We know first hand when women set their mind to something, they can truly achieve anything. That also applies to confidence around money. When you have the right money mindset and you experience the role it plays in living your best life, you’ll become a formidable force.
So it’s time to ditch all fear, obligation, and guilt that block your healthy views on money to achieve the life you’ve always wanted.
Financial educator, Catherine Alford helped us get to that place with her Morning Money Talk presented by Ally at the recent Future of Work digital conference. She shared tips for getting your finances organized at home and supercharging your savings (because we’d all like a little extra financial padding right about now!). She started her business from scratch with a $10 domain name and grew it to six figures so she knows a thing or two about managing money.
She explained that it’s hard to focus on your job, your side business, or your incredible start up idea if you don’t have your personal finances in order. Additionally, she says the more you save in your personal life, the more freedom you have to pursue your professional goals. Read on to learn about Alford’s three-step savings strategy.
Whenever I'm having those moments where I really don't feel like saving, I think of my three main reasons to save to remind myself why it’s important. Here they are:
Reason #1: Personal Freedom
Personal freedom is a massive deal to me. It's why I became an entrepreneur. I like doing what I want, when I want. I like choosing who I work with and what I spend my time on. I like having a job and still being able to pick up my kids from school. When you save your money and you're smart about how you manage it, the more personal freedom you have. Personal freedom with your finances allows you to walk away from jobs and situations that don't serve you and allows you to have fun too.
Reason #2: Leaving a Legacy
How cool would it be if your great-grandkids said, “Because of Grandma Cat or Grandma Sarah or Grandma Melody, all of us went to college debt-free?” What if, because of the lessons you taught and the discipline you established in your family, it changes the way your family behaves, perceives money, and donates?”
Reason #3: Extreme Generosity
Having savings also allows you to be generous with a friend who really needs help at a certain moment. I love the idea of extreme generosity, and I like practicing with micro generous moments. Remember, the more money you make, the more you can give away and make the world a better place.
How Much to Save and Where to Stash It
I like to have a three-step strategy when it comes to saving.
Get one month ahead.
Establish a solid emergency fund.
Set up sinking funds.
Get into the mindset of believing you're a warrior when it comes to savings and you are going to slash through these goals, however long it takes. If you want personal freedom, to leave a legacy, and to be extremely generous, these steps can help you get there.
Get One Month Ahead
There's a concept called mental load that's been gaining popularity over the past couple of years. It's this idea that women have to do thousands of invisible tasks, things people don't see, things we naturally take on ourselves like emailing our kids teachers or getting a birthday gift for our mother in law. No one assigns us these tasks. It's just that culturally women have taken up all of these tasks, and it is a heavy load on many days.
I don't want money to be one of those things for you, but money takes a lot of time to manage unless you get one month ahead. For me, getting one month ahead is stress-free budgeting, and here's why. When you're one month ahead, you start the month with all the money you need for the month.
The goal is to use your paychecks from this month to pay your bills next month. And if you're thinking, “That would be nice, but that's not possible,” you have to go back to your mindset. Remember, you are a savings warrior and you absolutely can accomplish that.
For some people, they can get one month ahead today by transferring money from their savings accounts and getting started on the first of next month. For other people, it might take a few months to get there, and that’s okay. What’s important is that you start.
Establish a Solid Emergency Fund
For ten years, I've been telling just about everybody to have a three to six-month emergency fund. And this year has completely changed my view on that because now, I am a fan of having six-plus months of an emergency fund.
If you have high-interest debt, like credit card debt, start with a one-month emergency fund. Then, pay off your high-interest debt as quickly as possible and go back and build your savings to six-plus months after that.
If you have low-interest debt, like a car loan or student loans, build your savings up to six-plus months now before aggressively paying those down.
I like to keep my emergency fund separate from my regular checking accounts and my investment accounts. I keep this money liquid. That means I can access it and have it today if I need it.
Set Up Sinking Funds
Sinking funds are little baby savings accounts for all of the big events and unexpected events that might happen in your life. Three examples are car repairs, holiday savings, and vacations.
One of the first sinking funds I ever created for myself was when I started my business, and I really wanted to get a MacBook Pro. I was in my 20s at the time, and it was the most money I'd ever saved. I would save a little bit at a time in an online savings account until I reached my goal.
That was my first experience, and I was hooked because it feels so good to go into a store with cash that you've already saved. There's no guilt, there's no stress, and there's no regret.
It’s the same thing with vacations. Have you ever taken a vacation that’s completely paid for up front? If so, you're not worried about getting home and looking at your credit card statement. If you save for vacations ahead of time and you have all that extra padding, you're actually able to relax. You can also use sinking funds for things like your kid's birthday party or holiday shopping.
To make this easy, Ally Bank’s Online Savings Account offers buckets. So, instead of having five or six savings accounts for various sinking funds, now you can consolidate them into one savings account with buckets inside of it named for your savings goals. This helps you to stay organized and in control of your money.
Bonus Tip: Automate Everything
I know a lot of people aren't fans of automation but for me, automating is everything. I automate my savings and paying my bills because it saves me a lot of brain space. It’s the easiest way to build up a savings account without thinking about it, and that is what I credit the most to being able to build up my emergency fund to what I have today.
If you've never tried automating or it makes you nervous, just try it for a month or so and see how you feel about it. Start by scheduling a small amount of money to automatically transfer to your savings account after you get paid. I know people worry about too much money being withdrawn from their accounts. However, after many years of automating, I have only had a problem two or three times, and it was quickly fixed with a phone call.
I hope with this three-step strategy, you can get started on your path towards financial freedom. Not only will having an emergency fund and sinking funds provide a great financial cushion but having them will also give you incredible peace of mind.
To learn more about Ally, visit ally.com
Ally Bank, Member FDIC
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