Financial Habits Wealthy Women Practice
Whether amid a life transition such as divorce, motherhood, widowhood, or starting a new job – women who take an active role in their financial future tend to share similar financial habits.
While traditionally, women have taken a less active role in their financial lives, some, Like Jean Chatzky, author of Women with Money, predict that women will control 75% of discretionary spending worldwide.
To equip these women with relevant tools, our team of financial professionals shares three financial practices to consider implementing to gain or maintain control over your financial future.
Develop a strong budget plan (and stick to it)
Creating a plan that allows you to live within your means while planning for the future just makes sense. The benefits of budgeting certainly outweigh the disadvantages. The instant thrill you may get from splurging on a new item is just not worth messing up your future finances. Intelligently spending your hard-earned money brings you closer to your financial goals.
Budgeting is not tricky. Using a simple spreadsheet or even a notepad, you can organize and take control of how you spend your money. A general formula to follow may include:
- 55% Necessities (food, utilities, housing)
- 20% Retirement
- 10% Emergency Fund
- 10% Recreation
- 5% Charitable Giving
If you feel a bit overwhelmed with where to start, the 50-30-20 strategy is also a simple process to follow. This approach has divided your income into three broad categories: necessities, wants, savings, and investments. Regardless of which method you choose, having a solid plan for spending your money is a critical component of building wealth.
Diversification is a technique that reduces risk by allocating investments across various financial instruments, industries, and other categories. It aims to maximize returns by investing in different areas that would react differently to the same event. While most affluent investors have a basic knowledge of their investments, working with a trusted financial professional will allow you to determine a specific investment mix of stocks or fixed income solutions to meet your short and long-term needs. A few critical reminders about diversification:
- Diversification reduces risk by investing in vehicles that span different financial instruments, industries, and other categories.
- Unsystematic risk can be mitigated through diversification, while systemic or market risk is generally unavoidable.
- Balancing a diversified portfolio may be complicated and expensive, and it may come with lower rewards because the risk is mitigated.
Working with a trusted investment professional and meeting with your financial advisor at least twice a year keeps a focus on adjusting your financial plan to ensure long-term success.
Educate yourself about personal finance
Personal finance is the beginning step you can take to become self-sufficient with your money. It typically includes understanding expenses, creating a budget, saving for retirement, investing, insurance, and more.
There are several books on personal finance that are interesting and help make learning more engaging. Some of our favorite books include:
- The Millionaire Fastlane – M.J. DeMarco
- Why Didn’t They Teach Me This in School? – Cary Siegel
- The Behavior Gap – Carl Richards
- Your Money or Your Life – Vicki Robin and Joe Dominguez
- Think and Grow Rich – Napoleon Hill
To learn more about how to build and protect your wealth, reach out to your team at FBB Capital Partners.