Financial Knowledge to Build Wealth
and Invest Wisely for Millennial Women
Financial Feminism MasterClass brought to you by BakerAvenue
Millennial women have it especially hard when it comes to saving, paying off student loans, and being able to purchase a home. Additionally, you may have witnessed your parents or grandparents lose wealth in the 2008 recession, which could affect how you view investing.
Typically, financial priorities for you include getting out of debt, living expenses, saving for big purchases, and planning for the future. Tackling these problems requires utilizing money-saving plans and wise financial management.
Meet Millennial Maggie, Age 29
I am a female millennial. I have been saving since I started my career in 2014, started an IRA in 2016, and in the past couple of years, I have been investing in BakerAvenue’s Impact strategy.
I do not own a home – I rent a two-bedroom apartment in NoLita, NYC. I currently have student loans but no credit card debt or any other type of debt.
The Top Three Issues for My Financial Future
- How to start investing: I would say the top financial concern I had entering my 20s was how to even start investing. Many millennials’ first experience with financial markets is opening a 401(k). There are a lot of questions that come along with this: What percentage of my salary should I invest? What is considered a good employee match? How should I allocate my 401(k)? Should I just use a target fund? Do I want a Roth vs. a traditional IRA? How do I open an individual investment account and trade my own positions?
- Budgeting and saving: Budgeting and saving are also very top of mind for millennials. Once you get your first paying job, it is really easy to want to spend it all on vacations, shopping, fun activities, etc. I think this is the most important time to develop healthy spending habits that will last you throughout your financial life. It is prudent to develop a plan and stick to it. For a lot of people my age, a big part of their plan is to pay off student debt.
- Starting a family: As millennials are reaching their 30s, a big financial concern we have is the economic considerations of starting a family. We need to make sure we have enough cash flow because getting married and having children will definitely increase expenses. We have to plan for a child’s education, which can include savings options such as 529 plans, Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA). Looking at healthcare expenses, life insurance needs, ensuring an estate plan is in order, etc. are part of the strategy. Often when people are just starting a family, it can be overwhelming since there are so many new financial concepts to understand – and it seems like it is all happening at once.
Overview of What to Consider
In Your 20s...
It is never too early to start saving for retirement. Setting up tax-advantaged retirement accounts that allow you to direct money into equities will grow and compound your money for the years to come. You will also want to consider building your savings. Emergencies do happen, and only a small margin (less than 5%) of illnesses or accidents that put people out of work result from job-related incidents. Therefore, you may not be covered by workers' compensation, resulting in a loss of income. Starting your savings by building an emergency fund amounting to approximately six months of your independent salary (or three months for a dual-income couple) is recommended...
- Start saving for retirement through equities
- Build your savings, including an emergency fund
In Your 30s...In the past few years, you may have started spending more and taking on more financial responsibility, such as starting a family. While it is in your best interest to save and invest, you will also want to start thinking about some long-term considerations. Now is the time to begin creating your will, setting up a financial power of attorney, and securing a life insurance policy...
- Create a will
- Set up a financial power of attorney
- Secure a life insurance policy
Overview for New Investors
Did you know that over a lifetime, women are losing upwards of $100 a day by not investing? And that women are 80% more likely than men to be impoverished during retirement?
Regardless of what generation you are, learning how to invest is a powerful skill that can provide you with an edge.
Recommended Portfolio Mix
Align your strategic objectives to your asset allocation. Keep in mind, your portfolio evolves as you go through life’s transitions. Typically, millennials should focus on growth.
A portfolio mix to maximize returns, often with much higher risk tolerance and volatility, that could have higher turnover and less tax efficiency.
- Momentum and growth stocks
- Emerging markets
- Alternative investments: Private equity, venture capital
Produce disposable income and growth to protect purchasing power. These assets have moderate risk and return goals.
- Dividend-paying stocks
- High-quality stocks
- Taxable / municipal bonds
- Income-producing real estate
ESG / Impact
10 years ago, even five years ago, conversations about impact investing would start with financial advisors asking clients, "Is this something you're interested in?" Today, it’s the clients proactively asking how they can back companies committed to best practices for environmental impacts, social responsibility, and corporate governance issues.
👉 Read more on:
- How investors are aligning their money with their values
- View our white paper on how to get started with impact investing
Today, over half of the global demand for gold is from jewelers and manufacturers for medical and electronic devices. The second-largest group of gold consumers is investors. Central banks, whose job is to control the flow of money, keep cash currencies and gold as part of their reserves.
👉 Read more on how to get started with investing in gold.
Budgeting & Debt
Budgeting and Saving Considerations
Knowing your monthly income and expenses is an essential part of creating financial freedom. Here are a few tips to keep track of what you spend and how to establish a budget.
Understand your income and how much of it is actually going into your pocket by using a budgeting worksheet to keep track of your wages and what you receive after taxes. Then take an inventory of all your expenses, including:
- Home expenses (such as mortgage or rent, utilities, internet, insurance)
- Transportation (gas, parking, public transportation, ride share, car insurance, tolls)
- Daily living (groceries, restaurants, pet care, cleaning services, child care, clothes)
- Subscriptions (gym fees, Netflix, Amazon, music subscriptions, apps, tech tools)
- Health (dental, medical, prescriptions, co-payments, personal care)
- Financial obligations (loan payments such as school, credit cards, 401(k), savings)
Also, take note of expenses like vacations, entertainment, and recreation. Another great hack is to use a software app to do the work for you.
Next, see where your money has been going. Identify the categories where you spend the most, distinguish between variable and fixed expenses, and review your overall habits. It can be eye-opening to see what you are spending your money on and realizing that your frequent $5 frappés are costing you over $1,000 per year.
The last step is to create objectives and a budget you can follow. Set goals that are high enough to motivate you, but not so difficult that they are impossible to attain. Write down your goals, as well as the reasons to put context behind them, and review regularly to track progress. After an initial first goal is accomplished, you should aim for a more challenging goal and continue to pursue it diligently until it becomes a habit.
Given the current state, it's also important to factor in inflation as you budget and save.
👉 Here are some issues to consider during times of high inflation.
Debt and Credit Tips
A common financial challenge faced by for millennial women is student debt. CNBC reported $890 billion of $1.4 trillion in student loans in America are held by women. Some tips to dealing with a huge debt include:
- Use your grace period: Pay down unsubsidized loan interest during your grace period before interest kicks in.
- Prepay: Cut the total interest you have to repay by paying early or paying a little extra on higher loans.
- Avoid refinancing with private lenders: You’ll lose benefits the government provides for federal student loans.
- Reassess your repayment plan: Compare payment amounts under your current plan to similar amounts under other repayment plans and switch plans if you can afford to pay more each month.
- Renegotiate your interest rates: Talk to your creditors to change your interest rates or payment terms (it could end up being better to take out a different loan at better terms).
- Consider consolidating: The government will consolidate all your federal loans into one debt. This could generate lower monthly payments.
- No negative amortization: Some federal repayment plans allow you to pay less than the monthly interest charged on your debt, but you’ll pay more in the long run.
- Use loan forgiveness: See what forgiveness plans you might qualify for and if available, take advantage of them.
- Pay on time: Delinquent payments generate fee penalties. If going through hardship, call your servicer to ask to change your due date or repayment plan.
Compensation and Taxes
Negotiating Compensation: Many findings underscore that men tend to get better compensation packages because they’re more likely to ask for what they want.
👉 Read our blog on negotiating job offers
Taxes: Tax laws change frequently, and these changes have potential impacts on your investments.
👉 View a directory of commonly used Tax Terms
Getting Married & Starting a Family
Buying a home
👉 Education planning: Read How to Get Started with 529 Plans
Start saving for retirement through equities
Build your savings, including an emergency fund
Set up a financial power of attorney
Secure a life insurance policy
How to Choose the Right Type of Advisory Firm
There are many different descriptions within the financial services industry for financial management companies, including asset management, wealth management, and family office services. So when choosing an advisor, it’s key to understand the differences between these terms and the capabilities that different types of managers offer. View this video or read more on choosing a financial advisory firm.
👉 Also, read commonly asked questions on the differences in wealth and financial advisory firms.
Our goal is to address the gender wealth gap and to empower women financially in creative and dynamic ways. Everyone deserves the opportunity to benefit equally from engagement in financial markets and live a life they design with intent and purpose.