Don't Live Paycheck to Paycheck—This Is How to Save Money in Your 20s
Is retirement still a thing?
Photo: ColorJoy Stock
A lot of people in their 20s are dealing with large amounts of student loans and credit card debt and living paycheck to paycheck, dreaming of days when they can begin to use their money to reach their financial goals. While it's easy to that think financial planning at this stage in your life is pointless, the truth is there are some basic strategies you can implement, regardless of how much debt you have or how much income you’re earning.
Learning these strategies will help set up the financial foundation you need to move through this challenging time in your life and set the stage for a strong financial future. Read on for eight simple steps to get out of that paycheck-to-paycheck cycle and start saving money ASAP.
1. Create a budget.
Even as a young adult who may not be making that much money yet, budgeting is critical because it allows you to see how much money is coming in and going out every month (it’s all about tracking your spending!). Although most 20-year-olds understand they should budget, the reality is most just don’t do it.
Get a budgeting system as early in place as possible and review how you are spending your money so you can make adjustments, if necessary, to ensure you are living within your means and able to save for your financial goals. There are apps that can help you now too such as YNAB.
The basic budget formula for after-tax income is:
50% for fixed expenses, such as housing (28% or less for housing expenses), basic food, insurance premiums, etc.
20% for financial goals. This would include extra debt payments, your cash cushion, retirement, etc.
30% for variable expenses, such as dining out, entertainment, travel, etc.
2. Set up weekly money dates.
Set up weekly money dates to review your budget and manage and plan out your finances. During your money date, you should pay your bills (although most should be set up as auto-pay), update and review your budget and take care of any other financial concerns. By calling this allocated time with your money a “date,” you can begin to bring a fun, exciting element into your financial life to help you stay committed for the long haul.
3. Open up a savings account and set up automatic contributions.
Most people don’t save because they make it way too difficult for themselves. Instead, review your budget and aim to start saving toward your financial goals by following the “pay yourself first” strategy. Under this method, you set up your savings to be automated every month and you save before you spend money on variable expenses.
The goal is to save 20% of your net income but don’t let that amount scare you. Even if you can only start with $10 a month, that’s better than nothing. Every year, review and see if you can increase your savings amount.
4. Build up a cash cushion.
The goal of a cash cushion is to have three to nine months of your fixed expenses in a savings account to pay for life’s unexpected incidents. Life always throws curveballs—your car breaks down, your computer crashes or you receive an unexpected medical bill—and having money in the bank to cover those expenses will help you maintain your financial peace of mind.
If your fixed expenses are $3,000 per month, you should aim to build a cash cushion of anywhere between $9,000-$18,000, depending on your comfort level, job security, etc. That sounds like a lot, I know. But remember, just start with what you can to build your cash cushion over a few years. Again, even if it’s $10 a week, that’s still one step in the right direction.
5. Keep an eye on your credit score.
Our credit score affects nearly everything in our financial lives. It affects the interest rate on the car loan we apply for, the mortgage loan, the credit cards—and even employers and landlords can reference your credit score when reviewing your application.
By monitoring your credit score, you can see where you stand and what you can do to improve it if necessary. Use websites like creditkarma.com to view your credit score (not your actual FICO) regularly for free and then pay to see your actual credit score at least annually using annualcreditreport.com.
6. Create a debt reduction plan.
The first step is to make a list of all your debts. Get clear about how much you owe, the interest rate of each debt, and the minimum payment due. Then review your budget to determine how much you can realistically add toward extra debt payments and start with the debt with the highest interest rate while paying the minimums on the rest.
This will allow you to save the most in interest payments. Once the debt with the highest interest rate is paid off, move on to the second-highest, and so on.
7. Start saving for long-term goals.
If you have the ability to start investing in your retirement accounts after you’ve allocated some monthly funds toward building your cash cushion and paying off your debts, then set up an automatic contribution into your retirement account. By starting early, you can allow compounding interest to work in your favor on your investment accounts.
If you are new to investing, make sure you do your homework and read investment books so you are clear about what to expect when investing in your future.
8. Focus on building your earning potential.
Income is one of the biggest factors in wealth creation over time. After all, if you don’t make money—or don’t make enough money—it is very difficult to save for your financial future. So if you can’t save as much as you would like to due to your income level, focus on ways to increase your earning potential for the long run. There are a lot of free courses you can take online, and even watching YouTube videos to sharpen your skills is something anyone can do. Also, there are so many ways you can earn extra money on the side. Ramit Sethi teaches this to his community at I Will Teach You To Be Rich.
Think outside the box, and continue to focus on increasing your earning potential every year.
About the Author: Brittney Castro is the founder and CEO of Financially Wise Women, a Los Angeles-based financial planning firm for women. She specializes in working with busy, established professional and entrepreneurial women who are passionate about life and want to finally understand money—how to manage it, save it, invest it, and protect it—in a fun and simple way. Follow Brittney @brittneycastro.
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This story was originally published on June 15, 2017, and has since been updated.
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This Founder Walked Away From a Steady Wall Street Job to Bootstrap a Clean Beauty Brand
And the risk paid off.
You asked for more content around business finances, so we’re delivering. Welcome to Money Matters where we give you an inside look at the pocketbooks of CEOs and entrepreneurs. In this series, you’ll learn what successful women in business spend on office spaces and employee salaries, how they knew it was time to hire someone to manage their finances, and their best advice for talking about money.
Photo: Courtesy of Cocokind
Leaving a steady job and switching lanes isn’t easy.
Just ask Priscilla Tsai, who was climbing the Wall Street corporate ladder when she decided to shift gears and launch Cocokind, a clean, conscious, sustainable skincare brand. "The first years were tough,” the founder and CEO tells Create & Cultivate. “I was only 25, considered successful in my career, and about to leave it all behind to start a company in an industry that I had very little experience in."
Disappointed by the lack of transparency in the beauty industry and sparked by her own struggles with hormonal acne, Tsai felt compelled to ditch her high-paying job in finance to launch an accessible clean-skincare company. Of course, it’s safe to say that Tsai’s risk has more than paid off—Cocokind is now stocked in every Whole Foods store in the U.S.—but all that success didn’t come without hard work and determination.
In this installment of Money Matters, Tsai shares the nitty-gritty financial details behind what it really takes to get a business off the ground.
CREATE & CULTIVATE: You walked away from a career on Wall Street before bootstrapping your business. What led you to leave a steady paycheck and switch lanes from finance to beauty?
PRISCILLA TSAI: I always knew I wanted to start my own company. My mom is an entrepreneur and watching her career progress definitely inspired me. Separately, my hormonal acne was my biggest insecurity, and I hated the harsh medications and pills that my dermatologist prescribed me. They kept my skin technically clear, but they also totally stripped it of moisture and gave me digestion issues. Ultimately, I decided to explore more holistic remedies for my skin and body, and when I’d created something that worked and that I was proud of, I knew I needed to share it. As a consumer, I was also disappointed at the lack of clean ingredients and transparency in the beauty industry, and I felt compelled to offer a better, more accessible option.
Can you explain what those founding years were like financially?
The first years were tough. I was only 25, considered successful in my career, and about to leave it all behind to start a company in an industry that I had very little experience in. I hustled in every way possible. I made full batches of products by myself. I created our first labels on Photoshop instead of hiring a designer.
I think many founders think that they need a ton of capital to start a company. Obviously, capital is important, but for me, time was almost as important as money. It took a lot of time for me to get Cocokind’s formulas to meet my standards, and it took a lot of energy and persistence to get our products into brick and mortar stores. I went door to door to Whole Foods’ in northern California to demo my products to the regional buyers, which led to building great relationships with them. Today, Whole Foods is one of our biggest retailers—we’re actually stocked in every single store in the United States.
“Knowledge is power. Knowing as much as you can about your financial situation is essential to feeling financially empowered and independent.”
Talk us through your bootstrapping process. How did you self-fund your business? Would you recommend that route to other entrepreneurs?
I really just tried to take things one step at a time, but I also worked quickly once I had a product concept and samples. I started going door to door to get my product out there and to start bringing in revenue as quickly as possible. Finding retail partners like Whole Foods helped me get Cocokind off the ground pretty immediately.
These days, it’s much more common to raise than to bootstrap and I think that either strategy can be effective. It’s really just about what the founder wants and which approach makes more sense for their work style and personality. I personally loved bootstrapping, but I definitely don’t think it’s for everyone.
How did you know the brand was ready to scale and introduce new products?
At Cocokind, we’ve always been big on social media because it makes it easy to build relationships with customers and hear their opinions and feedback. We’re able to use this feedback to decide what our community and what the market, in general, wants.
In the beginning especially, we funded new products by starting with really small batches—that way, we were never taking huge risks with inventory. On top of that, I thought it’d be better to sell out of a product and have a waitlist than it would be to overproduce a product and potentially run the risk of not selling enough of it.
I guess my main point here is that entrepreneurs should always recognize that their product will most likely change to improve, so over-investing in early iterations can be a bad idea.
“I hustled in every way possible. I made full batches of products by myself. I created our first labels on Photoshop instead of hiring a designer.
”
-Priscilla Tsai, CEO and founder of Cocokind
What was your first big expense as a business owner?
Either insurance or inventory!
How did you decide what to pay yourself?
I didn’t! I didn’t pay myself for the first two years of my business, but I was lucky enough to be able to live off of savings during that time.
How did you decide what to pay employees?
Research. I always want my employees to be paid fairly but as competitively as possible.
What are your top three largest expenses every month?
Payroll, inventory, and rent for our office and warehouse.
How much do you spend on office space?
We’ve always tried to spend 4% of our sales or less on rent. We did recently just relocate to a larger office space so we can continue to grow our staff.
How much are you saving? When did you start being able to save some of your income?
It varies. Saving has always been important to me, even more so when I had a regular job, before starting Cocokind. When I was in college, my parents helped me with my tuition and living expenses as long as I sent them an itemized list of all of my expenses every month. That experience helped me learn how to budget and it also taught me that when you know your numbers, you save more.
“Cash is everything. No matter how much profit your company is bringing in, you need to adhere to a tight cash flow model.”
What apps or software are you using for finances?
I actually just use Excel to track all of my expenses. I don’t have a financial advisor at this time.
Do you wish you’d done anything differently in your financial journey as a business owner?
Nope! I’m really proud of Cocokind and how far we’ve come, and I think we’ve always been responsible with capital.
Why should we all be talking about money?
I think everyone should talk about money. Knowledge is power. Knowing as much as you can about your financial situation is essential to feeling financially empowered and independent.
Do you have a financial mentor?
I don’t. But my parents did and do a great job of teaching me strong values when it comes to my finances and how I think about them, and I’m grateful for that.
What is your best piece of financial advice for new entrepreneurs?
Again, knowledge is power! Knowing your numbers and staying on top of them is crucially important to starting and running a sustainable business.
What is the biggest money lesson you've learned since starting Cocokind?
Cash is everything. No matter how much profit your company is bringing in, you need to adhere to a tight cash flow model. It’s something I’m still learning and always trying to improve upon.
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!
Easy Money: How to Afford the Life You Want (Even If You Don't Have a 6-Figure Salary)
This app is a gamechanger.
This post is in partnership with YNAB.
Photo: Courtesy of Create & Cultivate
Are you familiar with the phrase “scroll head”? If not, here’s some slang 101: a scroll head is someone that aimlessly scrolls through social media, with no purpose at all. In the tech-driven world, we live in, it’s common to find ourselves subconsciously using apps that provide us with no beneficial outcome.
Some jaw-dropping data we found courtesy of Pew Research Center states that 81% of Americans own a smartphone and users between the ages of 18 to 29 are the most dependent on their devices. No real surprises there, but our question is, what are those young adults doing on their phones? Some likely guesses are scrolling through Instagram or texting their group chat. But what about budgeting their monthly income? Say, what? Well, after reading a recent survey that found most young millennials had less than $1,000 in their savings accounts—nearly half had nothing saved at all—we can only hope that they’re devoting some of that scroll time to getting their finances in order.
So, if this sounds like you and you haven’t yet implemented a money-saving strategy, then it’s high time you did. And for those who already have one (and want to up their game), this will interest you, too. Introducing the app that consciously sets you up for success—You Need A Budget (or YNAB for short).
Whether it’s a European vacation you’ve been postponing since graduation, a little more spending money to support your social life, or you simply want to start saving for the future—you need a budget. And it’s no mystery that budgeting can be a big monster to tackle. But, thankfully, YNAB is here to be your best money-saving friend and help you get to where you want to be, financially. It’s so easy.
To make matters even easier, we’re going to show you a break down of the YNAB app’s features with a visual guide below. Follow along to see why you need a budget (like right now!).
Be sure to read all the way to the end to take advantage of YNAB’s special offer for Create & Cultivater’s!
How to budget with YNAB:
We created a theoretical monthly budget for someone who would benefit greatly from YNAB. This person is a freelancer, who brings home $4,000 (after taxes) per month. With the rise of the gig economy, it’s been made prevalent that freelancers facilitating multiple streams of revenue have a more convoluted experience when managing money. So, we wanted to highlight what that might look like, in a way that is easy and beneficial to any and all potential users—freelance or not.
Download:
When you download the app, you are given the option for a trial month free. Once that month is over, they will charge your card info stored in the app store at the yearly rate of $83.99 to continue using. Note: While, at first, this might seem like a steep price to pay for an app, we can guarantee you, that when you see how much money you’re saving (and how much this app is doing to streamline your finances) you’ll understand why. Think about it, that’s just $6.99 a month to have a financial advisor in your pocket. Believe us, it’s worth it.
Link or unlink:
You’ll be given the option to link your bank account directly to the app or manually input your dollar amount to then start budgeting. This is up to your discretion. For the sake of our theoretical monthly budget for a freelancer, we chose to manually input the take-home of $4,000.
Your accounts:
You will see a screen with a list of your accounts. You can choose to add multiple budget plans here. For our example, there is one account titled “Monthly Budget”.
Your budget map:
Your budgeted amount inputted (or the amount reflecting your current bank account balance if you decided to link your bank account) will be highlighted in green at the top of the screen. And below that, you will see a list of expenses you wish to budget against. Your budget map is completely customizable and it’s up to you how you choose to label and allocate your spendings.
Expense categories and labeling:
You can change the names of the different expense categories along with the expense names themselves. We added “Hopeful Savings”, renamed some expense labels, and removed other default expenses that came with the app.
Allocating your preferred spending:
You choose how much you want to allocate to each expense. Below is what we came up with for our theoretical budget. You can edit these allocations as you go if things change for you and your money. The app will let you know when you are over budget by showing the negative amount at the top and highlighting it in red.
Other features:
Beyond the budgeting tactics and tools, there is also a help button that will provide you with any assistance and resources you might need on your way to budgeting. You can also view your “Age of Money” to see how long as well as how much you have been saving. The “Net Worth” function shows what your debts and assets amount to and for more insight into your money-saving success. For more help, check out their online resources and guidelines.
Conclusion:
Though you will have to invest some time (approximately 20 minutes) to input all of the figures, in the beginning, it will be worth your while. Once the setup is complete, it’s easy money. In this specific scenario, savings came out to $140 a month. Now, this might not sound like a lot of bills. But think about it, over a course of 12 months, that’s $1,680. And remember, your budget map is always adjustable. We just placed higher importance on the money for fun and clothing, rather than bigger savings. But, that is just one scenario. After seeing how much we had leftover after dividing up our money (the way we thought we should), we came to realize that maybe we should reset our budget map and reconsider how much we want to save each month. This was a blatant sign of why we should save!
This theoretical process was purely to show the capabilities and functionality of the app. It’s literally that easy to map out your spending on a monthly scale, and incredibly helpful to see what you think you should be spending on rather than the reality. The app allows for extensive customization and we couldn’t love it any more than we already do.
Saving money is incredibly important for a number of reasons, but as is treating yourself here and there. There is no passing of judgment on what you spend your money on, and the app reflects that entirely. Now get out there and start budgeting and don’t forget to make adjustments along the way!
SPECIAL OFFER:
YNAB is giving all Create & Cultivater’s the chance to try the game-changing app for 34 days FREE of charge. So, break the paycheck to paycheck cycle, get out of debt, and save more money to reach your goals. It’s your turn!
How to Save Money in Your 20s in 5 Easy Steps (Yes, It's Possible!)
It’s time to make your finances a priority.
Written by Brittney Castro.
Do you have a resolution to get your finances together in 2019? A lot of people in their 20s are dealing with large amounts of student loan and credit card debt and living paycheck to paycheck, dreaming of days when they can begin to use their money to reach their financial goals. While it's easy to that think financial planning at this stage in your life is pointless, the truth is there are some basic strategies you can implement, regardless of how much debt you have or how much income you’re earning. Learning these strategies will help set up the financial foundation you need to move through this challenging time in your life and set the stage for a strong financial future.
Ready to get started? Read on to find out how to save money in your 20s and live the life you want.
1. Create a budget
Even as a young adult who may not be making that much money yet, budgeting is critical, as it allows you to see how much money is coming in and going out every month. Although most 20-year-olds understand they should budget, the reality is most just don’t do it. Get a budgeting system as early in place as possible and review how you are spending your money so you can make adjustments, if necessary, to ensure you are living within your means and able to save for your financial goals.
The basic budget formula for after-tax income is:
-50% for fixed expenses, such as housing (28% or less for housing expenses), basic food, insurance premiums, etc.
-20% for financial goals. This would include extra debt payments, your cash cushion, retirement, etc.
-30% for variable expenses, such as dining out, entertainment, travel, etc.
2. Build up a cash cushion
The goal of a cash cushion is to have three to nine months of your fixed expenses in a savings account to pay for life’s unexpected incidents. Life always throws curveballs—your car breaks down, your computer crashes or you receive an unexpected medical bill—and having money in the bank to cover those expenses will help you maintain your financial peace of mind. If your fixed expenses are $3,000 per month, you should aim to build a cash cushion of anywhere between $9,000-$18,000, depending on your comfort level, job security, etc. That sounds like a lot, I know. But remember, just start with what you can to build you cash cushion over a few years. Again, even if it’s $10 a week, that’s still one step in the right direction.
3. Keep an eye on your credit score
Our credit score affects nearly everything in our financial lives. It affects the interest rate on the car loan we apply for, the mortgage loan, the credit cards—even employers and landlords can reference your credit score when reviewing your application. By monitoring your credit score, you can see where you stand and what you can do to improve it if necessary. Use websites like creditkarma.com to view your credit score (not your actual FICO) regularly for free and then pay to see your actual credit score at least annually using annualcreditreport.com.
4. Create a debt reduction plan
The first step is to make a list of all your debts. Get clear about how much you owe, the interest rate of each debt, and the minimum payment due. Then review your budget to determine how much you can realistically add toward extra debt payments and start with the debt with the highest interest rate while paying the minimums on the rest. This will allow you to save the most in interest payments. Once the debt with the highest interest rate is paid off, move on to the second highest, and so on.
5. Focus on building your earning potential
Income is one of the biggest factors in wealth creation over time. After all, if you don’t make money—or don’t make enough money—it is very difficult to save for your financial future. So if you can’t save as much as you would like to due to your income level, focus on ways to increase your earning potential for the long run. There are a lot of free courses you can take online, and even watching YouTube videos to sharpen your skills is something anyone can do. There are plenty of ways you can earn extra money on the side. Think outside the box, and continue to focus on increasing your earning potential every year.
This post was originally published on December 26, 2018, and has since been updated.
Up Next: I Paid Off $30K in Credit Card Debt in 6 Months — Here’s How You Can Too.
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If You Have These 4 Money Books You Won't Need a Financial Planner
Read 'til you own it.
photo credit: Beth Cath
Sure, the world wide web has a seemingly endless bounty of information. Better yet, it’s all just a click away. But that doesn’t mean you should discount the value of a great book, especially when you’re looking to take charge of your financial situation.
Whether you are looking to reduce your debts, up your savings, start investing, or anything in between, there’s a book for you. Ahead, we check out some of the best personal finance books, period. So, pick up a coffee and settle in for some excellent reading—and start cultivating the bank account of your dreams, too.
FINANCIALLY FEARLESS
LearnVest founder Alexa von Tobel published Financially Fearless a few years ago, and it has quickly risen to the top of the ladder when it comes to must-read books. Von Tobel won’t make you give up your latte. But she will make you whip your finances into shape. That’s the good news. The even-better news is it won’t hurt. Von Tobel’s advice is accessible, down-to-earth and easy-to-implement. By the end of this book, you’ll feel confident about your financial future and raring to put your new money routines in place.
WORTH IT
If you hate being the last to know, make sure you add Worth It, the book by DailyWorth founder and CEO Amanda Steinberg, to your reading list, stat. Worth It will inspire you to see how money can be the key to freedom—by building your savings, taking control of your situation, or even just taking steps to understand what comes next for you. Sure, Steinberg gets into the nitty-gritty, which can be overwhelming for some of us. Happily, Steinberg makes it feel as easy as talking to your BFF.
YOU ARE A BADASS AT MAKING MONEY
If you’ve already read Jen Sincero’s life-changing New York Times best-seller, You Are a Badass, don’t skip the financial-themed follow-up: You Are a Badass at Making Money. Here, Sincero breaks down her money story in detail in a series of personal essays. Along the way, you’ll discover the little lessons that Sincero has learned from, all of which lead her from living in a converted garage to traveling the world. While every woman’s story is and will be different, Sincero’s is relatable, which means it’s practically guaranteed you’ll be able to pull something from this book that will change your life for the better.
OWN IT
Okay, so Own It is not a book about money. But it is written by Sallie Krawcheck, Ellevest founder and one of the most powerful women to have ever worked on Wall Street. In Own It, Krawcheck offers up advice on how women can play by a new set of rules in the workplace. And Krawcheck doesn’t just talk the talk; she walks the walk. Drawing on her experiences at the highest levels of business, Krawcheck outlines all the steps women can take to seize our power, at this moment in time, and change the game.
Noa is a Certified Financial Planner™ and founder of Socialyte Capital, a financial planning firm for style influencers. She is passionate about helping women reach their wealth potential through financial education and strategic money management.
This post was originally published on April 18, 2017, and has since been updated.
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The Weinstein Company Went Bankrupt
Here's what we learned.
As expected, the Weinstein Company, went belly-up bankrupt. Smell ya later perpetrators.
Reported first by Variety, the outlet states, "The Weinstein Co. announced Monday that it had filed for bankruptcy, finding itself unable to survive the allegations of sexual abuse leveled against co-founder Harvey Weinstein last fall.
The company may yet be able to reorganize and continue to produce TV shows and films under new ownership. Lantern Capital put in a 'stalking horse' bid, which provides a floor for a bankruptcy auction."
But what does filing for bankruptcy really mean? And what on earth is a stalking horse bid? Does the headless horseman ride him into your town? Sadly, no. (Childhood dream, smashed.)
So we're breaking down some familiar and unfamiliar terms.
BANKRUPTCY: WHAT EVEN IS IT?
As a young woman I first started to dig into the concept of bankruptcy in 2010. That's right. The first year R&B superstar Toni Braxton claimed $50,000,000 in debt and chapter 7'd her life. Un-break her heart. But then she filed for bankruptcy a second time. 6 months after that second filing in 2014, Braxton purchased a $3 million dollar home in "The Oaks" neighborhood of LA. How does that work? It's confusing that most people who file bankruptcy emerge in one piece.
Contrary to popular belief, many folks think that filing bankruptcy wipes out all debt obligations. That's not exactly true. You still have to pay off at least some of your debt, and what kind of bankruptcy you file will determine how that works.
So, let's break down the two most common types of bankruptcy.
You've likely heard of a Chapter 7 filing and a Chapter 13 filing (there are also chapter 11 and 12 filings-- the latter of which is only for farmers and fisherman, which is sexy), but for most of us who aren't 50 million in debt, we don't know the difference.
According to FindLaw.com, "Chapter 13 bankruptcies generally fall under the reorganization category, meaning that you will probably be able to keep your property, but you must submit and stick to a plan that will allow you to repay some or all of your debts within three to five years."
Chapter 7 bankruptcies normally fall in the liquidation category, meaning your property could be sold in order to pay back your debts. Property in this case could mean a car of second home. To file Chapter 7 you have to meet certain financial eligibility requirements-- your income being the most important factor.
So does the Weinstein Company filing bankruptcy mean it's going down for good? No. Will it ruin their credit? Didn't Harvey already do that?
For more light reading on the subject of bankruptcy click here.
WTF IS A STALKING HORSE
Since I don't spend my days perusing bankruptcy webbies, I had never heard this term. (Horse terms I do know include: "Get off your high horse," "Eat like a horse," and my fave "Don't look a gift horse in the mouth.")
[side bar: comment your favorite horse idioms in the comments below and let's be internet neiiighbors.] Back to biz.
According to The Cut, "The sale of TWC to an investor group lead by former Obama administration cabinet member Maria Contreras-Sweet and billionaire Ron Burkle fell through earlier this month. On Monday, the Weinstein Company released a statement expressing hopefulness about a new investor, Lantern Capital Partners, who submitted a 'stalking horse' bid to purchase the company in advance of a potential bankruptcy auction. 'The Board selected Lantern in part due to Lantern’s commitment to maintain the assets and employees as a going concern,' TWC said in the statement. 'The Company hopes that this orderly sale process under the supervision of the Bankruptcy Court will allow it to maximize the value of the Company’s assets for the benefit of its creditors and other stakeholders.'"
A Stalking Horse offer or bid is as follows: A stalking horse offer, agreement, or bid is an attempt by a bankrupt debtor to test the market for the debtor's assets in advance of an auction of them. The intent is to maximize the value of its assets or avoid low bids, as part of (or before) a court auction.
Does the stalking horse ride off in the sunset with the company assets? Again, this shit is complicated and there are pros and cons to this approach. National Real Estate Investor does a good job breaking down the pros and cons in language that makes sense.
Did this help or are you more lost than ever?
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Help! The More I Make the Less I Save
Is your bank account up in flames?
Does it feel like with every passing year, and every (hopefully) subsequent raise and bonus, life's expenses keep going up to? It's not in your imagination.
According to Nerd Wallet, "the rise in the cost of living has outpaced income growth over the past 13 years. Median household income has grown 28% since 2003, but expenses have outpaced it significantly. Medical costs increased by 57% and food and beverage prices by 36% in that same span."
Since 2009, most Americans have said they prefer saving over spending, but the fact remains that the average overall U.S. household debt increasing by 11% in the past decade. Today, the average household with credit card debt has balances totaling $16,883.
To adjust to the growing cost of living, we have to re-examine our relationship to money. It's not the only source of wealth and it's not only for spending. Obviously, you should be spending less than you make. But old models don't apply to new costs. For example when it comes to rent: The general recommendation is to spend about 30% of your gross monthly income (before taxes) on rent. Therefore, if you'll be making $4,000 per month, then your rent should be $4,000 x 0.3, or about $1,200. Those numbers don't really work when rent has been steadily increasing across the country, while wages do not.
So what's a working woman to do? Changing your mind about money is one solution.
Laleh Hancock teaches people how to uncover their own unconsciously held beliefs about money to experience greater wealth. Some of her top tips include:
1. Be willing to explore your beliefs around money
If you grew up in a family that said money is evil, you have to work hard to make money, or men should earn more, you may have adopted it as your own belief, even if it’s not. Ask yourself: If I had no belief about money being good or bad, what are all the different areas money can come into my life or my business?
2. Write a list of things you do and don’t enjoy... and question it all
It’s possible the things you ‘don’t like’ are on the list because other people have said it’s a chore, boring or hard work. Things you thought you didn’t like, but do, could become an extra source of revenue for you. Ask yourself: Do I really enjoy this? Do I really not enjoy this? And what is it that I do or do not enjoy about this, and what would make it more enjoyable?
3. Allow the business to work for you instead of you working for your business
Your business has a consciousness. Instead of trying to control everything in the business, partner with its energy for guidance instead.“Most of us work a million hours thinking we have to control everything in the business,” Laleh says. “If we are willing to allow the business to work for us, however, the business will draw in clients and staff for you.” Ask the business questions every day: What do you require from me today? Who would you like me to contact today?
4. Be open to change every day
Your money or business goals and decisions are not set in concrete. Be open to making a different decision every day, every hour or even every 10 minutes. “You have to know when it’s time to change and be willing to move in a new direction,” Laleh says. Ask yourself: is this what I want to be working on?
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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.