Investment is Power: Making a Financ(elle) Footprint
We’ve all heard many times that financial freedom is power — whether it was the wise words of an econ prof, your dad’s finance books, or from the tongue of your dapper financial advisor. While this means something different to everyone, the middle ground is the idea of security — something I’ve come to appreciate through my roaring twenties.
As a young woman equipped with a financial background from schooling, I’ve learned to reason beyond the standard theory of numbers. Growing up, money was never a topic of conversation at the dinner table. It was emphasized as more of a reward for working hard, and the glue to keep your future set. But, as I navigate the depths of my years, I start to see investment as a crucial safety blanket.
As women, we are increasingly pushed to understand the concept of money — what to do with it, where to store it, and of course how to make the most of it. The traditional mindset behind empowering women to get financially savvy has always been attached to the concept of independence. While I highly value and support this 100%, I do think it’s about time we shed light on the fact that empowerment also means responsibility.
Women need to instinctually think of the idea of investment as an initial means of wealth accumulation. Financial freedom comes from being able to manage money. It’s about time we ditch retail therapy and any quick splurges and allocate funds where they belong. Society needs to start pushing for money to be more than just superficial means of flaunting. Women need to be empowered to think in terms of asset allocation, growing our wealth, and the power of being high earners in any given field.
While the topic of finance can either be uncomfortable or too complex to understand for many, it’s nothing to be intimidated by. For many of us who are young and looking to invest in ourselves, there are many ways to get started. Here are some quick tips from the finance pros:
Open up a retirement plan — any plan:
The intention behind the following is to get a kick start on retirement savings and tax deferral. Employers normally provide you with a 401(k) plan or 403(B) plan, which allows you to allocate up to $19,000 per year from your earnings. Retirement contributions are tax-deductible from your current income, meaning the contribution of that kind of portion would give out a significant tax break.
If this isn’t provided with your employer, then it is wise to invest in a standard or a Roth IRA. Both of these will allow you to allocate as much as $6,000 per year and give you a tax deferral on your investment earnings.
So, what’s the main difference?
TRADITIONAL IRA: Is Tax deductible
ROTH IRA: Contributions are not tax-deductible. But a Roth IRA makes up for the missing tax deductibility. Withdrawals can be pulled out tax-free after the age of 59 and have been in the plan for at least 5 years.
REITs:
Decent start as a young person, as it is completely independent of the stock market, which can be unpredictable and ever-changing. REITs provides an edge in diversification as it’s a step into involvement with commercial real estate, which is more diverse than the standard residential property. REITs can go on to provide you with positive returns even if the stock market is underperforming at any given moment, given the fact that REITs pay regular dividends and commercial real estate can increase in value, even if the stock market is falling.
Purchase shares (fractional shares) of a stock or ETF:
There is no need to buy full shares of stocks or an ETF. Purchasing just a few shares teaches us the basic nit and grit of hands-on investing, without costing you a fortune to purchase stocks. Fractional shares allow you to own a piece of the company no matter what size the share.
All for now folks. Stay informed, stay smart!
