Healthy finances are an essential foundation for achieving your dreams. Surprisingly, we are not taught the essential skill of financial management at school or university. So it is up to us to learn it. Becoming skilled in this area frees us from stress and worry and, ultimately, gives us the freedom of choice. What’s not to love?! Many of us become stressed just thinking about money. However, please learn to love it. It is an essential foundation for your Wonder Womaning.
We’ve spent the last few years learning as much as we can about becoming money savvy and we’ve distilled this information into four key steps.
1. Reduce your expenses Firstly know what your expenses are. Use a spreadsheet or a tool such as YNAB (www.youneedabudget.com) to track and account for all of your expenses. This is about becoming conscious of what you are spending rather than chastising yourself! Simply being conscious of what you are spending has an amazing effect on your spending habits and allows you to consciously prioritise what you want to spend your money on. Establish a weekly money date where you update your spreadsheet or YNAB with your weekly spending.
The next action is to create a monthly spending plan. A good rule of thumb is to allocate 55% of your income to essentials (mortgage/rent, utility bills, groceries, etc.), 10% to fun (wonder women need fun in their lives including nights out, books, etc.), 10% save to spend (for example, your annual holiday or a new car), 10% on investing (see the section on assets), 10% on debt busting or charity (depending on your situation), and 5% on investing in yourself (see the section on assets). Planning your spending is a very powerful tool and gives you a budget to work within each month.
The third action is to reduce your expenses or ‘squeeze the juice’ as Ann Wilson says in The Wealth Chef. Go through every single expense that you have and see if you can reduce it. For example, are you on a phone tariff that is the most cost-effective for your usage? (most of us are paying higher phone bills than we actually need). Make this a fun exercise and reward yourself for your endeavours. In one evening’s ‘squeezing the juice party’ with my husband (and wine!) we saved over £1,000 a year just by changing providers for a number of our utility bills.
2. Increase your income Next, tackle your income. How did the budgeting above work for you? Is your income large enough that 55% of it can cover your essentials? If not, you need to increase your income (as well as tackle your expenses!). Research has shown that women are much less likely to ask for a promotion or pay rise. So here is your chance! Ask for a pay rise. It is actually easier than it sounds. Write an email to your boss asking to discuss a pay rise and/or promotion. You may not get a pay rise straight away but they now know your desires and it’s surprising how stating what you want often brings just that.
A second option is to move job. If a pay rise has been flatly refused or you are at the top of your pay scale, then consider moving job. This has countless benefits including gaining new experience for your cv, giving you a different sense of perspective and learning, and a pay rise.
Thirdly, look at other ways to bring in income. For example, Airbnb. Do you have a spare room that you could rent out? Or consider putting your whole house or apartment on Airbnb while you are away on holidays. Other ideas are renting out your driveway or garage, decluttering and selling the things you don’t need anymore on eBay, or taking on a part-time job in the evenings or weekends. The list is endless.
3. Decrease your liabilities Einstein said that compound interest is the eighth wonder of the world. It is very powerful if it’s working for you (see the next section) but debilitating if it’s working against you. So if you have any debt – work to address it now. In your spending plan, you have allocated 10% of your income to paying off debt. Set this up as a direct debit payment immediately. There is a highly effective technique for addressing debt called the debt-snowball method. It is a strategy where if you have multiple debts (for example, credit card and car loan) then you pay them off starting with the smallest balances first. Once the smallest debt is paid off, you proceed to the next smallest debt and so on.
So you are now actively paying off your debts. The second step is NOT to get into any new debt. For example, avoid car loans, holiday loans, house improvement loans, etc. Only spend what you can afford. Can’t afford a new car with your savings? Don’t buy a new car. And do yourself a big favour and cut up your credit cards. It is hard but you are doing this for you. Remember that :-)
“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” Albert Einstein
4. Grow your assets This is the most exciting and empowering part of being a Wonder Woman with money :-) Building assets is essential to becoming financially free. Women are often less prepared for retirement and more reluctant to invest in the stock market than men. Key activities here are a. establishing an emergency fund, b. growing assets, and c. having a pension plan in place. These all require some focused attention and research. Some key things to watch for: i) Fees – financial managers charge a fee for their services which is to be expected but these are often much higher than they should be – so question all fees and find ways around them including considering managing your own pension pot; and ii) Ensure that your assets are diversified (i.e. that you have a range of assets) because all assets fluctuate in value over time and you want to minimise this while maximising your rate of return, and taxes.
Remember, you are your most valuable asset. So grow yourself too :-)
Applying the above rules even in a simplistic way will have a profound effect on your finances but you will eventually need further information to grow as a Wonder Woman with money. These are some of the best books that we’ve come across on the subject. Enjoy!
The Wealth Chef by Ann Wilson
How to Own the World: A Plain English Guide to Thinking Globally and Investing Wisely by Andrew Craig
Influence: The Psychology of Persuasion by Robert Cialdini
The Richest Woman in Birmingham by Judymay Murphy
We Are All Wonder Women is an international movement for female conservation professionals to be inspired, connected, and empowered to create an authentic, fulfilling and happy career.