Being financially independent is everyone’s goal, however a lot of people don’t know where to begin or what to do. After spending 9 years in wealth management and 1 year in commercial banking I realized that it is not how much money a person makes that matter, but what they do with their money that does. I have sat with individuals that made six figures and had only $200 in their savings, were renting, had okay credit, and tons of debt. I have also met with individuals that made minimum wage, had over $10K in a savings account, and owned property. So it dawned on me that most people know nothing about finances and because society makes us feel uncomfortable talking about money, they don’t bother to seek for help or advice.
If you are looking to become more financially independent, then these are a few tips that I can give based on my experiences. I am not a financial advisor and this information is solely my opinion. Please do your research as well.
Open a Checking/Savings account
I know it sounds crazy that I have to write this. However, I have come across so many people that did not have any of these and were in their 20s! Not to mention the tons of stay at home moms that married young and whose husband controlled all the finances. But what happens if there is a divorce? Yes most likely the woman will get her share, but after that she will still not know how to manage her finances. I had to teach a lot of women how to write a check and log into their bank account online because they just never had to worry about it. Don’t wait to learn, take control of your life and get your own personal account. Learn how to use mobile banking, how to do transfers, how to write a check, and how to use bill pay.
Pay yourself 10% first
We all work so hard, the typical workweek consist of 40 hours, plus commute. Most people automatically start to pay bills as soon as payday comes. We are conditioned since we are young to get a job so that we can pay our bills. This is wrong and I would never tell my daughter this. The point of working is to create wealth. How do you create wealth? You pay yourself first! On payday BEFORE you pay any bills at all, save at least 10% of your net income and put it in a savings account (for now), THEN you can use the money that you have left over to pay bills. Create a budget and see what your due dates are for your bills and try to split it up so that you are not using one complete pay check to pay all your bills all at once. If you find that you are short to pay your bills, then send the minimum to your credit card for example, instead of sending more. The point is to get into the habit of saving money from every pay check, at first it will seem small, but with time it will add up and before you know it you will have a couple of thousands saved. Just like with everything in life, it takes baby steps and consistency to reach your goal. Also, you have to be strong that no matter what temptations come your way, you will resist and not touch your savings account.
Focus on 1 credit card at a time
Credit card debt has been the vain of my existence on and off for many years. I remember wondering why this wasn’t a course in college even as a finance degree student! This is the downfall of many individuals that become slaves to the vicious cycle of spending way more than they can afford without realizing they will be paying a premium for that item they charged unless they pay it off fast. However, it happens to all of us, we wake up one day and realize we have a few cards and the minimums are now into the hundreds for each. Yikes! No worries, it is doable and you can pay them off and save your credit score at the same time. Choose one card to focus on, send as much as you can to that one card, and send the minimum payments to the rest of your cards to avoid lowering your credit score. Trust me, it is better this way, than trying to send a bit more to each card and not making any real progress on the principal of the loan.
Open an Investment account
My 2nd favorite of all the tips mentioned here. So now you have some savings because you have listened to me and have been paying yourself 1st! Great, now you will invest your savings because most traditional bank accounts only pay .01% annually. Now divide that by 12 and multiply that by your savings amount, that’s the interest that you are making by keeping your money in a bank. Let’s do some quick math to give you a clearer picture, .01/12= .000833% If you have a $1,000 in your savings account then, $1,000 x .000833% = $.83. You have just made a whopping $.83 (yes 83 cents!) in a month. Meanwhile, banks use money that people save and loan it to others and charge at least 6-7% interest (Annual Percentage Rate-APR changes with the market).
After working at Barclay’s in wealth management and seeing how much money a person could make by investing and having their money work for them, and then working in commercial banking and seeing that only customers that have a certain amount (usually $10K+) saved are referred to premier or investment bankers I was extremely disappointed. EVERYONE should be referred and taught how to invest. But the system is designed to keep the poor poor.
Investing is risky and you have to know that the market is volatile, especially during these times with Covid and the economy being in crisis. However, if you are vigilant on your investments, RESEARCH, keep up to date with the news, and know when to cut your losses you could make a good rate of return (ROR) on your investment. You don’t need to have hundreds of dollars to start, take $100, do research and buy a stock. Start with what ever you can afford and as you continue to save, keep transferring money to your investment account and diversifying your portfolio in order to hedge your risk. Am I using too many financial terms? Investopedia is your best friend! You can search up any term there that you do not understand.
Okay so I got your interest, what now? Open an account; there are a lot of platforms. My personal favorite is Ameritrade. There is also Etrade and Robinhood (an app that can be downloaded to your phone) to name a few. I love Ameritrade because it has this awesome research tab that you can literally look up any stock and read about the company and see analyst reports and their hypothesis as to where the market is headed.
If you want me to go into depth on the different asset classes, please send me an email or comment below.
Become Your Own Boss
It is important for everyone to be financially independent, especially for women. I have seen that this is the reason why many women will often stay in abusive relationships. They think that they can’t support themselves or their kids if they leave. There are a lot of resources available for women, mother’s especially that you can apply for and that can help you while you get on your feet. You can go through a year or two of struggle and enjoy the rest of your life being financially independent. The choice is yours. Make it so that no one can ever tell you what you can and can’t do, so you don’t have to depend on the approval of your spouse in order to buy those fancy shoes your heart desires, and to set an example for your daughter and son that they too can be financially free.