I have a 6-figure job and my husband stays home with the kids — here are the 10 best pieces of advice I can give you about money
Courtesy of Liz Gendreau
- Liz Gendreau, the Chief Mom Officer, is a 38-year-old MBA who works as an IT program manager at a large company making a six-figure salary. Her husband, Todd, stays at home with their three boys, ages 14, 10, and 3.
- She's been the primary breadwinner since shortly after they were married, over 16 years ago.
- Personal finance has been one of her hobbies since she was a teenager.
- She says everyone should know how to track their net worth, invest their savings, and align their financial goals with their dreams.
When I was 16, I picked up a book from the library called "The Wealthy Barber" by David Chilton.
That book changed the course of my financial life.
Like most teenagers, I thought only the famous or uber-successful were wealthy. Ordinary people couldn't become rich, right?!? The title of the book that drew me in, like it did millions of others. How on earth could a barber, of all people, become wealthy?
The book was fun and engaging, not dry and dull. It was told as the story of several friends who learn important money lessons from a wealthy barber (and the people hanging out at his shop) over the course of a year. I learned all the important foundational lessons about money that you don't usually learn as a teen.
It covered real estate, mortgages, taxes, retirement, investing, college savings, and so much more. That book inspired my lifelong passion for personal finance. Because of that book, I opened an IRA as a teenager, invested in a 401(k) the minute I had a job that offered one, bought a condo at 20, started investing for my boys to go to college when they were born — and a whole lot more.
The financial lessons continued to pay off even into my 30s. Having personal finance as a passion kept my family from bankruptcy. When I was 32 my husband almost died of septic shock — an event that rocked our world and continues to impact our financial life. Without the solid financial foundation I'd built, starting with this book, our lives would be totally different today.
Over the past 20 years, I've read hundreds of books, blogs, magazines, and articles about managing money. Here are the top 10 things I've learned.
Don't rely on your partner to manage your money
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Many women aren't taught important lessons about managing their money in the same way men are. But it's so important they're involved with their finances.
A recent report from UBS Wealth Management found that over half of married women (56%) leave long-term financial planning decisions to their husbands. Why? Because 85% of those women believe their spouses know more about finances.
Interestingly, did you know that a Fidelity study shows women investors outperform men?
Women outlive men. Nearly half of marriages end in divorce. And eight out of 10 of us will end up, at some point in our lives, being solely responsible for our money. These are all huge reasons women need to be money smart.
Relying on someone else can be a recipe for disaster. Sadly, according to that same report, 56% of these women discovered a money secret. Hidden debt. Inadequate savings. Overly conservative — or aggressive — investments.
That's a high price to pay.
Being in the dark about where your money is, where it's going, and why, is no way to go through your financial life. But taking charge of your money can be confusing and overwhelming. So where do you start?
Know where all your money is, where it's going, and why
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The first step to being smart with your money is to know exactly where you are right now.
You can't make financial changes in your life without knowing where you stand. I've been tracking my net worth since I was 20 years old. It's actually a lot of fun to look back on past years and see what my financial situation was in my mid-20s, at 30, and now at 38.
We often overestimate how much can be accomplished in a short period of time, and underestimate how much can be accomplished over a long one.
There are only three things you need to know:
- What you have (and owe) — This is called your net worth, or a balance sheet in the corporate world. It's everything you own, minus everything you owe. Knowing your net worth tells you where all your money is and how much you owe. You'll want to record what kind of account it's in, how much is there, and what it's invested in.
- Where your money is going — Note that this isn't a budget. No, it's a simple analysis of where your family's paychecks go each month. What are you spending on? What's going to expenses, debt, saving, and investments? If you don't track your money through a free tool like Mint, you can usually download the information from your bank and credit card(s).
- Why your money is where it is — Why is it invested the way it is? What's the reason you have X dollars in checking, Y in savings, and Z in these funds in retirement? Why are you spending on the things you are?
Even if you have a spouse that already tracks the money, it's important that you know the answer to all these questions. Make time to sit down together and go through the details.
Knowing where all your money is, where it's going, and why, is the beginning of smart money management. After this, you need to get to know your dreams.
Establish your dreams
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What are your ultimate goals and dreams? Where do you want to go in life?
Sit down and really think about your ultimate dreams. Do you want to start a business? Retire early? Send your kids to college without debt — or finally get that degree yourself? Buy a first home, vacation home, or become location independent? Maybe your dream is to travel the world as a family before your kids grow up, or start a scholarship to help underprivileged children go to college.
Why is knowing your dreams an important money tip?
Because without clarity on your dreams and goals, you can't make your money work effectively for you. You'll be saving or investing with no purpose, which means you might not be doing the right things to get you where you want to go.
When you know your dreams, your why will help you down the long, hard road. It will get you back on the path when you fall off, and will give you the courage to stand up to those that might mock you.
It's your "why" that will keep you going.
See the rest of the story at Business Insider
See Also:
- I have a 6-figure job and my husband stays home with the kids — here are 10 things no one seems to understand
- I'm 28 and I've saved over $240,000 — here's what I've learned about money from tracking my net worth for the past 2 years
- We asked 16 regular people on the streets of NYC about the best and worst financial advice they've ever received, and most were told the same thing