Getting your Financial $hit Together in 7 Steps
Getting on top of your finances can be super confusing, especially if you’ve had a weird relationship to money (and you’re not alone if you have — 61% of women would rather talk about death than money). A lot of women avoid this conversation because it’s taboo or uncomfortable or confusing or we think we’re not supposed to or, honestly, because we think someone else is going to take care of it for us (I know this was true for me for a long time and something I’m still unpacking). There are a lot of people incentivized to systemically keep women from understanding money (whether consciously or not), but when we understand our own money, we decide that we’re in control. Feeling on top of your own finances is an incredible, freeing feeling that I really wish for every woman to get to feel (also, please read my privilege statement here).
My background is as an Elementary School Teacher so I want to break this down super simply for you (not because you’re not smart, but because so many folks in the finance industry make this all so confusing and difficult to understand and I’m telling you, it doesn’t have to be). If you broadly have the feeling that you want to get your financial shit together, here’s a flowchart you can follow to get started. Once you can answer ‘yes’ to a question, you can move onto the next number.
1. Do you know how much you spend a month?
a. If yes, woo! Keep tracking until you have a real sense of your averages in each spending category and can safely say “this is my average monthly spending.” Having that number is incredibly empowering and such an important starting off point.
b. If no, you need to do a spending staredown and get crystal clear on your monthly spending. It’s really hard to do any sort of financial planning without a clear number here. It’s a simple exercise, but support really helps and I love guiding women through this process.
2. Do you spend less than you earn?
a. If yes, nice! You can move onto prompt three.
b. If not, what can you cut out so that your monthly spending does not exceed your monthly earnings? Again, a spending staredown is immensely helpful here so you know exactly where your money is going and can adjust from there. Often times, I’ve found that women are spending much more money in categories that they didn’t even realize they were spending in and, with some gentle guidance and conscious effort, can quickly change habits that set themselves up to have a positive cash flow (earn more than they spend).
3. Are you credit-card debt and loan-free?
a. If yes, lucky you! This is a real privilege. You can move onto prompt four.
b. If no, this is even more of a reason to make sure you’re crystal clear on your monthly spending. You should have a recurring amount that you’re paying back each month to minimize your debt and you should do it as aggressively as possible. Debt compounds over time, especially with high interest rates, so getting your spending down and prioritizing auto-pay towards your debt each month is essential.
4. Do you have a savings account?
a. If yes, nice! What’s your interest rate? There’s no reason it should be lower than 1% (your money shouldn’t just be sitting in savings, it should be making money and some banks offer much better interest rates than others).
b. If not, open one up and start putting a little money in there each month. Most finance folks suggest having 3–6 months of your monthly spending (again, this is why it’s essential to actually know what that number is) in your savings account as an ‘emergency fund’.
5. Do you have a retirement account?
a. If so, high five to responsibly getting older!
b. If not, open one up, especially if your workplace offers any sort of matching benefits. Might sound like a broken record, but did I mention you should do a spending staredown? Figuring out how much you can readily contribute towards retirement also depends on your monthly spending.
6. Do you have your own investment account?
a. If so, sweet! This is an excellent way to build wealth.
b. If not, think about starting one. Investing doesn’t have to be complicated and you don’t have to be a rich white dude to do it. Seriously!
7. Have you answered ‘yes’ to steps 1–6 and feel financially stable? Sounds like you’re in a good spot and can start think about redistributing some of your wealth to support organizations that align with your values. What organizations are you passionate about supporting? What causes do you care about? What kind of world do you want to see? Next you should think about allocating money on a monthly or yearly basis to org(s) you care about. This can be $5 a month or it can be $500 a month. It’s whatever works for you.
