Editor’s Note: Today’s post is authored by Erica Holland. In addition to her full-time role at a private equity firm, Erica runs a personal finance and lifestyle blog, ModMoney, where she simplifies personal finance in a relatable way, and dives into important “real world” topics seldom taught in school.
We all know and admire a savvy woman who has her financial life in order. She sticks to her budget, she saves for retirement, she’s smart with her credit cards, and unplanned expenses never seem to throw her off course. Whether she’s your boss, your sister, your friend, or your mentor, she follows a set of rules that keep her finances in check. There are five simple habits we can all adopt to follow her lead and set ourselves up for financial success.
1. Save for retirement
If you’re young, retirement may be a distant thought as you confront more immediate financial obligations. Still, it’s important to start saving for retirement as early as possible. That’s because compound interest is a powerful tool that literally turns time into money. Let’s put it this way: If one woman starts saving at age 25 and another starts at age 35, the younger woman can have double the retirement savings at age 65. All because she started 10 years earlier.
Most employers who sponsor tax-advantaged retirement plans like a 401(k), a traditional IRA, or a Roth IRA will also match your contributions dollar-for-dollar up to a certain amount. But there’s a catch. If your employer will match 5% of your salary but you only contribute 2%, then the match will cap at 2%. A financially wise woman never leaves money on the table, so try to contribute at least as much as your employer will match.
photo by Wayne Miller via Darling Magazine
2. Build a rainy day fund.
The problem with only saving into a retirement account is that you can’t withdraw from it until later in life. So what are you supposed to do when your A/C breaks down? Or when your car needs a new battery? What if you take an unexpected pay cut at work? You need savings you can access sooner than age 59 ½. You need a rainy day fund.
A good rule of thumb is to keep 3-6 months of living expenses in a savings account. To calculate this amount, consider your monthly obligations —mortgage, rent, car payment, food, utilities, insurance, etc. These add up quickly! However, software platforms like Digit make it easy to save without thinking about it. Digit links to your checking and moves small amounts of cash every few days into savings. It’s the perfect way to build a rainy day fund with minimal effort.
photo by Alison Engstrom for Camille Styles
3. Track your net worth.
Financially responsible women seem to always know the balance in their bank account. On top of that, they also know their net worth. Tracking this number is an important habit because it represents your entire financial position. Your net worth is the value of everything you own minus everything you owe. Most of us own a variety of assets — cash, savings, investments, and a home, to name a few. On the other hand, we also have liabilities that we owe — credit cards, mortgages, student loans, and other debt.
That’s a lot to keep track of, but you don’t have to do it manually. Personal Capital is a free tool that consolidates all of your accounts onto one dashboard. Beyond calculating your net worth, the app helps you budget, invest, and plan for retirement. Even if you only check your dashboard once a month, you’ll better understand your financial picture and be able to spot any negative trends.
4. Always get the best deal.
Even the most frugal women indulge in some shopping now and then. But when they do, they maximize their purchases with online shopping portals like Ebates. These portals actually let you make money while you spend it. Ebates offers cash back for every dollar you spend at thousands of retailers. All you have to do is sign up (and earn $10 right away), choose your retailer, and shop like normal. Ebates mails you a check every three months for the cash you’ve racked up.
There are also a couple of browser extensions that help you save money when you shop. Honey automatically finds and applies coupon codes at checkout. Wikibuy activates when you shop on Amazon and finds lower prices from other retailers. All of this technology enables you to enjoy the finer things without the budget guilt.
5. Find lost money.
You know that amazing feeling when you find $20 in an old pair of jeans? Well, you might actually have more lost money than you realize. Think about it. Did your apartment complex ever return your security deposit? Did you cash all your payroll checks from your side job in school? What happened to the Coca Cola stock your uncle bought you when you turned thirteen? Unclaimed property can include abandoned bank accounts, safe deposit boxes, life insurance payouts, pension benefits, trust distributions and more.
There are billions of unclaimed assets out there, and each state has a program designed to return them to their rightful owners. To find yours, go to MissingMoney.com and type in your name and state (try every state you’ve lived in). If you find unclaimed property, you can start the claims process directly through the website. You’ll fill in some personal information, return a form, and the state will mail you a check in as little as two weeks. Share this trick with your girlfriends, and they will certainly crown you as the most resourceful and savvy woman they know.
