‘Where do I start?’ SheMade’s guide to financial security
By Hanin Najjar
Taxes, investing, credit scores, buying a house, opening a retirement account. There are so many things to learn about money and finances, it can get overwhelming. You may be asking, “Where do I even start with managing my money or planning for my future?” They never really taught us any of this but we’re kind of expected to know.
We got you covered! This article is a step-by-step guide to building long-term financial stability.
Make a budget
The first step to managing your money and making a financial plan is to figure out how much money you make (after taxes) and how much you spend on necessities. Make a list of how much money you need every month for essentials: rent, bills, food, gas, etc. How much money do you have left over? A good tool to help you manage your budget and stick to it is Rocket Money. It has both free and premium versions.
Pro tip: Ideally, you should spend 50% of your paycheck on necessities, 30% on wants and 20% on paying off debt, saving or investing. Track your expenses and make a budget.
Build an emergency fund
You need to build an emergency fund. An emergency fund is money that is for serious unexpected expenses or situations. This can be losing your job, a sudden health issue or an unexpected car repair. Most people will say that an emergency fund should be 3-6 months worth of expenses. How much you should have in your emergency fund depends on your situation. If you have kids and are the only source of income for your household, you may want 10-12 months of expenses. If you live alone and have a stable income, 3 months worth of expenses is completely fine.
Pro tip: Do not put your emergency fund into an investment or a place that is hard to reach. Keep it in a savings account. You need your emergency fund accessible at all times.
Pay off high-interest debt
After you’ve built an emergency fund, focus on paying off all your high-interest debt. High interest debt is anything above 7% like credit cards or some student loans. Credit card interest rates averages between 15% and 20% and can go up to 36%. That’s a really high interest rate that can keep you in debt for years if you don’t pay it off immediately.
If you have multiple credit cards with debt, start by paying off the card with the highest interest rate. You can also open a new credit card that will not charge interest for the first few months to buy you some time to make enough money to pay it off.
Pro tip: Don’t start investing until you’ve paid off all high-interest debt because even if you make money on the stock market, you’ll be losing money in debt.
Investing for long term
Once you have a budget, an emergency fund and you’ve paid off your high-interest debt, you can start investing for the long term. It is never too early to start investing or thinking about retirement.
“Investing is the fastest way to become a millionaire, the easiest way to become financially independent and the only way to save up enough to retire. Women lose up to a million dollars in their lifetime because they invest too late or don’t invest at all. ”
If you are ready to start investing, check out “SheMade’s beginner’s guide to investing.”
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