Three Bad Financial Habits to Stop. Three Good Ones to Start.
Since I started my financial coaching business, I have noticed a few trends when it comes to women and personal finance. Some trends are uplifting and inspiring, and others, not so much. Today I want to highlight some areas we can improve upon as women and provide details on how to eliminate frustration, lack of control and stress around money. Women have many unique challenges when it comes to managing our money and knowing about these challenges is the first step to conquer them and rise above. In this post, I will discuss the top three bad habits I work with clients to overcome. If we replace the bad habit with an alternative pattern, we have just made huge progress toward building confidence and controlling outcomes to improve our financial lives.
Bad Habit #1: Spending and paying off the same $5k on your credit card.
According to MoneyGeek.com, the average cardholder has $5,769 in credit card debt, which is up from $5,611 the year prior. Based on what I have seen, this stems from lack of preparation and savings for things that tend to pop up throughout the year. Things like car repairs, holiday spending, vacations, medical bills, and other “life happens” expenses, are the culprits for why my clients carry credit card debt. Rarely has the debt been collected for extravagant items and instead born from necessity when there is not enough savings set aside. In fact, more than 60% of Americans don’t have enough in short-term savings to cover a $1,000 emergency. We all could do a better job of saving for a rainy day.
DO THIS INSTEAD: Build up a balance in your savings account to cover those items that pop up.
This requires you to make a list of spending categories and your credit card statements are an excellent place to start. How much are you spending on those surprise expenses every year? Figure out your annual pop-up spending and divide it by 12. This is how much you need to tuck away in savings every month. Go ahead and earn rewards by using your credit card for transactions, but pay it in full every month from the money you have set aside. You just made a big improvement to your personal finances by not paying interest on your credit cards.
Bad Habit #2: Not setting annual financial goals or knowing all the details of your financial life.
Technically, this represents two bad habits and even three if you have a partner/spouse and you don’t do this together. Chances are, if you are somebody who doesn’t have a net worth statement or know exactly what you own vs. what you owe, you have this bad habit. In order to set annual financial goals, you need to be 100% clear on where you currently stand financially. I hear it time and time again, “We’re doing fine, but I know we could be doing better with our money”. I can boldly state that the majority of my clients come to me because they do not have clarity on their financial picture and therefore don’t set realistic and attainable money goals. I can also boldly state that when you do have clarity, you then have control, and can very easily move your financial ship towards calmer seas and even your version of money paradise.
DO THIS INSEAD: Update your net worth statement once per year and set three financial goals.
You don’t have to be a slave to money management if you have the right tools in place. When I have a new client who does not have a net worth statement, we make one together. Once it is in place, it is very easy to update on an annual basis. There are plenty of net worth templates online and it’s as simple as adding up everything you own and subtracting everything you owe. That number is your net worth. The goal, beyond the obvious statement of not having a negative number at the end of this equation, is to grow your net worth every year. The three goals could be two ways to increase your assets (things you own) and one way to decrease your liabilities (things you owe). Your net worth statement will tell you what you need to do. That’s why it is a mission-critical document and an important tool for improving personal finances.
Bad Habit #3: Not setting clear goals and having annual performance reviews with your employer.
Many women believe they are being paid equally at work. The fact is most women make eighty cents for every dollar a man makes in the same role at work. Here in Utah, that number drops to seventy cents. This is a very difficult thing to prove and why it continues to happen. Additionally detrimental, as women we tend to believe our work will speak for itself and being the squeaky wheel does us no good. We accept mediocre pay increases and don’t meet with our employers to set goals and conduct regular performance reviews. This is costing us money and lots of it. Do you have clear performance goals at work? When was the last time you sat down with your employer to discuss growth opportunities? Don’t let this bad habit hold you back.
DO THIS INSTEAD: Meet with your boss at least once per year. Set at least three performance goals that are challenging, but attainable. Ask for transparency in pay/performance in the workplace.
Throughout the year, you need to document all the ways your work directly contributes to the bottom line. Set clear performance goals for yourself and understand what your employer wants you to achieve. Reach all of these goals. When you reach them, sit down with your employer and demonstrate why you are worthy of a pay increase and promotion. Additionally, if we don’t ask for transparency in pay/role/responsibility, it won’t exist. That’s why we need to demand for transparency and accountability in the workplace. We need male allies and we need to support the women around us. We work hard. We need to work harder at looking out for #1 (yourself).
As I mentioned earlier, we women have unique challenges when it comes to feeling confident and in control over our money. I believe knowledge is our most valuable asset and clarity is the key to making improvements. Every woman has a unique perspective on why money is important, but when we align our personal values with our use of money, we hit the sweet spot in our financial lives. I hope I have provided you with some education. It’s now your turn to develop clarity around your financial life and develop some new ways of making your money work harder for you (not the other way around!).
Ready to feel confident and in control of your money? Schedule your free Q+A with Kasey of Upward Personal Finance now.