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How to Handle Your Finances: Q&A With Ellevest

It’s easy to talk endlessly about our favorite new superfoods and the latest trendy skin products on the market, but sometimes we tend to tiptoe around a topic that should be discussed more frequently: our finances. Ellevest is a company started by real women to help other real women set financial goals, make smart investment decisions, and help navigate the new financial era we’re in today. Ellevest is changing the game for women everywhere, and we were lucky enough to get the chance to ask them some questions of our own. Here’s what we learned in our Q&A:

 

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We love that ELLEVEST is all about redefining investing for women. Could you explain the company’s overall mission?

Ellevest’s mission is to close the gender investing gap. Women don’t invest as much as men do, and this can cost us hundreds of thousands, or even millions, of dollars over our lives. And this is despite the fact that we live longer than them and have salaries that peak earlier, so investing is arguably more important for us. We believe it’s because the industry has been built around what men look for. At Ellevest, we provide a digital investing platform that we believe is both smart and beautiful, and, importantly, that is the only one designed to take into account our longer lives and different salary curves.

Sometimes the hardest part about managing your finances is not knowing where to start. What are a couple basic tips you would give to young women who are just starting to think about their financial responsibilities?

Gaining control of your financial picture for the first time can be daunting. My advice? Set a goal and just do it. Firstly, pay off any and all credit card debt you have outstanding. Next pay off any other high-interest rate debt. And then start working towards goals that matter, such as investing for a down payment on a house or to start a business. (No concrete goal? Invest anyway.) At Ellevest, we are big fans of investing in low-cost diversified investment portfolios, and investing a bit out of every paycheck. That way it becomes a habit: a smart habit.

What’s the best way to establish the right budget for yourself and stick to it?

Rule number 1: you absolutely must spend less money than you make each month. No exceptions, or you’ll tread water in your financial life or even worse, rack up credit card debt. To get a handle on your budget, start by tracking your finances for 2-3 months. Figure out where you’re spending your hard-earned dollars, and how much you’re spending in each category. And yes, I mean everything from rent and utilities to your dinners out.  Once you know where the money’s going, identify the areas that made you raise an eyebrow, and find ways to cut back. Tools like mint.com are a great way to track your spending and keep yourself honest.

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With so much information out there, it’s easy to make the wrong decision when it comes to making an investment. What’s the best way to know when a young woman should invest her money?

Ask yourself a simple question: Do I have credit card debt? If the answer is yes, then it’s not time to start investing. The amount you’re paying in interest on your credit card debt can far outweigh the benefits of investing. So tackle that first. If you don’t have credit card debt, or any other debt at 5% – 7% or above, then it’s time to start investing. You may want to start with your 401(k) at work. If your employer has a 401(k) “match,” you’ll want to take advantage of it, because that’s free money. Actual free money. Beyond that, only have a small amount to invest? Don’t let that stop you from getting started! Put what you can aside, and get in the habit of contributing regularly.

How do you suggest one deals with the battle between when to splurge and when to save?

Follow the old adage of paying yourself first. If you can set up recurring deposits to your investment account that coincide with your paycheck, you’ll never see it as excess cash to spend. Out of sight, out of mind. And is it OK to splurge every once in awhile? Um, yes, you work your you-know-what off, and as long as you’re paying yourself first and saving regularly, definitely indulge every now and then. (For me, it’s buying from online consignment sites. Pure heaven.)

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What’s one overarching piece of advice you’d give to young women when it comes to protecting their finances?

Get to know who you’re investing with, and what their responsibility is to you as a client. I highly recommend finding an investment advisor who acts as a fiduciary. Fiducia-what? Believe it or not, not all financial professionals are required to act in your best interest. (I know, I can hardly believe it either.) A fiduciary is required by law to put your interests first, above anyone else’s. So ask the question of anyone you’re currently invested with or thinking about investing with. And if you’re wondering whether Ellevest is a fiduciary, the answer is abso-friggin-lutely. We wouldn’t have it any other way.

What’s one thing you wish more young women knew about their finances?

I really wish more young women understood the importance of understanding and managing their own finances. When I was in my 20’s, my then-husband controlled our finances. When we filed for divorce, I was completely in the dark — even though I’d worked at a bank and had an advanced business degree. Let me tell you, I didn’t make that mistake twice. Whether you find yourself in a similar situation or endless relationship bliss, having a handle on your finances is essential. The earlier you start, the better — both for you as an individual, and also for your family in the long term.