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How to Make Your Money Work as Hard as You Do



Audio Transcript

Hey everyone. I’m Laura Adams. I hope you’re doing well. Where I am in Vero beach, Florida. It already feels like summer. It is very hot and the turtle nesting season just started here, which I love. I spotted the first mark nest a few days ago, and the beach patrol go out every morning on their four wheelers. And they’re looking for turtle tracks. We primarily have the really big loggerheads here. So the tracks are hard to miss. They kind of look like a tractor just crawled out of the water. And when the turtle patrol sees a fresh nest, they take its coordinates and stake it off to protect it. And by the end of the season, there will be tons of Mart nests. As far as you can see up and down the beach, I’ll be posting pictures on my Instagram account. So be sure to follow me there under Laura D. Adams.

And I want to welcome you to the show. I’m a leading personal finance and small business expert and award-winning author. If you work for yourself, either part-time or full-time, or you want to be your own boss one day, I hope you’ll check out my latest book, money, smart, solo preneur, a personal finance system for freelancers entrepreneurs and side hustlers. It’s definitely what you need to know to build a small business and a big financial future. So I hope you’ll check it out. It’s available everywhere books are sold and no matter what you want to achieve with your money or what you want to learn about personal finance, this podcast is for you. I’ve been writing and hosting money girls since 2008, and it’s for everyone who needs financial education guidance, and very practical. Here’s what to do right now. Kind of advice. We have college students all the way up to pre retirees who are loyal listeners.

They’re asking questions, taking action and improving their financial lives. So I am very glad that you’re here. My goal is to help you live a healthy enrich life by making the most of what you already have planning wisely for the future and making smart money decisions. I always say it’s a marathon, not a sprint. When it comes to building wealth and believe me, no one is born a money genius. It takes time to understand how money works and how to create a solid financial foundation. So I’m really glad that you’re here. I’ve got a special episode for you today. I interview Lorna [inaudible]. She is the head of women, investors and customer engagement at fidelity investments. Her job is to empower women regardless of their career or financial situation to help them become more actively involved in their finances. What a cool job. And by the way, this show is not just for women.

We have lots of advice and tips for, to, to manage their money with purpose as well. So stay with me fidelity recently came out with a financial sentiment survey and it caught my eye because they found that the pandemic continues to cause historic levels of stress, especially for women. The survey showed that 79% of women suffer from stress due to money and job security up from 67% last fall. That’s just a crazy high number. So stay with me. I know you’re going to get a ton of value from my conversation with Lorna, we cover how to create a simple money plan that alleviates financial stress. How many women believe there’ll be better off financially in 2021 than in 2020? So there is some good news on the horizon. We talk about exactly what to do with your money based on its purpose. We talk about how to make your money reach its full potential without being too risky, even if you’re afraid of investing.

And we cover tips for creating a solid financial foundation and lots more. So here’s my interview with Lorna Lorna. I am so glad to have you on the show today. Thank you for having me as well. I would love to talk about some of the interesting studies that you at fidelity and all of your cohorts. I’m sure there’s a lot of people involved in creating studies, but you’re doing some really interesting work regarding sentiment. You know, I, I think with the pandemic, it’s just caused a lot of stress. It’s caused a lot of upheaval in our lives in so many ways, but finances is definitely a big part of the stress. I think for many people. And I thought the study that you did that showed 79% of women report suffering from financial stress related to money and job security was amazing. And that’s up from last fall, which is still really high. What do you think is going on that we have seen that jump in stress from women this year. So thank you.

For setting the study. And yet there are a number of people who work together to really understand how both our clients, as well as everybody across the U S is feeling now, you know, the pandemic has taken a toll on everybody. And when we do the study, we do talk to men and women. What we did find, although stress and particularly financial stress was very high for everybody. It was highest for women. And what is interesting is that, um, you know, we’ve been in a pandemic now for about a year and we throughout this year have continued to take a pulse on how people are feeling when it comes to their life and money. And what we found for women in particular is that stress is you just continue to increase. And most recently it had hit its highest rate. And so that was a real concern for us because as you know, we’re heading into a long year, we do have some sights of a positivity coming with the vaccines and things potentially opening up.

We weren’t seeing that stress come down. So that was a concern. Interestingly enough, though, Laura, at that same time as seeing that stress, we also saw some positive notes. And the one that was most interesting is that it seems that the pandemic and that stress has been a positive catalyst for women to take action with their money, many hats. And we saw that throughout the pandemic, but also the study revealed that seven and 10 plan to take action in the next six months. And that 69% of women believe that they would be better off financially in 2021 versus 2020. So that’s at least two positive things we saw as well.

I love that you did see something positive. Um, definitely it’s good to, to know that people are looking to the future with some good attitudes regarding their finances. So with that in mind, let’s talk about some sort of actionable steps. If you’re somebody who is a little stressed out right now, you’re, you’re hopeful about the future, but you’re just, you’re not sure really where you need to start in order to take control of your money because that’s really what it’s about. It’s about creating a plan for yourself. And in many cases, the simple act of doing some planning will give you confidence. You’ll feel like, Hey, I’ve, you know, I’ve got a plan. I know how to get from a to B. And even though you haven’t gotten to be yet, you know, that you will get there, you have confidence that you will get there and that can make you feel less stressed.

So I would encourage anyone who’s listening. Who’s, you know, a little uncertain about money to follow some of the advice that we’re going to talk about in the show today and just put some things into, into action for yourself. You want to go from a state of worry into a state of action. Being proactive, in my opinion is one of the best ways to reduce anxiety and to reduce worry. So Lorena, one of the things that you recommend is that you want to map out your money goals. And we talk about a financial plan within this industry, the financial industry a lot. And I think it can be really intimidating to people because it sounds like almost like a business plan or something. That’s going to be like 10 pages long and know really complex. And they’re going to have to research and do a lot of work to even create it in the first place. How do you recommend that folks go about creating a money goal or a plan for themselves?

I’m happy to talk about that. And one thing I want to highlight that I think you said that’s so important is that simple steps can turn into game changers and they can reduce the stress. And I just want you to know that I personally hold, I’ve been doing this now for a number of years prior to that had a lot of financial stress and had not taken some of these simple steps. And when I did it is amazing how much, what I would say stress and anxiety came down. And I always talk about it as I had a little bit less fighting in the home, which we were just, you know, sometimes raising our voices about money. So when we walk through these it’s because I personally have taken these steps and it’s been a game changer for me. So I love that you said that, you know, a financial plan, it’s an industry term for sure.

And what we like to talk about it as is this idea of just creating a roadmap to achieve what’s important to you. And what’s important to you. You can think about in a couple of different buckets. So first there’s long-term goals like how you want to retire. Now, a lot of people, if you’re younger, may not be thinking about retirement for what you want to do is just kind of have some type of vision for what they may look like and write it down. Well, you also want to do is think about other bowls. What I always recommend is really looking at a timeframe of six to 12 months, three years, and then, you know, 10 plus years, if you think about it in those buckets, what you can actually start to do is begin to write down. What’s important to you. As an example, I just spoke to someone the other day and they said, the big thing for them is within seven to 10 years, they want to buy a home.

They knew that in 25 plus years, they’d be looking at retirement. They talked about where they wanted to retire and that they’re interested in if they could living by the water. I said to them, write it down, figure out you’ve got that seven to 10 year. You’ve got that retirement. Is there anything else that you want to do in that short term? Anything else you’d need money for? What they started to do is kind of walk through all of these things that are personally important to them. It wasn’t always about how much it was just, this is what’s important to me. And when you write that down, you start to develop goals of what you want to achieve. And then you can begin to really think about the type of money associated with each, but that’s really what a roadmap is. A financial roadmap is, is that process.

Yeah. So it’s really more about dreaming. It’s really more about just getting in touch with your true desires for yourself and your family versus like crunching a bunch of numbers and, you know, getting out calculators it’s that easy. And so you mentioned a couple of excellent long-term goals. Retirement for most people is a long-term goal because they’re probably more than 10 years away. Although we have many people listening to this show who are early retirement or approaching retirement. And so, um, that would be more of a short term goal for them. But for most of us, it is a long-term goal. I like the three year point as a midterm goal, maybe mid goal. If you are somebody who wants to buy a home, you know, within, let’s say three years and the match your, your midterm goal, and maybe a short term goal within the next six to 12 months, maybe that’s buying a car or taking a vacation, right?

Those are maybe some typical ways to think about, about these different dreams that you have. And the reason that the timing is so important is because what you’re going to do with this money in these different buckets is very different, right? The short-term goal is going to be something you’re probably going to save. You’re going to put that in the bank. You’re not going to give it any investment risk because you don’t want to lose that money, but for the retirement, the longer term goals, and usually the mid year goals as well, in some cases you’re going to, or I would say most cases, you’re going to be investing the money for the long-term goals because you need growth. You need a large amount of money to grow and accumulate over time to reach that retirement goal, or reach that down payment for the house goal that you want. So that’s why, and I think a lot of people don’t understand why it’s so important to segregate these goals into the, the horizon or the timeframe. Um, and it just truly is because you’re going to do something a little different with, with each of them.

I think that that is exactly right. And I think what’s most important. What you said is really being thoughtful about in the shorter term. So in that less than three-year bucket, that’s really what you talk about is accessible, right? Cash that you can access and utilize be it. You mentioned purchasing a car within six to 12 months. What we do like to think about and where the opportunity is, is really when you don’t need that money. For what we say around us, three to five plus year horizon people often think long-term, I’m going to invest that that’s where retirement, what many people need to be thinking about in in-particular women is from money that you don’t need. Let’s just say it’s five plus years. What is the opportunity to make that money work harder? So if in 10 years you’re looking to buy, let’s say a home.

What can you do to invest that money so that it achieves its greatest potential? And when we say invest, I think what’s really important is there are a number of different vehicles that you can invest. And some may be something as just putting it into something like a CD, which gives you potential for a higher rate of return. Over time, there are different investment mixes that are really important to consider, to really look, to make sure you’re making the best decision. So your money can, you know, earn its highest potential. Or what we like to say is work as hard as we do with the weather warming up this time of year, many of us are ready for a new spring wardrobe.

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So the first thing that we always want everyone to do is take a step back and try to get a clear picture of what they own. So think about, you know, incomes and saving that you have and then what you owe. So that could be monthly bills. That could be some type of debt. In addition, really thinking about establishing a financial safety net is a major game changer in a part of this, you know, resetting your financial foundation or setting your financial foundation. One of the things that’s most important when we talk about a financial safety net is really around establishing an emergency savings. Everybody should have an emergency savings. And what fidelity recommends is that they have at least three to six months, uh, easily accessible money. They can utilize if something happens and something that can happen. One is the pandemic that we just went through, where there was unplanned job loss, but that money could also be utilized for if the car breaks down or if the heater goes out.

And so we always want to make sure that people have that saved. And one of the things that we found in our study is that many people and women in particular say they know they need it. And they know that it needs to be six months, but interesting is during the pandemic, what we actually found was people were saying, you know what? I may even be thinking about needing more than that six months. And they start to call it their sleep at night number. What is your sleep at night number? So what is that safety net that makes you feel most comfortable is something that you should be thinking about.

Yeah. And it truly is different for everyone because you might have a large family, you might have a family with just one breadwinner. You may have a lots of debt. You know, there’s, there’s just a different financial scenario for every person or every family. Um, so you do need to think about, you know, is your job in an industry that is secure? Are you going to stay in your job? Do you want to go out on your own and become self-employed? You know, we’ve all got different financial goals and dreams as we talked about. So that emergency money really does need to be re-evaluated and adjusted every year. I think, I think you really should think about this. And, and certainly three to six months is an excellent target that will work probably for most people. But I would say there are some folks out there who might, you know, might want 12 months.

And that seems like an outrageously high number. If you haven’t saved a penny yet for your emergency savings. I know that you’re probably thinking, oh my gosh, Laura, you are nuts. How can I save a year’s worth of, of living expenses? And the reality is you might not do it in a year. You might not do it in three years, but you do have to get started. And so just putting away a little bit each month, being consistent with it, um, I promise that’s the way to do it. You don’t want to just say, oh, well, Hey, I just can’t do that. And kind of throw up your arms and give up. You really just have to start with small steps. And before, you know, it you’ll look up and your savings account will have way more in it than you ever thought was possible. So Lorna, let’s talk about the next step. And, you know, we kind of mentioned this earlier, but putting your savings to work by investing. So for the money that is appropriate to be invested typically are more longterm goals. Why is it important to invest money versus simply saving it? Why what’s the benefit there? Because you’re putting it at an investment risk that might make you worry a little bit, but in the longterm, why do you think it’s worth it for the important thing that we talk about is making sure that your money is reaching its greatest potential.

And I think when we look at investing and I know for women, as we’ve done these studies, we have found that women are great savers, but when it comes to investing, there is this concern. You, you use the term risk, um, but this concept of high risk and lose it all. And the reality of investing is there are different opportunities for you to invest given your timeframe and there. And given that it gives you a much greater opportunity to earn at a much higher rate. And I always use this very simple scenario because there was an aha moment for me. When you look at actually putting, you know, let’s say it’s $20,000 in a bank account, you, these days will earn very, very little. But if you actually take that and think about that over five years, but if you take that $20,000 and you invest it in a conservative mix, so that has a number of different investing vehicles. And we can talk about how to do that. You have potential in that conservative mix to earn at a significantly greater rate, we’re talking several thousand dollars. And so what we just, um, don’t want, and what we see is that without taking those steps to really invest, you’re missing out on that growth potential that you could really have access to. And that’s why it’s so important.

Yeah. In fact, I received an email, you know, just today I get emails from listeners and readers all the time. And basically the, their listener was saying, why should I invest in a retirement account versus putting my money in a CD? And you know, it just comes down to, as you said, the earning potential, you will be leaving money on the table. If you are looking at long-term goals and not investing for them. And I’ve got an example, I’ll give you, let’s say you invest $200 a month and you do that for 40 years. So you start maybe in your twenties and you’re looking at retiring in your mid sixties or late sixties, whenever you choose. If you can invest for 40 years putting away 200 a month, let’s say you’re only getting 0.2, 5% in your bank account and your savings account, which is pretty typical.

Um, after the 40 years are up, you’re going to have a hundred thousand dollars in that account. And that’s not enough for retirement, but if you did the same investing strategy, 200 bucks a month for 40 years, and now you invest and you get a 6% average annual return, which is very doable. You’re going to have $400,000 at the end of that 40 year term. If you get 7%, which is also very doable, you’re going to have about $530,000 in that retirement account. So that’s the big difference. Would you rather have a hundred thousand dollars or over $500,000 at the end of that 40 year term? Now they’re going to be some years where you’re not going to get the Sev the full 7%. Again, you, you’re getting that on average over this time horizon that you’re investing some years are better than others. And we all know there’s there’s volatility in the market, but as you mentioned, Lorna, there’s kind of a, a spectrum of risk that you can choose.

You can go from very conservative, might be CDs, bonds up to 100% stocks, which could be at the more risky end of that spectrum. You get to kind of choose that range that you want for yourself. So it is not a zero risk or kind of like throwing the dice and you’re, you’re at Vegas kind of thing. There really is a lot in between those two points. So I would encourage anyone who thinks that investing is gambling to really evaluate the ability that you have to adjust that risk. I just know a lot of people that have stayed away from investing, even members of my own family who have stayed away from investing because they feel like it is not under their control. And that really couldn’t be farther from the truth. Yes, there’s volatility. Yes. We don’t know what the markets hold, but if we look at what the market has done historically, since like, you know, the early 19 hundreds, the market has given a very nice return, depending on what year you, you look at it, you could see about a 10% return, definitely an 8% return over time, depending on where you, you start.

So the idea is that looking at that growth and knowing that companies and in the us and around the world are going to continue to be profitable. We know that the future of investing is, you know, in everyone’s best interest. So I would definitely encourage folks to talk with an investment professional, if you’re at all afraid of investing or you feel like, you know, it’s just not for you. Give it some more thought and really think about moving your money from a CD when it matures or from a bank account. If you’ve got a lot of money sitting in cash right now, earning very little, like less than 1%, remember that you’re probably going to be missing out on huge amounts of money over the long-term as Lorna, uh, you know, so wisely points out. So Lorna, if somebody is interested in learning more about investing, what would you recommend for them? Are there any good resources at fidelity that you could offer?

And Laura, I think what you said is so important, I think yes, for the long-term investing, I would even say any money that is sitting in cash that’s outside of that emergency savings. You want to be thinking about, you know, going back to our financial goals, when do you need that money? What do you need that money for? And then being thoughtful about, you know, what steps you can take to really make sure that it’s earning as high of return as possible. And that’s why there’s just so many different options for that. What I would say, um, uh, steps there’s and that’s really our game changer. Number four, I like to think about it is take advantage of free resources. So if you are someone who simply just looking to learn more, really want to understand the different options that are available, do some on your own.

That is [email protected]. We have a number of resources and step-by-step guides that can help you. What I would also say though, is some people who are just getting started and also just have a number of questions and jumping in, we run a discussion theories on now, a monthly basis. It’s 30 minutes and then interactive taking questions as we go on different money topics, which we call women talk money. And what I would recommend if you’re just starting out, or even if you’re someone who’s a bit more advanced and wants to jump into the conversation to join us, and you can register for [email protected] forward slash women. And that’s for everybody that’s for everybody just that is not that we have women and men join because it’s an open dialogue on what we can all do to make our money work as hard as we do.

But lastly, what I would say is I do recognize that the financial industry has made the concept of investing more complicated than it needs to be. And so there are a lot of different options and it is not something that, as you know, where I mentioned to you earlier, we all are experts in we’re experts, in the different fields and our different jobs that we have. And so I always do recommend if this is something that you’re interested in doing more with your money and you want help, fidelity offers help for free. You can reach out to 1-800-FIDELITY. You can speak to them about developing a roadmap or a financial goal roadmap, and about opportunities to invest. And we’re here to walk you through those different options and help figure out what’s best for you. And I think if I go back and think to myself, what I would’ve done differently earlier in my life, it is one invest more would have been to reach out and get that help that I likely was just hesitant to do before. And so I’d recommend to anyone who’s listening and thinking about it, do something. I think about it as financial self-care and take those steps.

Awesome advice, Lorna. Thank you so much.

Thank you for having me today. I really enjoyed the conversation.

I’d love to know what questions you have about investing and retirement. You can always leave me a voicemail message by calling 3 0 2 3 6 4 0 3 0 8, or you can send me an email using my [email protected]. That’s also where you can find more about me, my work, my books, and online courses. That’s all for now. I’ll talk to you next week until then here’s to living a richer life. Money girl is produced by the audio wizard, Steve Ricky Berg with editorial support from Biatta Centura. If you’ve been enjoying the podcast, do us a solid favor and rate and review the show you’re listening. It might be apple podcasts, Stitcher, Spotify. There’s so many great platforms. Take a moment to rate and review the show within that platform. And don’t forget that there are back list episodes and show notes that are always [email protected].

According to Fidelity Investments’ recent Financial Sentiment Survey, the pandemic continues to cause historic levels of stress, especially for women. The survey showed that 79% of women suffer from stress due to money and job security, up from 67% last fall.

However, there’s good news, too. Seven in ten women believe they’ll be better off financially in 2021 than in 2020 and are ready to take control of their money.

To discuss the Fidelity study and actionable tips to make your money work harder (regardless of gender), I interviewed Lorna Kapusta. Lorna is the Head of Women Investors & Customer Engagement at Fidelity Investments. Her job is to empower women, regardless of their career or financial situation, to become more actively involved in their finances.

4 Ways to Help Your Money Work as Hard as You Do

Here are four tips to help your money work harder:

Tip #1: Reset your financial foundation

Having a clear picture of your overall financial situation and establishing an emergency safety net is a game-changer. It’s critical to review your saving and spending, so you know exactly where your money goes and what to plan for.

A recent Fidelity survey found that more than half of women said they need at least six months of emergency savings to sleep well at night. But only 30% have saved that much.

One way to tackle a savings deficit is to use the 50-15-5 guideline. It’s a rule of thumb that encourages you to spend 50% of your monthly income on essential expenses, such as a mortgage, rent, utilities, food, and transportation.

You spend 15% on retirement. And by the way, if your employer offers a matching contribution, it counts toward 15%. You spend 5% on savings, such as building your emergency fund. The remaining 30% is yours to save or spend as you wish.

Tip #2: Map your money goals

Having a financial plan means you have a road map to achieve what’s most important to you. It includes long-term goals, such as retirement, and short-term goals, such as buying a home, car, or going back to school.

Start by mapping out what you want to accomplish with your money in the next 6 to 12 months. Then go out to three years, ten years, and then to retirement. Writing down your goals is a powerful step to making them tangible and achievable.

Tip #3: Put your savings to work 

Fidelity’s research found that, on average, women save a higher percentage of their paycheck and often get better investment results than men.

Nearly half of women report having $20,000 or more in savings, outside of their retirement or emergency fund, and more than a third (35%) have at least $50,000. But many are keeping it in cash or bank accounts, earning less than a one percent return. In other words, many women are missing out on thousands of dollars of potential earnings over the long term.

Tip #4: Use free resources 

There are plenty of free resources, no matter how much you earn or where you are in your financial life. Fidelity offers Women Talk Money, a weekly 30-minute interactive discussion about relevant topics for women. Join us and ask your financial question–you’ll be glad you did!

This article was originally published on Quick & Dirty Tips.

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