The holidays are here and what a precious time to disconnect, recharge, catch up with friends and with yourself. If you strive to use the summer period to build a stronger, wiser, and more self-confident version of yourself, here is the first area to work on: your first investing plan.
But wait! We know that you feel tempted to skip towards the end of this article directly to the 3 steps to create your investing plan, but here is the first rule in the relationship between women and money: invest in educating yourself.
Gift yourself a moment to understand the why and the what of creating an investing plan:
The why
It is crucial for women to build financial independence as early as possible, but it is never too late to start. Here is why:
Women earn less than men. According to the European Commission, women in the EU earn on average 13% less than men. This is due to pay discrimination, where women are paid less than men for doing the same job, but also due to women tendency to choose lower paid careers like health care or education. Even when women go for high paid roles in leadership, the glass ceiling is still a barrier and less than 8% of top European companies have female CEOs.
Women take more unpaid work. Whether that’s to care for relatives or children, women tend to take more career breaks to perform unpaid work, diminishing our contribution to savings, investments, and pension.
Women live longer. According to a recent DC Pulse survey, 63% of women are worried about outliving their retirement savings. And their worries are real. Women live longer than men but invest less towards retirement due to the gender pay gap, career breaks, and lack of financial education, among other reasons.
We are the role models of future generations. Currently, there is a lack of female role models in politics, professional sports, the financial and technology sectors, and so on. Only if we get involved in those areas, will young girls see themselves represented as CEOs, athletes, AI masters, or investors. It is our responsibility towards the next generation!
The what
The goal is financial independence. Creating an emergency fund that will keep you safe while making difficult decisions, like quitting the toxic job or relationship; maximizing your savings towards your dream house; or building the financial net to retire early and in style.
And today you are here to build your financial independence through investing. While the markets fluctuate and investing comes with a risk, research shows that women are better investors than men. This is due to our mindful approach to risk and resistance to emotional investing. Meghan Railey, co-founder and CEO of Optas Capital, puts it this way: “While we have found that male clients tend to eagerly invest in the latest asset class everyone is talking about, like cryptocurrency, female clients do not generally jump on the shiny bandwagon.”
An investing plan prepares you to tolerate the risk of fluctuating markets, invest in the brands or industries you are passionate about, and maintain the cool when your investments are underperforming, or performing better than expected!
The how
Now that you understand why it is important for you to take action now, and the benefits of having an investing plan, here are the 3 key steps to take this summer:
Determining your risk tolerance is a crucial step to gain self-confidence when it comes to investing. It will shape your investing plan, starting with the amount you invest and the specific assets you choose.
To gauge your risk tolerance, let’s consider this simple question: How much are you willing to risk losing without compromising your financial well-being? While you always want to minimize losses, it’s important to identify the maximum amount of money that, if lost, would still allow you to meet your monthly expenses with confidence.
To ensure that your investments work in harmony with your overall financial stability and aspirations, work with the Her Lab Financial health check. This one-pager will reveal your risk tolerance, and therefore, how much you can afford to invest.
Are you looking to create an extra income to build your emergency fund or house deposit faster? Are you willing to take higher risk and have access to higher profit? Or will you rather invest small and frequently to ensure a comfortable retirement? Your money goals and risk tolerance will define your investor style, and here is a summary of the main investing styles. Make sure you complete your Financial health check first.
Dividends investing. If you are looking to make an extra, steady income that will help you fund your dream home, travels around the world, or that life project you can’t take off your mind, this is the way to go.
Dividends are payments companies make to their investors when business is doing well, however not all companies pay dividends. Here is a blog post to create an extra income as a dividend investor.
Stocks investing. If you want to choose the companies you invest in and are curious about how they innovate in new products, engage their customers, or invest in their employees and environmental causes, you can buy their shares.
If this is your investor style, here is your summer homework: identify the brands you engage with on social media, the products you recommend to your loved ones, and the companies led by inspiring leaders. Follow the news to find out if they announce new products, achieve their revenue goals, or invest in their employees’ wellbeing. By the end of the summer, you will have a verdict on whether they deserve your trust or not!
Investing in funds. A fund is a pool of money from lots of different investors where a professional decides how much to invest, and where. While you don’t get to choose specific companies to invest in, you can choose topics and industries that align with your values, like top technology companies, environmentally friendly brands, or companies based in developing countries.
Investing is anything but a summer love affair, we are here for the long term! Book your financial dates in your calendar and make sure to make it a priority. Cancelling or postponing your financial independence is not an option.
To ensure you have the time to learn and research, you can take yourself to a weekly financial date to start with, and move it to monthly once your investment plan is underway. Go to your favourite café, or cook your chef-like brunch at home, remember you are conquering someone on this date: your future self.
Here is a list of things to do during your financial dates:
- Financial health check – while this is the first thing to do before making your first investment, consider completing it again several times a year to ensure a healthy relationship with your money. Download it here for free!
- Learn how to invest – shop the Her Lab tried and tested course on Investing for Financial Wellbeing. During this self-learning journey, you will work towards financial wellbeing in the same way you build your physical or mental health.
- Find your inspirational woman – whether that’s women talking about investing, career development, or financial wellbeing, follow and if possible, connect with an inspirational woman.
- Read about investing – tap into free resources like the Financial Times, the Economist, or the Her Lab blog to stay connected to the world of financial wellbeing.
The bottom line
Now that you understand why it is important to build your financial independence and how an investing plan can help you get there, your three steps to take this summer are: identifying your risk tolerance, defining your investor style, and scheduling financial dates for the rest of the year.
While investing is risky and not taught in school, by learning how to invest you can tap into all its benefits as a woman. Your journey as an investor starts here!
Want to start investing? Cut through the noise with Her Lab education and resources.