As a continuation of our Real Talk series, we’re shining a spotlight on women working in the fields of Finance and Media. Kristin O’Keeffe Merrick and Kara Stevens talk about gender bias, asking for what you need, and what progress looks like in their eyes.
On how gender informs a person’s greater financial picture
I could write a book just about this question alone. Gender and money are intertwined from an early age. Girls are taught different lessons about money, career aspirations and are often shielded from financial conversations. They are encouraged to study different subjects from boys, to take classes like languages, literature, music and art and steered away from subjects like math, science and finance. As a result, by the time they reach college, they tend to major in subjects that will result in lower paying jobs. In addition, girls and young women are not taught about money, investing and risk taking and therefore by the time they become adults are not given the same advantages as men. Women have a tendency to take less risk than men over their life which directly results in lower returns and lower wealth levels for women vs men.
On spending tips and budgeting for the first time
It is easy to calculate your ‘fixed’ costs like your rent, utilities, and car payments. It is much more difficult to figure out where the rest of your money is going. Do a three month look back on your spending and identify your spending trends. Look for ways you can cut back on certain items and where you could make positive choices and habit changes to improve your overall financial picture. Create some achievable goals for budgeting and have an accountability partner to check in with once a month.
On her financial advice for women looking to have children
Do your research on what childcare costs will look like. Do you plan on working after you have a baby? If so, what does daycare cost? What is the average cost of a nanny? Get a strong understanding of what a monthly cost of having a new baby will be. Include diapers, food, medicine, doctor visits, clothing, etc.
On saving for your child’s education
I am a strong proponent of 529 college savings accounts. Each state has its own plan and each plan has its own pros/cons. However, all 529 plans allow contributions to grow tax-free if the money will be used towards education costs. TAX-FREE! This is a huge gift from the government and it is something to take very seriously. College costs are outrageously high and getting more and more expensive each year. Saving for college as early as possible is crucial. By 2030, private universities could cost $500,000 for four years!
On improving your financial situation
Every woman should know exactly how much she makes. She should know what she is putting aside for retirement savings and she should have a defined savings target and strategy to achieve that target. In order to improve one’s financial situation, one must first have all this information. If this is overwhelming, consider hiring a financial advisor to help you. It is money well spent.
On what she wishes she would’ve known when she was younger
I made a great deal of money in my late 20s and early 30s. I took it for granted and I didn’t save enough or invest enough of it. It’s a big regret of mine and I make it my mission each day to keep smart young women from making the same mistakes.
On prenups and marriage
I am a proponent of a prenup if there is a distinct imbalance of wealth between the couple or if there are other circumstances that warrant it. It should be discussed openly and without shame, embarrassment or animosity.
On writing a will and talking about life insurance
IT’S POSITIVELY CRUCIAL. If you have debt, children, a spouse, or a business, you should have life insurance. Everyone should have a will and you should also consider if it makes sense to have a trust.
On minimizing debt
Debt is an extremely important area that you want to minimize, because we're ultimately talking about the greater financial story. Wealth is a measure of net worth and net worth is all of your assets minus your liabilities. Liabilities are things that you owe and assets are things that you own. So, if you want to increase your net worth and generally your wealth, you want to keep your debts to a minimum. By doing so, you can actually have more financial freedom and more financial security.
Debt, especially when it's consumer debt (or things that you've purchased that you don't necessarily need), is wasting your resources (money being one of them). What you end up doing, especially if you put purchases on a credit card, is paying more than the actual price of that debt. (I.e. if you have bought something for $10 and you put it on a credit card, and the interest rate is a 20%. You're paying 20% on that $10. So the actual cost of that debt is $12, even though the actual price of the item that you purchase was $10.) So I think your ultimate goal is to minimize consumer debt that's not going to help you in the long run of building wealth.
On credit card best practices
It's important when it comes to opening a new credit card for you to have clear understanding: the money is not free money, the money is given to you at a cost, and that cost is interest. So when using or opening your new credit card, please understand that there is an interest rate. You should be able to see what percentage you're being charged to borrow this money. Sometimes interest rates are as high as 23% for credit cards. When you have a late payment, it’s important to understand your late payment fee, your billing cycle, and how many days you actually have to repay the debt when thinking about opening up a new credit card. In general, when opening up or using a credit card, it's important to think through why am I charging this or putting this on a credit card. Think I should aim to pay for things in cash. This way once you purchase something (whether daily or monthly), you don’t have to think about how you’re going to actually finance or repay the debt. It’s best practice to pay it off in full, at the end of the month so you don't add on any additional interest unnecessarily.
On enhancing your personal financial picture (when you already have a 401k, savings account, and no debt)
First things first, you should aim to max out your 401k (or any other similar retirement savings vehicle you have through work), especially if you have a company match since that percentage amount is free money. When it comes to your savings account, make sure that you have enough for emergencies. Usually the rule of thumb is three, six, or nine months of your living expenses or your net income for that amount of time. Once you have those things taken care of, and you have no debt, any extra money can go towards investing, property ownership or even possibly building a business because those are three levers to build wealth in this country. You should also not forget to save some money for fun. This way if there's something that you wanted to do, you can enjoy the money as well. I think that all too often, we don't try and balance fun into the equation.
On the importance of setting a budget
It's extremely important to set a budget no matter where you are in your financial life, salary, or in your network. Budget is your BFF when it comes to giving you an understanding about when you can purchase something, how often you can purchase something. A budget gives you an idea of the areas of your life that you can cut costs on. This way you can actually put that money towards something that actually brings value to your life. Setting a budget is not a source of deprivation, but a source of information and it gives you an opportunity to be creative as well. This is because in some cases you will notice that you have a lot of wiggle room in your budget if you are able to plan accordingly. It also makes you see that you're overspending in areas that you may not be aware of. And that you can reduce spending in certain areas, so that the money goes towards something that you actually enjoy or something that has a high financial priority. This is why it's extremely important to set a budget. Because someone that makes $100,000 but spends $100,005, is going to be in debt, versus someone who makes $50,000 a year and only spends $30,000, they're going to have $20,000 in wealth versus the person who makes more money, but hasn't been able to save any because they lack of budgeting framework.
On getting excessive spending under control and being a conscious consumer
It's two pieces. First, excessive spending often comes from other things that are going on within ourselves; excessive spending is often a symptom of a lack of satisfaction in other parts of your life. Second, it comes from being subject to consistent advertising in magazines, on TV, on the Internet, on social media, and our emails. So, one of the first ways to begin to get some control around excessive spending is to scan your environment and to see if your environment is very much prone to making you spend. I personally would look at the things that I consume. Are you reading magazines that encourage you to feel bad about yourself so you want to buy something? What gives you the impression that if you bought this X item that this wonderful thing in your life would happen to you? All these wonderful people will want to be your friend or you'll be happier. You'll be more successful. So I would recommend scanning that and assessing what’s at the core.
On the best piece of financial advice she has learned along the way
I have so many pieces of advice that have been great, but since we're talking to women, I think the biggest and the best piece of advice is to start early in thinking about your financial future and that your 20s aren't a throwaway decade. You can have fun, but you also can be really smart about how you use your time in compound interest on your side [when it comes to investments]. And secondly, I would recommend looking at your friends, because sometimes our friends contribute to peer shopping, peer pressure to spend, peer pressure to keep up appearances. Ask yourself are my friends financial values ones that are aligned to excessive spending? If yes, there's a number of things you can do. You can reduce the amount of time you spend with them. Better yet, if you have a conversation about your financial goals, maybe they too may see the light and want to shift their thinking around their spending as well. Looking at your environment can help you really see what your triggers are too, allowing you to pay attention to when you shop, or when you spend certain times of the month, or certain times of the day, certain reasons or if certain emotions compel you to spend. Is it for escapism? Is it because you're feeling lonely? Is it because you're feeling happy? Is it because you're feeling like you need to treat yourself because you've worked hard? There's a lot of different things that can contribute to that. This is why understanding what your mindset is around the “why” of your spending, can help you really get to be more conscious of your spending habits and the rationale for them.
I also think it’s important to become more conscious in general as a consumer. There are podcasts, books, and conferences that speak to ideas of using what you have, sustainable living practices, minimalism - even how people are learning how to prioritize their time over money. I think those are all ways that you can cut down on excessive spending getting it under control and become a more conscious consumer
On her tips for women when it comes to personal finance
When we talk about women in personal finance it is usually in relationship to how we are viewed in society and our relationship to men. I would say specifically for women that are working, it's important for you to begin to have negotiation techniques. This way you can negotiate more for your starting salary or for any type of performance reviews you can ask for more money. Get into the habit of making space for yourself at the table and asking for more. I would also say that men are not inherently better at numbers or money. So we women shouldn't be afraid to tackle finances. Relatedly, since women are considered to be the more communicative and relationship driven gender - even though that's not always the case - if you identify as that type of woman, you would benefit from having relationships with other women who are focused on their career, are focused on making money or focus on building wealth and share support resources and accountability so you can reach the end goal together.
On her personal finance tips during these uncertain times
- Prepare your finances: If you never believed that there was a need for such thing as an emergency fund, let the coronavirus' impact on the global economy offer some evidence. Begin to reduce non-essential spending and begin to save with intention. Since there's a chance that we may be headed into a recession, which could lead to layoffs, use your time at work to save as much money as possible so you can have at least 6 months worth of savings tucked away.
- Manage your consumption of media: If you feel anxious and tenuous about your future every time you tune into the news, perhaps it's time to tune out. Plug into financial content that aligns with your goals before the coronavirus pandemic. Return to the blogs and podcasts that offer you information, inspiration, and encouragement.
- Speak to your financial advisor. Get an educated opinion about what your best options are. A financial advisor will help round out your perspective by giving you insight into past economic recovery trends as well as their forecasts for future financial patterns.
- Add to your streams of income with a product or online business. No industry is immune to the impact of coronavirus, but some are in a better position to offset the blow because they have a business model that includes products and services that can be delivered remotely.