As you read through ‘Girls Just Wanna Have Funds’, we hope you have gained some new information to help you on your journey to financial well-being and investing.
Through the first chapters of the book, we learn how to PREPARE for the journey. In regards to money management, it’s important to understand your mindset and the source of your beliefs about money. If you still have some doubts about that, you may want to review our previous blog post on ‘The Psychology of Money’ for some guiding questions that will help you get clarity on that. The answers to these questions may seem confronting at first, but it’s important not to forget that just because of your upbringing and your family’s financial situation during your childhood does not mean you cannot succeed financially. Since you are reading this post and reading the book, you have taken the first step towards taking charge of your finances! As soon as this is accomplished, we can move towards building financial confidence, which makes it easier for you to take control of your money and achieve your goals. Make sure you read chapter ‘Find financial confidence’ so you can learn about the three aspects of financial confidence as well as the four steps to achieving it.
But, with this blog post we want to discuss the most essential as well as practical part of the first chapters, which is ‘Getting to Grips With Your Finances’. As the authors put it, ‘It is not exactly a sexy topic but creating a budget should always be the first step on your financial journey. The purpose of a budget is not to punish yourself for enjoying life and spending money on things you care about, rather, it is about creating an overview of your financial situation and making sure you are spending the way you intend to.’
Women Who Get It agrees that the most simple and effective way to start is to choose the 50-30-20 rule. But first, start by asking yourself these 5 questions:
1. What is my income?
2. What are my expenses?
- Recurring expenses (insurance premiums, gym memberships, phone and internet, subscriptions and rent)
- Variable/discretionary expenses. (Include your groceries, entertainment, dining out, travel, shopping, gifts, charitable giving, etc
TIP: retrieve bank statements that will provide guidance on your spending.
3. What are my debts?
4. What are my priorities?
TIP: if you struggle with impulsive buying, try this: before purchasing an item remind yourself first of the your financial goals and priorities at the time and then think of your hourly salary rate to put it in a perspective of ‘how long do I have to work to purchase this item’ and see if that is aligned with the need for the item.
5. How can I make this sustainable?
TIP: start by having small achievable goals to avoid getting overwhelmed. You can find guidance on goal setting in the ‘Golden Rules of Setting Goals’ chapter in the book.
You may find yourself in a situation where the 50-30-20 allocation is not possible because your obligations weigh too heavily on your income. In this case, you can set your own percentages according to your priorities: do you prefer to sacrifice your discretionary spending or your savings? The answer is up to you, but it would be better to keep the three budget categories even if you have to allocate to one of them as little as 5% of your income. It is important to save but it is also important to have fun!
Keep up the reading and stay tuned for our next blog post on how to make your first actual investment!