In this “Financially Savvy Female” column, a recent Ellevest study found that financial stress is actually making women sick. Nearly half of women (49%) say that money stress has affected their mental and emotional health, and nearly 40% have become physically ill due to money stress. That’s why it’s so important to practice financial self-care. To find out how to actually do this, we spoke with Kerry Keihn, financial advisor and director of operations of Earth Equity Advisors. Here’s what she recommends for improving your financial wellness.
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When making an effort to improve your financial wellness, the first step is usually to get a clear picture of your financial circumstances. What steps can women take to do this?
The most important thing to know is that you are not alone in your struggle to understand your finances. It has nothing to do with your intelligence — the financial industry has basically crafted its own language to make things more difficult to understand.
If you like to handle your finances yourself, there are a growing number of resources that help make it easier. Don’t burn yourself out trying to decipher financial jargon when you can go to sources like Investopedia or GOBankingRates. These resources have different articles and calculators to help guide you through anything from what is the best credit card for your needs to whether or not it makes sense to refinance (and what refinancing means). Your local cooperative extension office may also offer free or low-cost financial education courses, which can be very helpful.
If you are working with a financial professional and they are not making things clearer for you, it’s probably time to find a new advisor. Look for someone whose values align with yours and who speaks clearly and transparently, so you don’t leave your conversations with them feeling more confused than when you started.
Another important step is setting yourself up for financial success. This can greatly help alleviate worries. What are some ways to do this?
When it comes to setting yourself up for success, one of the most helpful things is to know what you’re spending versus what you’re earning. While you can make your own budget in a spreadsheet or on a piece of paper, there are a lot of free budgeting tools available, like Mint, which can automatically categorize your spending and draft a budget for you to adjust. For most of us, there are so many expenses, it can be incredibly difficult to mentally track all of them, which can lead to feelings of anxiety and stress.
In addition to a budget, what are the components of a good financial plan?
The first priority is to make sure that you have an emergency fund. A good general rule is to keep at least three to six months’ worth of living expenses, but it varies by person. The main reason for an emergency fund is to have enough on hand to continue to buy food and pay for your mortgage or rent if your income were to drop or an unexpected bill arises. The second thing to factor into your plan is paying off any high-interest debt, especially credit card debt.
If you still have cash left over each month after funding your emergency fund and paying down high-interest debt, you can consider life insurance. It’s not mandatory, but you may want to set aside some of your extra cash into that, especially if you have children or other people that depend on you. Or, it may be time to focus your financial plan on big picture goals like saving for retirement. Check to see if your company offers a workplace retirement plan. Many companies offer a match to incentivize savings, so if you can, try to save at least enough to get the matching funds. If your company doesn’t offer a retirement plan or you want to save more in addition to that, you can explore what personal retirement accounts could be a good fit for you.
Finally, women should work to improve their money mindset. What are some ways to establish a healthy relationship with your finances and how you view money?
So often we view money as a necessary evil, or we feel like we must sacrifice our values to invest our funds and watch them grow. This isn’t the case! You can simultaneously “do well and do good.” Your money can align with your values. There are many ways to feel better about what your money is up to — the following are just a few ideas.
- Shopping: When it comes to shopping, nothing holds truer than the saying “vote with your dollars.” You can do this by shopping local, buying environmentally friendly products and shopping at responsible businesses, like B Corporations. It can bring peace of mind to know your dollars are going to causes you believe in.
- Banking: Check out your local community banks and community credit unions. These options often have higher interest rates than the big banks, and they often are key community players. If there isn’t a local bank that meets your needs, don’t give up! There are other banks you can find through the B Corp directory or sources like Green America.
- Investing: It’s exciting to see the demand continue to grow for sustainable, responsible and impact investing options. With the increase in demand, we are unfortunately seeing an increase in “greenwashed” investment options — funds that throw in words like “green” or ” social justice” when they still invest in fossil fuels and opioid manufacturers. Be sure to look under the hood before you invest in something that claims to be responsible. You can use tools like As You Sow to research different funds you’re interested in, or search through Green America for a responsible investment firm.
- Donating: There are so many different ways to give to the causes you care about! In addition to writing a check or donating online from your bank account, you can also donate stock. You could also consider setting up a donor-advised fund. If you are over 72.5, you may be able to donate money directly from your retirement account to nonprofits of your choice. If you are working with a financial advisor or an accountant, let them know if charitable giving is important to you so you can discuss your options.
GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.
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