests, it isn’t hard to find an episode that you can relate to.
Best Money Tip: Stay true to you. In the episode Dr. Laura Forese: Changing the Future of Women’s Healthcare Dr. Forese advises, “Be true to your own brand. Be true to yourself. Don’t try and emulate anything else. I think having a distinct identity is very important when thinking of your brand, but ultimately making sure that your ethos makes sense and that it’s true to who you are. You’re not putting something out there just because you think people are going to love it, you’re putting it out there because you know it’s the right direction to go and it makes you happy.”
The Podcast: The Biz Chix Podcast: Female Entrepreneurs
Why We Recommend It: This podcast is less about learning from others’ stories, and more about uncovering your own methods to financial success. Host Natalie Eckdahl is a well-known author and coach and has used her background in business to promote the importance of growth, adaptability, and team-building.
Best Money Tip: Reset your mindset. According to Episode 360: Why We Create Our Own Glass Ceilings women are scared to charge more for their products due to fears of judgment and scarcity. In response to this issue, host Natalie Eckdahl feels as though, “our mindsets need to be continuously reset as we up-level and advance in our businesses.” She suggests that confidence is key in making a profit and continuing to know the worth of your project.
The Podcast: Inspired Money
Why We Recommend It: Hosted by financial advisor Andy Wang, this podcast brings inspiration and motivation into the financial success conversation. Aiming to shift listeners’ perspectives on money, the interviews that Wang conducts are both informative and captivating and will be sure to stick with you the next time you pull out your wallet.
Best Money Tip: Be thoughtful with your dollars. On Buy the Change You Want to See With Jane Mosbacher Morris, she emphasizes that “not only should there be alignment with your values and your purchasing decisions, but also knowing that how you spend your money and who you spend your money with can significantly impact the lives of others.”
What are your favorite money podcasts? Share the link below with your top money tip so we can all tune in!
From Here On Out: 16 Steps to Financial Success for Every Stage of Life
The first day of the rest of your life.
This story was originally published on February 17, 2019 and has since been updated.
THE SOONER YOU START CRAFTING A FINANCIAL PLAN, THE BETTER YOUR CHANCES OF HAVING A LIFETIME OF FINANCIAL SUCCESS.
Have a 401k? Are you putting your dollars into an IRA? Do you know the 50-30-20 rule? You want to set out on your own, buy a house, plan for retirement? There's no time like the present to give yourself the present of a future. So let's talk money, honey.
YOU'RE TWENTY? WELCOME TO ADULTING.
No longer a teen, no longer relying on your parents to bail you out of tricky financial situations, and perhaps paying for your own health insurance. Your twenties are when you first really start to understand the inner-workings of earning, saving, and planning for your future. Especially since you're facing down an overcrowded job market and some oh-so-painful student loans. The Class of 2015 is the most indebted in history, the average student owing $35k, and many others taking out second loans for grad school.
In order you prep for a secure future, in your twenties you should focus on saving-- and that means living below your means. You might be tempted to blow that first big(ish) paycheck, or YOLO it for a bit, but if you're dropping dollars you don't have and racking up hefty credit card debt, you're screwing yourself. Forget FOMO, you should be more concerned with FOMRO (fear of money running out.)
Forget FOMO, you should be more concerned with FOMRO (fear of money running out.)
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1. PAY YOURSELF FIRST. You've heard of treat yo'self. This is pay yo'self. This catchy tagline is intended to encourage saving. Even if it's a small amount every week, you need to start putting money away. Here's a tip: If you're using cash and you break the bill, deposit the rest of the amount into savings.
2. YOU NEED AN EMERGENCY FUND. If you lose your job, get sick, or are unable to work, financial planners suggest having an emergency fund that can cover a month's expenses. That way you're not dragging yourself into debt when you're already down.
3. LEARN THE 50-30-20 Rule.50 percent of your income should cover needs like rent, food, and transportation costs. 30 percent should cover things you want like night's out with friends, the occasional trip, maybe a new pair of shoes. 20 percent should be put away. This doesn't always work out every month, expenses pop-up, but you should be tracking your finances too see how close you're hitting the goal.
4. STOP GETTING PARKING TICKETS. You need to be financially responsible now and stop wasting money. If you have a pile of unpaid parking tickets in your glove box, it's time to take a good hard look in the mirror and at those parking signs.
5. START SAVING FOR RETIREMENT NOW. If it sounds crazy, it's not. LearnVest, a financial program that is accessible to everyone, released a study finding that a planner who starts putting $600 a year away at the age of 25 will have $72k by 65.
6. TAKE ADVANTAGE OF 401(k) EMPLOYER MATCHING PROGRAMS. It's hard to think about the "future" when it feels like a distant nebulous blob. And you're first thought at putting money into a 401(k) or similar program might be: I want this money now. However, if you're lucky enough to land a job where your employer offers a contribution-matching 401(k) do not overlook this opportunity. It might mean a slightly smaller paycheck, but it's free money for your future. You'll barely even notice it, but you will notice the chunk of savings you've accumulated by the end of the year.
ALRIGHT, YOU'VE HIT YOUR STRIDE IN YOUR THIRTIES
If you learned how to save and plan in your twenties, in your thirties:
1. ALL OF THE ABOVE RULES STILL APPLY. You need to consistently practice saving-- both for short-term and long-term goals. Want a house? That down payment doesn't come cheap, and to get a bank loan you need to have proven steady income, and cash in the bank.
2. CREATE A DEBT-FREE-BY-40 SCHEDULE. You should also aim to be completely debt-free by the time you hit forty. That way you enter the big 4-0 able to focus on your nest egg instead of those student loans.
Beyond that many of us typically make some very significant financial decisions in our thirties, like buying the aforementioned starter home, or starting a family. You might have more money in your thirties, which means it's prime time to be even more careful about how you spend. It's called lifestyle inflation-- don't get caught in it. When we have money in the bank we feel a little freer to spend on "unnecessaries," which can be dangerous. Treat yourself, sure, but don't treat yourself right out of a comfortable future. Short term pain, long term gain.
"Don't get caught in lifestyle inflation in your '30s. Live within your means."
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3. PAY YOUR BILLS ON TIME. If you're looking into home ownership, you can be sure the bank is looking into you-- and every bill you pay, or haven't. From checking if you've paid your car payments on time and haven't lagged on other bills, to seeing what you spend monthly. If you have creditors chasing you down, you can bet your bottom dollar that those bigger life purchases are going to be impossible to acquire. Good credit is a must if you want a good rate from auto loans to mortgages.
4. START INVESTING. You need mix up your investments by starting a stock portfolio which sets you up for greater financial security in the long run.
5. BUY A COOKBOOK. All that money you spend out eating out in your twenties? It's time to meal-plan in order to financial plan. Americans spend more money on eating out than on groceries. And with apps like Postmates making food delivery a cinch, we're tossing away dollars.
6. STOP BLIND SPENDING. We tend to work longer hours with every passing decade. And the app economy has made convenience very appealing-- but it's at a high cost. Apps like the aforementioned Postmates make it easy to spend without seeing. What the tech banks on is that you're not registering how much you're actually spending. A five dollar delivery here, six dollars there-- in the immediate it seems small, until you realize you've spend 300 the last month of delivery fees. That's 300 dollars you could be putting in savings or an emergency fund.
WELCOME TO FORTY & THE REST OF YOUR LIFE
1. OUT OF DEBT? YOU SHOULD BE, OR CLOSE TO IT. Wild to think about it, but in your forties you're closer to retirement than you've ever been before.
In 2013 data showed that the average female worker in the U.S. retires at 61. You should be as close to out of debt-- especially with those student loans, than ever before.
You shouldn't be paying off your student loans while paying for your kids to go to school.
2. INCREASE YOUR SAVINGS. From your emergency fund to how much you're putting away for retirement. Since the aim for your forties is to be out of debt, you should be able to reallocate those fund into savings. Your life is probably a little more expensive than it was in your thirties and the stakes are a bit higher. So even if you're making more money, that mortgage, cost of kids, and that nicer car don't pay for themselves.
3. MAXIMIZE YOUR CONTRIBUTIONS. Currently, for 2016, the 401(k) and IRA contribution limits are $18k and $5,500, respectively. In your forties you should be maximizing these contributions, especially if your employer matches your donations.
4. START A COLLEGE FUND, IF YOU HAVEN'T ALREADY. If you're planning to send your kids to college, it won't come free or easy. Higher education comes at high costs. According to the College Board, the average cost of tuition and fees for the 2015–2016 school year was $32,405 at private colleges, $9,410 for state residents at public colleges, and $23,893 for out-of-state residents attending public universities. That doesn't include: housing, meals, personal transportation, or books.
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The 5 Keys to Conquering Your Credit
Do you know how healthy your finances are?
Sponsored ad by Chase Slate®
How would you answer these questions: “Do you have healthy finances?” “Do you often spend more than you make every month and dip into your savings?” “Do you know where the BULK of your income is going?”
Chances are good you said “yes,” to the first question, “maybe” to the second, and “no” to the last. Everyone wants to think that they are doing well (or at least OK) financially, but we also innately avoid looking at the nitty gritty dollar details. The ones that make us do a double take and realize, maybe our finances aren’t actually that healthy. The cost of living is high (!!) and that can be hard to stomach.
So, what’s a modern working millennial woman to do? Rip off your blinders and look. According to Brittney Castro, Certified Financial Planner™ and Chase Financial Education Ambassador, it’s the only way for you to secure your future and status as a financially wise woman.
“As a Certified Financial Planner™,” Castro shares, “I talk to modern millennial women all the time, and I think it’s important to recognize that women in this age group have a diverse mix of financial goals, from paying off student loans, to increasing their income, to improving their credit, to saving for a down payment on a house.”
What you do with your money today drastically impacts your future. If you’re wondering where to begin, read through Brittney’s five keys to conquering your credit and achieving financial health below. Then, check her out at #CreateCultivateNYC this May where she’ll be speaking on a panel on behalf of Chase Slate.
MAKE A MONEY DATE WITH YOURSELF
You make regular dates to check in with friends and family. See how they’re doing and what’s going on in their lives. The same concept can (and should) be applied to your finances. If you don’t know where your money is going, there’s a good chance you’re not doing the best at saving.
So, make a date. Put it in your calendar and don’t flake!
Brittney suggests this plan of action:
- Schedule a specific time, once a week, to review and plan your budget. This can empower you to keep tabs on your spending habits.
- During your money date, plan for upcoming expenses, such as birthday gifts or special outings, and adjust your budget accordingly.
PAY YOUR BILLS ON TIME
“Another simple but powerful way to improve your financial health – pay all your bills on time,” says Brittney.
“Payment history is the most important factor when it comes to calculating your credit score (generally 35 percent of the score),” she says.
Building credit is an important part of financial health. There are many big steps (ahem, buying a home) that aren’t possible without good credit. Even if you think you’re going to be renting forever (get financially savvy and you won’t!) you need to take the steps right now to secure your future.
According to Brittney, “The credit information that a lender requests could mean the difference between paying huge interest fees and potentially securing the deals we want.”
The gist? “Set up payment reminders or enroll in automatic payments so you’ll never forget,” says Brittney.
USE THE TOOLS THAT ARE READILY AVAILABLE TO YOU
The internet actually wants you to succeed. It’s true! The information superhighway is literally an information SUPERHIGHWAY that charts ALL OF YOUR SPENDING. You don’t have to balance a checkbook or tally up receipts. It’s all there waiting for you to explore.
Brittney says, “Take advantage of tools that empower you to make savvy financial decisions and manage your credit and finances with confidence.” Whether you’re using your smartphone or your laptop, there are numerous services and apps that want you to succeed!
“For example,” says Brittney, “The Chase Slate Credit Dashboard gives cardmembers access to their FICO® Score and a graphical analysis of their 12-month score history.”
Knowing your credit score helps you assess where you stand and how close or far you are from achieving your goals and creating the life you want.
GO ONE STEP FURTHER BY CHECKING YOUR CREDIT REPORT
In addition to monitoring your credit score, checking your credit report is essential to making smart financial decisions.
“Visit www.AnnualCreditReport.com to get a free, in-depth overview of your credit history,” says Brittney. “Review the report closely for any errors – late payments or amounts owed that are incorrectly listed – and immediately remedy with the credit bureau.”
And if you think checking your credit report might negatively impact your score – think again! When a lender makes an inquiry – a request for your credit report information – there is a small impact on your credit score. However, these so-called “hard inquiries," which can happen when you apply for new credit or a loan, begin to fade in impact after the first 12 months and drop off your credit report completely after two years.
WHEN IN DOUBT, USE THE 50-30-20 RULE
What’s that? Brittney explains, “Using this rule – 50 percent of what you earn (net income after taxes) is allocated to living expenses, 30 percent is spent on nonessentials (like eating out and shopping) and the remaining 20 percent goes to your savings account. This approach is easy to implement, and can be adjusted to your personal money priorities.”
While we tend to notice the big expenses (as they make the biggest immediate dent in our savings), it’s often the little ones that get us in the end. Every time you order takeout, press BUY on the pair of shoes you’ve been eyeing, or opt for a morning latte at your local coffee shop instead of making coffee at home, you’re spending money that could easily be put in your savings, or go toward paying your bills.
Let’s think about the coffee example for just a second (and actually do the math). If you buy a latte every morning at $4/cup, seven days a week, 365 days per year, that’s over $1,400.00 dollars in lattes (!). The cost of pressed juice is even higher.
Use the 50-30-20 rule to determine exactly how much of your income you can safely allocate to these types of non-essentials. Then, you can move forward with confidence, knowing you’re making steady progress toward your financial goals.
Have other financial questions? If you’re heading to NYC, write them down and be ready to ask Brittney during the Q&A when she joins us on “Just Do It: A Real World Guide to Channeling Your Entrepreneurial Spirit” on behalf of Chase Slate.
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The Best Financial Decisions to Make in Your 20s
Fall in love with finances.
Image credit: Becca Tapert
Mortgage-backed securities, sub-prime loans, traunches…. It’s pretty confusing, right? Does it make you feel bored or stupid? Well, it’s supposed to. Wall Street loves to use confusing terms to make you think that only they can do what they do. – “The Big Short”
Savings. Does the word send shivers down your spine?
As a Millennial, the (credit) cards may feel hopelessly stacked against you. Everyone said “go to college and a good job will easily follow.” No one prepared you for entering the workforce in the wake of The Great Recession. No one warned you about how long student loans would follow you. No one explained how truly tight life is on a entry-level salary. Living paycheck-to-paycheck often seems like the only way to keep your head above water. However, if you can master the art of saving at a young age, not only are you setting yourself up for a secure future, but you’re also building a powerful muscle of financial self-control.
Disclaimer: I am not a financial professional, just a young person who has worked to gain basic financial literacy.
Build an Emergency Fund
To move away from the paycheck-to-paycheck panic, focus on building an emergency fund. Truly audit your life, exploring what short-term sacrifices you can make. Brew your own coffee instead of buying a fancy latte. Funnel your entire tax refund directly into savings. Sell personal items you no longer use. Surely there’s something you can sacrifice, even $10 a week is better than nothing. You never know when you’ll have a medical emergency or car failure or suddenly become unemployed. However, the one constant with emergencies is they will happen to everyone.
Recommendations vary for emergency fund goals, but most advisers recommend saving 3-7 months’ worth of living expenses. Start small, focusing on just saving $1000. After your first $1000, shift gears to save the next $1000. Breaking this into small goals will make this feel more manageable.
Credit Cards
Don’t. Just don’t. There’s so much to be said on the topic of credit cards: How high interest rates will be your demise. That you should always pay them off in full. You don’t need more than one. You should avoid any with annual fees.
Credit spending will undermine your saving goals. If you’re drowning in credit card debt, then focus on paying off the highest interest rate debts first. Cut up the cards and throw them away. Paying off your 17% interest rate card is a 17% guaranteed return on investment for those dollars, way better than the return on a boozy brunch.
Start Saving for Retirement
Financial professionals everywhere advocate the value of starting a retirement account in your 20s. Touting the power of compounding interest, you’ll vastly multiply your investment if you start saving at 25 versus at 35. Once your emergency fund is healthy enough to protect you from catastrophe, start saving for retirement.
401(k)s – Employers regularly provide 401(k)s and often offer matching programs. Matched funds are basically free money, so sacrifice as much as you can from your paycheck to take full advantage of these. Not doing so means leaving cold hard cash on the table.
Personal Retirement Accounts – If your workplace doesn’t offer 401(k)s, consider opening a personal retirement account. There are many options: IRA, Roth IRA, HSA’s, etc. Talk to a personal investor about your best option, but make sure your investor is a “fiduciary,” which means they’re legally obligated to act in your best interest.
"No one explained how truly tight life is on a entry-level salary."
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Start Saving for Goals
After establishing an emergency fund and retirement savings, you can now save for life’s big purchases. Maybe you want to buy a car, go on vacation, or plan for your wedding. When your friends post magical pictures of what’s going well in their life, it’s easy to get caught in the Instagram jealousy game. Don’t forget, they had to pay for that photo, and many them are doing so with credit cards. No amount of Instagram likes will feel better than paying for a major purchase in-full and with cash.
Be Smart with Extra Income
If you get a raise, bonus or any other unexpected extra income, divert that directly into savings. You’ve already figured out how to live at your current salary. You won’t even notice the difference, but your savings will thank you for the bump.
Fall in Love with Finance
Recently over dinner with my best friend, she mentioned how she’s become fascinated with finance and loves talking about retirement plans with her co-worker. I enthusiastically revealed that it’s also become so exciting to me. We’re total finance nerds.
"No amount of Instagram likes will feel better than paying for a major purchase in-full and with cash."
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There’s a whole world of helpful resources out there to self-educate yourself on personal finance.
If financial personalities interest you and you want to know, “can I afford it?” Suze Orman is a hoot. Dave Ramsay also educates with charisma, breaking financial freedom down into digestible baby-steps.
Maximize your daily commute by listening to economic podcasts. Planet Money and Freakanomics make big economic theories personal by connecting humanized stories to tales of dollars and cents. The Minimalists focus on living within your means and pepper amazing financial wisdom throughout.
If you prefer films, The Big Short is fascinating. Last Week Tonight often covers finance while also cracking you up, like this segment on Retirement Accounts. If you prefer documentaries, check out Frontline: The Retirement Gamble.
Surround yourself with the vocabulary of economic theory and personal savings and before long you’ll become fluent in finance. You might just fall in love with savings.
Do finances overwhelm or excite you?
An original version of this article appeared on Darling. Written by: Talitha Baker.
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Do You Know Your Financial Health?
Cough, cough. Clears throat. Has no idea.
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.
"If you don’t have a emergency piggy bank to break into, you might end up broke."
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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?
"You can’t always control how much you make, but you can usually control how much you spend."
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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.
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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 hello@collaboratechicago.com