Baby Steps Your Way to Financial Freedom
How often have you set New Year Resolutions on 1 January, only to break them and feel bad by mid January? If it is as regular as me, it is pretty much every year since I was around 25. I must lose weight, save more and learn French by July!
I think it is safe to say that these lofty resolutions rarely work for us -so we need to rethink the game and our approach.?
Let’s look at the data regarding women and their relationship with money:
Women are 51% of the global population and we hold around $93 trillion dollars of wealth which is one third of the world’s wealth. So, what does this data tell us? It tells me that whilst we are the majority of the world, we fall short when it comes to wealth. We are less wealthy than men, generally speaking.
At Sophia, we’ve noted that it rarely matters how much wealth one holds when it comes to financial literacy. We see some ultra wealthy women who require financial education and conversely, we see women at the opposite end of the financial spectrum with very little disposable income who can manage a budget like a budget ninja!?
It is perfectly normal for us not to have the skills we need to manage or grow our wealth. I mean, nobody ever taught us, so it would be mad to expect us all to do it like the budget ninjas mentioned above! Budget ninjas are unicorns at the moment but we want more unicorns in the world - something my five-year-old would be super happy about.
Historically women have invested less money and less frequently than men. However, according to Fidelity data, 67% of women are now investing their savings in the stock market. This represents a significant 50% increase in the volume of female investors active in 2018. Further research suggests that women are not only arriving on the stock market in greater numbers, but they generally outperform their male counterparts too.
Outperform you say? That’s right, women are bringing home the bacon!
How do we spend our money?
The retail industry has a term for women - Main Grocery Buyer (MGB). Now I don’t know about you, but I know women are more than just this term. In the context of being the MGB, there is an entire ecosystem built for us:
When the going gets tough in the pandemic, we respond sensibly in the effort to control overall spending. Data tells us where we stand when it comes to being in control of spending.? However, despite all the bargain hunting, research efforts, being sensible with money and being the main decision maker in the household [WOW! What a mouthful, how many things do we want to do?] it doesn’t materially improve your financial prowess.?
By that I mean, our efforts that go into being good with money, happens at the budgeting side. This is great news, yet it doesn’t leave us time to learn about how to invest our money to secure our future wealth.?
There is a difference between managing what we have and growing what we have. Just putting this out there, that maybe we ought to free up some time, course correct and balance managing our money with being the key decision maker for building our wealth.?
Now, it is hard to discuss spending without considering savings. Simplistically, they make up the whole pie. On one side, you have spending, on the other, savings. When it comes to spending, it is natural for people to think of it as a spend-save equation and then apply judgement to it.?
We ran some research amongst women to understand their decision making process when it comes to consumer spending, including impulse purchases.? We found a common ticker tape going around their heads which goes something like this:
Or they also told us this:
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Now, that seems dramatic yet these are the conversations women shared with us.?
We need to dip out of this spend-save equation of managing money, we need to recognise that there are many other factors at play here.?
Micro controlling every money decision indicates a poorer relationship with money and spending. We need to reconsider our approach to money and make sure to build in some ‘give’ for joyful spending. We must learn that deprivation to bump up savings in a spend-save model is not a strategy.
Data shows we are sensible and good with money. Most women also think we can do better, despite this. Let’s make sure we have a solid discipline to managing money and that we build in regular budget reviews so our financial goals evolve as we do.
The risk of inaction!
Women live longer than men and yet we retire with only two thirds of the retirement money that men have.? This means our ability to do more of the things we love is greatly reduced in our futures unless we alter this trajectory.
"You can’t be what you can’t see!" I often quote this to people during interviews, podcasts and articles that I write. Let’s collectively move towards managing our finances in a different way. A way that inspires our daughters to do the same from an earlier age than we had the opportunity to do. They need to see us role modelling behaviours. We might not be able to fix everything but we can lead the change and when we hand over the baton, they continue on that trajectory of change. My daughter (and son) are certainly my motivation for doing things differently.
The future is bright!
According to Fidelity's 2022 Money Moves study, younger women are getting into investing earlier than ever. Younger women are learning from the mistakes of older women who did not start investing until later in life.?
Why does it matter to start earlier? Well, the earlier you start, the more you will benefit from compound interest. This essentially means that you can start conservatively investing and build confidence and profit over time but because you are starting early, once you have some confidence, you can afford to take risks too because you have the benefit of time.? Essentially, start slow and steady when doing something for the first time but then you can take more risk if comfortable.
The good news is that you don’t need to be a maths whizz (I am certainly not), a finance professional to take control of managing your money and neither do you need to have millions of dollars in the bank.
Where do I start?
Going back to my opening paragraph, I think we have all learnt that making bold statements of drastic change come back to bite us on the backside pretty quickly. So let’s park that one and let’s start with a baby step. What can you do today to change the trajectory of your financial situation and start to take control every day without changing your entire lifestyle??
My answer is; baby steps start today. You should start with an overview course on managing what you do have and make sure you are doing everything you can to maximise your money and once you have that sorted, move on to growing what you have. Sign up to our latest course ‘Your Money Basics’ for women, and start to lay the foundations you need for financial freedom.
Sign up to www.sophiawomen.com to find women just like you and to find out where to start your journey.
Tanya Rolfe - Co-founder, Sophia
Special thank you to Sharon Moo for contributing to this article
Networks & Partnerships | Development | Philanthropy | Consultant | Board Member | Skoll World Fellow
2 年"Women live longer than men and yet we retire with?only two thirds of the?retirement money that men have." This is a frightening statistic at best and the gender pay gap as well as peak earnings (less than 10% of women are in leadership positions) contribute to this challenge.