Diversity Woman Magazine

SPR 2019

Leadership and Executive Development for women of all races, cultures and backgrounds

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DW Life > d i v e r s i t y w o m a n . c o m S p r i n g 2 0 1 9 D I V E R S I T Y W O M A N 43 as possible will be better prepared for fu- ture fi nancial events, both negative and positive. Fried adds, "People can handle their own investing and management or not, but ei- ther way, they need to be part of conver- sations about their fi nances and fi nancial future." rough Lumina Financial, she of- fers monthly social gatherings with an ed- ucational component. e idea is to create a community where women feel less alone learning about money management topics. "We call it breaking the money silence," she says. Building your future by balancing credit, debt, and savings Dawn Sanchez, a Certifi ed Financial Planner and a Retirement Income Certifi ed Profes- sional at Ameriprise Financial Services in San Francisco, has nearly 20 years of expe- rience working closely with clients. When it comes to money management, even before investing, she makes sure a client is working on an emergency fund "fi rst and foremost." An emergency savings account optimally covers six to 12 months of basic expenses, including rent or mortgage payments, gro- ceries, and transportation costs. If that seems daunting, start by covering one month's worth of expenses. Diff erent types of savings accounts serve diff erent purposes and can help you quickly build your reserves. Numerous institutions off er money mar- ket savings accounts to individuals. ese accounts earn around 2 percent interest on an annual basis. at return isn't always as high as investing in fi nancial products like mutual funds, but money markets tend to have more relaxed rules about when you can withdraw your money. Retirement planning is another way in which many individuals fi rst begin consider- ing how to prepare for their fi nancial future. Many major employers off er retirement contribution programs, including some matching amounts. Sanchez suggests that, if possible, "Go beyond what your employer matches in your 401(k)." at could mean setting up additional pretax or high-interest retirement accounts, or simply adding more to your employer-managed fund. In addition to creating strategies for sav- ing, it's crucial to remember that all debt is not created equal. When it comes to balanc- ing debt and savings, it's possible to do both. A good rule of thumb is that good debt can include anything with an interest rate under 5 percent. Some federally subsidized student loans, for example, may run well under that threshold. Paying them off may feel good, but the repayment amounts may be so low that you can pay the mini- mum due each month during the full repayment period and invest your money elsewhere to earn ad- ditional returns. Keeping your credit score healthy also means accumulating some debt and then paying it down to demonstrate that you can manage your personal balance sheet. As credit cards have very high interest rates, try to pay them off in full every month. Keep older lines of credit open, even if you don't use them much or at all. ose available lines of credit contribute to the overall amount you could borrow if needed. And don't be afraid to ask for credit line increases if applicable. Diversify your investments Pretty much without exception, advisors use the same word to describe a smart in- vestment strategy: diversifi cation. is step is one that Sanchez typically considers once clients have other fi nancial products, such as a traditional savings account, in place. "If a client is new to investing, I make sure she gets comfortable (with the level of risk) be- fore we branch out," she says. In practical terms, diversifying invest- ments means that you might have some cash savings—which may include tradition- al savings or high-interest money market accounts—as well as stocks, which are more vulnerable to market shifts and swings. Mutual funds are a typical way to begin investing in the stock market, as some funds—such as the category called bal- anced funds—include the exact type of diversifi cation that can shield investors from the worst market volatility. ere is typically a minimum amount one must invest in a mutual fund. Exchange-traded funds, or ETFs, have become popular since they were introduced over two decades ago. ey may have slightly lower manage- ment fees than mutual funds and can be bought and sold the same way as individ- ual stocks. Much like mutual funds, ETFs hold a collection of assets that are evaluat- ed together. Both of these types of invest- ments are worth exploring if you're look- ing to expand beyond retirement-focused investments that off er tax-free income, such as 401(k) and Roth IRA accounts. (A Roth IRA is a popular individual, after- tax retirement account in which you pay taxes as you contribute, but can withdraw funds tax free when you retire.) Digital resources for DIYers A reputable service can help you plan your savings and investment strategy. ey ask you to answer a questionnaire about your expenses and spending, and link to your existing accounts to maintain a full over- view of your fi nances. Mint, a free, secure service with a user- friendly website and a mobile app, has long been a favorite among people trying to stay on a budget and keep an eye on numerous accounts at once. A newer, savings-focused app, Acorns, rounds up your purchase to- tals and invests the rest to make saving a bit easier. It costs $1 to $3 a month and is free to students. Albert, another popular budgeting app (free for iOS), analyzes your spending habits and automatically creates a budget you can tweak and track. Many credit card companies and banks off er mo- bile apps. With a few clicks, you can get an overview of available funds or view your savings to see if you're meeting your goals. Taking charge of your personal fi nances can have a positive impact on other parts of your life. Financial advisor Fried says, "When women take control of their fi nanc- es, they make better choices in general." DW Brittany Shoot is a journalist based in San Francisco.

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