Ok, ladies. Here is the sad truth. We are falling behind in the wealth game. And yes, while the pay disparity does factor into this. It is also because we are not investing our hard-earned dollars.
When it comes to net worth, the true marker of wealth, women hold 32 cents on the dollar compared to men. For black women it's 8 cents. For Latinas it's 4 cents. Ouch. The fastest way to close that gap is to start making our money work for us. Also known as investing.
But, what does that actually mean? Making your money work for you? What exactly is investing? Is it safe? Why didn’t any of your professors talk about this stuff?
Or maybe they did, and you weren’t in class that day. Hmmmm.
Whatever. There's no time like the present. So grab a pen and paper and start taking notes. Now it’s time to grab a pen and paper and start taking some notes.
The first thing to know is that the act of investing can create an opportunity for you to earn income outside of your paycheck without you putting in hours at your desk job. It’s as close as you can get to making money while you sleep.
But, like anything that sounds too good to be true. There are some downsides. It is very possible that you can lose money with investing. Which is why it’s important to go into this situation after you have done some research and are fully prepared to handle any potential outcomes.
Before you get started with investing, here are five questions you should ask yourself before you do.
What are my goals? Before you do anything with money, it is important to set your intention and get clear on your goals. Are you hoping to pull this cash out in a year to travel the world? Do you want to stash it away for five years then pull it out to use as a down payment for a home? Do you want to keep it in one place until you are ready to retire? Gaining clarity around your goals will help you determine which investment strategy is the best for you.
Am I financially stable? Investing is a risky endeavor and you should only do it when you have your basic needs met. Before you start investing, ensure that you have a comfortable cash cushion in your savings account and you can easily generate the money you need to cover your monthly expenses. If you are living off your credit cards or if your parents are still helping you out with your rent payment, then you are not ready to start investing.
What is my risk tolerance? There are many different ways you can invest your money, known as vehicles. There are savings accounts, stocks, bonds, mutual funds, REITs, real estate and businesses. Each vehicle carries a level of risk. The riskier the vehicle, the more money you can make. It also means you can stand to lose a lot more money. The reverse is true for less risky vehicles. On the least risky side are bonds and savings accounts such as Radius Bank’s High-Yield Savings, which has a relatively high APY*. These vehicles have a low interest rate and a low rate of return, meaning you won’t make that much money from it. But, you also are guaranteed to not lose any money, either. The riskier vehicles include mutual funds, stocks and real estate. You need to determine for yourself, how much risk you are willing to take on. Generally speaking, the younger you are the more risk you can afford. But, you also have to take into account other life choices you wish to make- such as starting a family or business, and purchasing a home. Both, will require access to cash. For a general rule of thumb, subtract your age from 100. The difference is the percentage of risk you can take on. For example, if you are 30, your portfolio can be made up of 70% high-risk investment vehicles. This is only a general rule of thumb that you can use to make a decision that fits your needs. It is up to you to consult with a professional about your unique situation.
Do I understand the difference between mutual funds, stocks and bonds? It’s important to be knowledgeable about investing before you jump into it. It would be like skiing down a Black Diamond slope without knowing how to ski. Sure, you could figure it out. But, more than likely you’re going to hurt yourself. You don’t have to know everything about investing - just like you don’t have to be an Olympic skier to have fun in Vail- but the more you learn, the better you’ll be at it. To help you get started, check out Radius Bank’s Money Management Academy. They have a section on investing that goes over the basic terms you should know and has some games you can play to get accustomed to investing.
Who can I reach out to about investing? With anything new, it’s always nice to have people in your life that you can reach out to for advice or insight. Your parents may have tips for you. Talking about investing and your money goals with girlfriends is a great way to hold each other accountable and get a sense of what your peers are doing with their money. During the Money & Mimosas Like.A.Boss. Bootcamps, we spend time sharing our investment stories and learning from experts. Click here to stay in the loop about our next event.
And now I want to hear from you! Have you started investing or are you thinking about investing sometime soon?
This post was in partnership with Radius Bank.
*Annual Percentage Yield (APY) is accurate as of 4/4/18. Minimum amount to open account is $10.00. Rate tiers are as follows: 0.00% APY applies to balances of $0.01—$9.99, 0.05% APY applies to the entire balance on balances of $10.00—$2,499.99, and 1.30% APY applies to the entire balance on balances of $2,500 or more. Rates may change after account is opened. Fees may reduce earnings