I have a favorite uncle. I consider him a mentor. When I tell him that I love him, the other end of the phone goes quiet. I know he is blushing. That’s just how Caribbean old school men do. I love and I understand it. Well, one day, I called him to tell him how I was progressing in life, especially when it came to my finances. I was trying to impress my uncle by telling him how much I had saved in the bank. I was shocked when he told me that I shouldn’t be saving so much money in the bank. I was wasting it.
I did not understand.
As a successful business man, he told me (my brother, too, who is also my hero) that once you save a certain amount of money to cover you in the case of an emergency, you should be thinking of ways to maximize the value of your dollar. As you know, you get PALTRY interest on savings accounts because it’s safe. Aint’s no money maximizing at the bank.
My brother and uncle were aptly instructing me to take more risks with my money by investing in stocks, bonds, mutual funds, and index funds. In essence, you can’t SAVE your way into being a MILLIONAIRE. I mean, I guess you could, but it would take longer and you may have to sacrifice the simplest of pleasures for it. And who wants to walk around looking ashy and crazy just to save a buck? Not me.
After these conversations, I spoke with my financial advisor to increase my monthly deductions and had a chance to ask him a few questions about investing with BMWK female readers in mind. Here are a few of the questions that I asked:
Do I have to make a lot of money to begin investing? Many people feel that they don’t make enough money or have enough money to begin investing, but that is a misconception. You can start with as little as a few hundred dollars and can make systematic additions/contributions with as little as $50 per month.
Black women have been historically good savers and historically conservative. Why is that a double-edged sword? Black women tend to be on the conservative side when putting money into savings vehicles, which can be a double-edged sword by limiting the growth. And eventually, the return can be eroded by inflation (the cost of goods) over time. There’s nothing wrong with being conservative, but a certain percentage of your assets should have a little more growth potential.
I have a lot of student debt. Should I wait before I pay it all off to begin investing? Student loan debt can be a tremendous burden to most people and can be as big as a mortgage in some cases. This debt can put a gigantic strain on you from paycheck to paycheck and is a major issue in this country. There are ways, though, to extend the time to begin payment and even ways to restructure the payment plan in general.
If you have some discretionary income after paying your overhead (debts and living expenses) then you should try to save at least 5-10% of each paycheck at a minimum. This can be figured out by doing a personal balance sheet. Add up all monthly income (after tax pay) then subtract all monthly expenses from it. You will come to your disposable income amount and hopefully there will be enough to start putting some away for your future and making your money work for itself.
What budgeting basics should a woman have in place to make putting aside investment money for the long term? Individuals who are serious about building a good quality of life sometimes need to make sacrifices and not make decisions based on emotions or wants. Buying a $200 pair of shoes or a $400 pocket book might look great and impress your peers, but usually does not help your overall quality of life, especially if it takes away money that could go towards your plans and goals you want to achieve.
If your peers judge you on those material items, then maybe it’s time to find some new friends. Success does not come without a cost. That cost usually entails discipline, sacrifice, education and taking some risks. Seeing your money invested is a wonderful feeling, especially when knowing that you did the necessary things to make it happen, plus you also grow your self-confidence and self worth as well as independence in the process.
BWMK: Are you saving too much? What do you need to do to begin investing?