Getting the Facts on Finance with Kristen Robinson

Taking time with Kristen Robinson, Senior Vice President, Fidelity Investments to unravel the world of finance for PINK.

What is the easiest method for women to create their budget, but most of all stick to it? Do you recommend any apps for them to download and maintain accountability?
Oftentimes, the word “budget” sounds like a daunting responsibility that many people want to avoid. However, it doesn’t have to be that way. Creating a budget takes you one step closer to gaining more control over your financial life. With so many competing priorities in your life —whether it’s paying down debt, taking care of your family or going out with friends—it’s important to know where your money is going.

These days, getting smart about your spending habits is easier than ever. There are great tools available online that make budget-building less complicated. Consider using a budget snapshot tool to track your spending and zero in on how you use your cash. When you sit down to start creating your budget, ask yourself the following key questions:

  1. How much of my monthly paycheck is going toward essential expenses (housing, transportation, food, utilities, debt) vs. discretionary (cable, phone, entertainment, clothes)?
  2. Do I have short-term debt, such as credit card or student loans? If so, am I making a conscientious effort to first pay down the debt with the highest interest rate?
  3. Have I established my savings priorities? Do I have a “rainy day fund” in case of an emergency? If so, do I have enough to cover at least six to nine months of living expenses in case I’m confronted with a sudden life altering event, such as job loss, taking care of a sick loved one or unexpected health issues?
  4. Do I have a retirement plan and am I making the most of it? Remember to continue making contributions to your retirement accounts even if you’re still working off your debt. Once you’ve paid down your high interest rate debt, consider increasing your retirement savings contribution. Additionally, some credit cards, such as Fidelity® Investment Rewards® American Express® Card, allow you to deposit your 2 percent cash back rewards directly into a cash management, brokerage, retirement or 529 account, allowing you to save and invest more each month.
  5. Where can I make adjustments? If you’re spending more than you are making, look for areas you can make adjustments. Can you spend less on dining out or entertainment? Think about how much you need to set aside to help fuel your goals.

Sticking to your budget isn’t a perfect process, but any small adjustments you can make in your spending habits are steps in the right direction. Fortunately, there are plenty of free online apps that can help you stay on track. Also, consider using mobile banking apps as they can help you keep track of both your everyday spending and retirement savings. Lastly, though it may not be as fun as using online apps, try to practice good old self-control by reminding yourself of your financial priorities. Try to keep long-term goals in mind, which can give you the strength to say “no” when you become distracted by opportunities to spend money you could otherwise be saving. Do you really want to go on an expensive vacation if it means you might have to sacrifice other important savings goals? Prioritizing and taking small steps are two keys to success, and building a budget is an important first step in creating smarter financial habits.

How can someone reduce debt or find new ways to save when they are between jobs, launching a new career or launching a new business?
If you’re going through a life changing event that’ll impact your finances, it’s important that you keep a close eye on your everyday spending. Now is a good time to try to keep your budget lean and only spend on the essentials — keeping discretionary spending at bay.

Avoid using a credit card to finance purchases that aren’t absolutely necessary, especially if you don’t have the money to pay for it. When you’re in the middle of a financial transition, it’s wise to not create even more debt for yourself. Ask yourself if you really need to spruce up your home, take an expensive vacation, or take advantage of the latest sale.

How can someone become a better investor today given that the 2008 financial crisis is still fresh in the minds of people who were negatively impacted by it?
Fidelity’s 2013 Couples Retirement Study found that nearly 30 percent of women were more interested in preserving wealth than in higher returns, versus 20 percent of men. Overall, women are great savers, but many aren’t putting their hard-earned money to work. How you invest is just as important as how much you save. The good news is that the same attributes that make women such dedicated savers can also help them become smart investors.

If you haven’t already done so, take the time to review your investments to ensure you have a mix of stocks, bonds and short-term investments that take into account your financial situation, tolerance for volatility (or risk) and when you will need the money you are investing. Here are four rules to investing:

  1. Don’t put all your eggs in one basket. The market is made up of many types of investments. Not all of them move in the same direction at the same time. Spreading your money across a variety of asset classes can help minimize volatility.
  2. Invest early and often. It’s never too early to start saving. In fact, the earlier you start the better off you’ll be, thanks to the power of compounding.
  3. Keep it simple. With thousands of mutual funds to choose from, investing can seem overwhelming. One consideration is to choose a fund that automatically diversifies your investments, or meet with a financial professional to determine what asset mix suits your unique situation.
  4. Check in on your portfolio at regular intervals. It’s important to check your mix periodically and make changes when necessary, as some of your asset classes may have performed better than others. A good rule of thumb is to review your portfolio at least annually, and whenever your financial circumstances change.

What is the difference between a financial plan and an investment strategy?
A financial plan and an investment strategy work together to help you achieve your financial objectives. A financial plan looks at the bigger picture, taking into consideration one’s overall goals, such as saving for a home, education costs or retirement. An investment strategy is the part of the financial plan that involves choosing the investments to fit your individual time horizon to meet these goals.

Before creating a financial plan, it helps to know the answers to a few key questions:

  1. What’s my budget?: By now you already know that budgeting is the first step in creating smarter financial habits.  A good budget can help you stay on track to meet longer term savings goals.
  2. What are my retirement goals?: What’s your anticipated retirement date? How much do you need to save to increase the chances you can live the life you expect during your Golden Years? Are you on track to meet your retirement savings goal? Are you saving as much as you can at work? Investing in an IRA?
  3. Does my partner/spouse share my financial goals?: Financial discussions between couples could serve as a much-needed reality check. According to Fidelity’s Couples Retirement Study, 38 percent of couples who have not yet retired disagree about the lifestyle they expect to live in retirement. That’s why it’s so important that you and your partner are on the same page or engage in a healthy discussion about your financial future. Check out this couples quiz and conversation guide to get the dialogue started.
  4. What’s the cost of college?: The biggest expense a parent or soon-to-be parent will have to prepare for is college. Even saving small amounts each month after your child is born could help you build a sizable college fund over 18 years.
  5. Can I handle market volatility?: As you choose your investments, consider your tolerance for risk. Evaluate your investment selections with a financial professional to determine the right investments for your time horizon and risk tolerance.

Are women actively involved in the decision making around their finances? How can they take control of their financial futures so they aren’t caught unprepared?
Women historically have not been as involved when it comes to decision-making around investment strategies and long-term finances. According to a recent Fidelity survey, 53 percent of men say they still take the lead in making the decisions around long-term financial goals compared to only 41 percent of women. Moreover, Fidelity’s 2013 Couples Retirement Study found that 52 percent of women believe their husbands or male partners would do a better job overseeing the family finances than they would.

Many women are essentially imposing their own “financial glass ceiling,” allowing a lack of confidence to keep them from achieving long term financial security. The financial confidence gap can have a ripple effect on the entire family. Statistically, a growing number of women will be solely responsible for their finances at some point in their lives, so relying on a loved one to handle the finances may not be pragmatic in the long term.

It’s imperative to have a plan in place before facing a life altering situation, such as death, divorce or the illness of a spouse. Preparation will help you make informed financial decisions, even during an unexpected and difficult time.

Whether it’s lack of confidence, knowledge, time or interest, it’s time to break down the barriers that get in the way of taking that first step, or next step, to being financially prepared for every stage of life. When women do become more engaged, they are able to make educated decisions and achieve better financial outcomes, providing them greater peace of mind that they have a plan to manage their money today, and reach their goals for the future. Sometimes they just need help getting started.

Depending on where you are on your financial journey, you can accomplish small tasks to seize control of your finances. Today I’ve highlighted three great places to start—budgeting, reviewing your investments, and financial planning. Each of these financial to-dos will help you begin to take ownership of your financial decision-making and build the life you want to lead:

  1. See where your money goes. If you are just beginning to get your financial house in order, a good place to start is tracking your current spending, setting priorities and building a budget that allows you to regularly save for your future.
  2. Become a more informed investor. It’s important to review your investments regularly to make sure you have a mix of investments that take into account your financial situation and risk tolerance.
  3. Create a roadmap for your financial future. To help you build your future, put a roadmap in place to ensure you stay on track to meet your financial goals.

Photo by Taylor James | Fidelity

Share this Article