Are you ready to learn about investing?
Here's the deal... in my experience many women are a little frightened by investing.
Let's look at the stats...
- According to Money magazine, some women miss out on approximately $1 million in investments in comparison to their male counterparts over the course of their professional lives.
- According to Fidelity, women make smarter investments than men by 0.3%. (Yes, a small number, but WE’LL TAKE IT).
You know my saying: We budget so we can save; save so we can invest; and invest so we can grow wealth.
You may also know that I recently announced my first book with a major publishing house, titled Get Good With Money.
One of the ten steps of what I like to call “Financial Wholeness'' is actually dedicated to investing… BUT I know how often women run away from the topic. (Trust me, with more than 10 years in the game I’ve seen some things… HECK I ran from investing too).
That’s where the Get Good With Money Girls come in! Ashley, Maria, and Tamara are all at different income levels, with unique goals and needs, yet they are all starting on their 2021 goal of INVESTING. Follow their stories on my social media platforms and blog to find simple strategies to invest at any stage of the game.
I’ve been in the lab with Jully, a.k.a the Investing Latina, to create this easy way for us to learn about investing...by following some women who have some of the same "life" things going on that you and I do.
Hey Jully!
Hey Get Good With Money Girls! I’m Jully, Founder of Investing Latina. I’m an award-winning money expert, writer, producer, and youtuber and I’m extremely passionate about inspiring women to invest. Tiffany and I teamed up to show you just how simple it can be to start investing with our series: “Investing 101 with the Get Good With Money Girls''. Throughout the year, we will be breaking down investing terms, showing you different scenarios, and answering all of your investing questions along the way. We will be going live regularly to talk about investing, so be sure to follow TheBudgenista & Investing Latina to join our chats and to get all the goodies that we’ll be sharing.
I want to get started by introducing you to three amazing (fictional) women - from completely different backgrounds, living in different parts of the United States, and making different salaries. One is just starting her career as a teacher, one is an Executive Assistant & Mom, and the other is a Solopreneaur. Although they have different paths and different experiences, they share one thing in common: a desire to build wealth by investing and to secure their retirement. I’m going to give each of them an investment strategy based on how much they make, their goals, and most importantly: how to use the tax codes to protect and grow their money.
This week we talk about choosing the best account to meet your unique needs.
Meet Ashley a 24 year old teacher in St. Louis, MO
Salary: $35k/year
Ashley’s 2021 Retirement Investment Goal: $2,560
Accounts she will be using: 403(b), and Roth IRA
Why invest: Ashley recently graduated and doesn’t have too much money to spare, but she can start small now and slowly work her way up. She’s going to contribute up to the company match and also use a Roth IRA to invest outside of her work-sponsored account.
Why these accounts: Since Ashley has access to a work-sponsored retirement account, that’s always the best place to start. I know they call it “saving for retirement”, but you’re really INVESTING, which many people don’t realize. Also, Ashley’s company is offering her a MATCH, that’s like “free money”, which is a nice benefit perk to have. If she doesn’t contribute, she will miss out on that money that her company is gifting her for retirement investing.
Now, outside of work Ashley is going to open a Roth IRA. IRA stands for Individual Retirement Arrangement, and it’s something you can do on your own, at any investment institution. A Roth IRA is an amazing retirement account that does a few amazing things but the biggest one is: it allows you to invest post-tax and you never have to pay taxes on the money you put in or the money you make through that investment account. Isn’t that amazing?!
Opening a Roth IRA: to name a few of my favorite, you can use fidelity.com, vanguard.com, etrade.com to open Roth IRAs. Many other institutions offer IRAs, too!
Meet Maria a 33 year old professional mom from Charlotte, NC
Salary: $75k/year
Maria’s 2021 Retirement Investment Goal: $8,850
Accounts she will be using: 401k, 529, and Brokerage
Why Invest: Maria has done ok with saving for retirement by saving up to the company match of 3%, but she wants to bulk up her accounts and she also wants to invest for her kids. Her ultimate goal is to build generational wealth.
Why these accounts: Maria has been using her 401k at work for some time now, and she understood early on that getting the company match is “free money” that she should always take advantage of. This year, she wants to invest more so I’m going to have her increase her 401k contributions. In a 401k, the maximum that the employee can contribute is $19,500 (in 2021, and this amount goes up a little every few years), and this doesn’t include the company max! Aside from that, she will also create college savings plans for her kids via a 529 vehicle. 529s are designed to help save (and invest) for educational expenses. So these accounts will help pay for tuition, books, room & board, a computer, and more while her kids are in college. The money grows tax-free, so the tax savings on the money earned in the account is a big plus.
Lastly, Maria’s 3rd type of investment account will be a brokerage. So there are no tax benefits like there are on her other two types of accounts, but it’s another vehicle for building wealth. What’s great about investing using a brokerage account is the flexibility you have. There is no penalty to take money out, she’s not restricted on how much she can put into the account, and she has access to any funds or stocks she’s interested in investing in. It’s important to note that for Maria, we will focus on long-term investing - because we want to avoid paying short-term capital gain tax! Remember that understanding taxes is a big part of investing and building wealth, so Maria is going to do what she can to minimize her tax liability. We’ll learn more about taxes throughout the year, so stay tuned for the journey.
Opening a 529 in North Carolina: https://www.cfnc.org
Opening a brokerage: you can use any investment bank to open a brokerage. I once again recommend Vanguard.com, Fidelity.com, or Etrade.com.
Meet Tamara, a 42 year solopreneur in New York City, NY
Salary: $125k/year
Tamara’s 2021 Retirement Investment Goal: $14,400
Accounts she will be using: Roth IRA, Solo 401k, and Brokerage
Why Invest: Tamara has never invested for retirement because she has never had access to an employer sponsored account, but that doesn't mean she can’t invest for retirement using an Individual Retirement Account (IRA) and other accounts that she has access to.
Why these accounts: Tamara will be using these accounts because she has to open her own accounts since she doesn’t work for a company. Opening a Roth IRA will be her beginning point and introduction to investing for the first time. Remember that anyone with earned income can open and contribute to an Individual Retirement Arrangement. In this case, I am having Tamara use a Roth IRA, where she will be contributing up to the limit of $6,000 into this post-tax account allowing it to grow over the years, as her business and income grows. Since she is a small business owner, I’ll also have her open a Solo 401k through her business. This is an awesome account because it will give her the ability to invest more than any other retirement account. The limit on this account is $57,000 for 2021, and although Tamara won’t be maxing it out, she’ll definitely be using it to her advantage. Tamara also wants to have the flexibility of a brokerage just like Maria did, so she will have a brokerage account that she will be contributing a small amount to every month.
Opening a Roth IRA, a solo 401k, and brokerage: you can use any investment bank to open a brokerage. I recommend Vanguard.com, Fidelity.com, or Etrade.com although there are many more options out there!
Have an investing question, you can #AskMeMoneyThings by texting Jully at 917-636-4049 or by clicking here.
Are you good with money? Take my Financial Wholeness quiz by clicking here.
See you in the next episode...
Disclaimer: Please keep in mind that we are not certified financial planners, and that by investing you take on risk, so be sure to not construe this as investment advice, but rather as educational content.