Invest in Yourself First
A few months ago, my friend scored her first full-time corporate job. She had been working part-time since college, struggling to save enough money to support herself and live on her own. Her first full-time paycheck in hand, she booked an appointment for something she had always wanted: eyelash extensions. That’s right. Eyelash extensions. She spent $200 on so-called “semi-permanent” lashes that were neither semi, nor permanent. I had coffee with her about a month later, and watched as she pulled them out lash by semi-permanent lash. “I need to have them redone,” she said. I asked when she planned to move out of her parent’s house. And without batting a $200 eyelash, she said “I don’t think I can afford to move out.”
Over the course of a lifetime, women spend an average of $150,000 — $200,000 on their appearance. Depending on the source, women spend an average $44,300 on hair, a whopping $50,000 on dieting, another $50,000 on clothes and $15,000 on make-up. By comparison, women have saved a median $34,000 for retirement. In other words, while the average woman spends upward of $150,000 on her appearance, she saves a mere fraction of that amount to invest in her own financial well-being and independence. By “investing” in Jimmy Choo’s, Jenny Craig and Botox, women are effectively put their money into someone else’s retirement account instead of their own.
Ladies, it is time we pay ourselves first. I’m not suggesting we give up our mascara and Manolo’s entirely. But before you go out and buy that next Louis Vuitton bag, I’d like to offer some financial advice.
1. Pay yourself first
- Before you buy a single thing, carve out a percentage of that paycheck and put it away.
- The best way to “treat yourself” is to turn that $100 into $200.
- Start with something simple, like opening an E*Trade account where you invest in an index fund.
2. Learn the basics about investing
- It has never been easier to invest money in the stock market.
- If your company has a 401K plan, and even better, if they have a matching program, start a 401K immediately. Even if you can only put a small amount of your paycheck into retirement, it is better than nothing at all.
- Feeling daunted by the stock market, start with a simple savings account. Make sure it returns interest.
- If investing is out of your comfort zone, consider buying a book on the topic. Personal Finance for Dummies is a good start.
- Start following Sally Krawcheck at Ellevest. She knows a thing or two about investing, and she has built a business primarily focused on teaching women how to invest and save.
3. Know where your money goes
- Start paying attention to how you spend. How much is “discretionary” vs. how much is on basic needs.
- How much could you save if you stopped buying coffee, cut back on clothing, hair or beauty products?
4. Set some financial goals
- Establish a savings target, for example — I want to save $100 per month. It can be small. Again, saving something is far better than saving nothing.
- Pay off your debts before you save. If your credit card is charging you 25% interest on your balance, and you are only making 1–2% interest on your savings, you are losing a lot of money.
- Consider creating a budget that establishes a path to your goal.
- Track your progress, and make sure you meet your goal each month.
5. Live within your means
- Follow Elizabeth Warren’s 50/30/20 rule:
- Spend no more than 50% of your after-tax income on needs (food, shelter, clothing, health, transportation)
- Spend no more than 30% on the things you want
- Use the remaining 20% to reduce your debt or invest in savings.
In addition to the list of 5 things to do to pay yourself first, here are the things that you should avoid:
1. Revolving debt.
- Pay off your credit cards every month.
- Avoid putting things on your credit card that you wouldn’t be able to afford otherwise.
- If you have trouble managing your credit card spend, consider cutting them up and using a debit card instead.
2. Frivolous beauty fads.
- Gwyneth Paltrow, I’m talking to you. No one needs to spend $66 on special jade eggs for their vajayjay. No one.
- Leave the long lashes to the Kardashian sisters. Invest that $200 in something that isn’t “semi-permanent.”
3. Expensive weight loss crazes
- Americans spend more than $60 billion per year trying to lose weight. Let’s imagine for a moment if all the women who contributed to the wealth of that industry, invested in their own wealth instead.
- In the end, you are far more likely to lose British pounds than actual pounds. Save your money, exercise more and eat less.
4. Styles that fade before the clothes themselves
- How much did you pay for those distressed jeans that you are wearing? Or how about your yoga pants? Remember culottes? Yeah, me neither.
- If you are a fashionista, consider buying a few classics for your wardrobe and then keep the rest on a tight budget.
- Borrow or trade clothes with friends if you cannot afford to buy.
5. Keeping up with the Joneses
- Here is a well-kept secret: The Joneses are broke. American households carry an average of over $16,000 in credit card debt and over $132,000 in total household debt, including mortgages.
- Let the Joneses spend their money and then some on expensive cars, watches and handbags. They’ll be working into their 80s to pay it off.
After more than two years working full time, my friend is still living at home. While her lashes are long and full, her bank account is still short and empty. It is time we start paying ourselves, ladies, and let the Joneses pay everyone else.
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