Financial success is a journey that combines discipline, knowledge, and the willingness to act upon sage advice. Drawing inspiration from the practices and insights of some of the world’s most financially successful women, we can uncover the habits that underpin their achievements. Let’s delve into these personal finance habits, now enriched with specific advice from industry titans.
1. Have a retirement plan
Abigail Johnson, CEO of Fidelity Investments, hammers home one thing: knowing your money is crucial, especially when eyeing retirement. So, what’s her golden nugget of advice? It’s pretty straightforward — get yourself a retirement plan that does more than just guess your future expenses. Think you’ll need about $50,000 a year to live comfortably? Start figuring out how your Social Security, pensions, and savings can cover that.
Let’s break it down a bit. Say, for example, you calculate your must-have expenses (we’re talking the non-negotiables like your home, healthcare, and keeping the lights on) to be around $30,000 a year. Still, your guaranteed income (like pensions and Social Security) only adds up to $30,000. You’ve got to have a plan for covering the rest. Where’s that extra $20,000 going to come from? Investments in an IRA, a side hustle, savings?
2. Incrementally increase savings
Co-CEO and president of Ariel Investments, Mellody Hobson, suggests regularly increasing contributions to savings accounts like a 401(k), especially with salary raises. Say you’re earning about $50,000 a year. If you kick off by putting away 5% into your 401(k), that’s $2,500 yearly. Not too shabby, but here’s the kicker — with each raise, you bump up that percentage just a notch.
Over time, not only does this become a game of watching your savings balloon, but you’re also playing it smart by maxing out your contributions sooner than you’d think. It’s like turning a slow trickle into a powerful stream. This strategy is golden because it’s about making your future self seriously thank you, all while getting the hang of living well within your means today.
3. Budget religiously
Elizabeth Warren famously endorsed the 50/30/20 rule. It’s like the Holy Grail for managing your dough, and it’s something financial whizzes like Abigail Johnson probably nod along to. Why? Because it’s all about getting real with your expenses and ensuring you’re covered for the future.
So, here’s how it breaks down: 50% of your income goes to those must-have expenses (think rent, groceries, and, yeah, those pesky utility bills). Then, 30% is your fun money — this is for those dinners out, the latest gadgets, or maybe that yoga class you’ve been eyeing. Lastly, 20% is tucked away into savings or paying off debts. Simple, right?
But let’s put some real numbers to it. Imagine you’re bringing home $4,000 a month. According to this rule, you’d allocate $2,000 for essentials like rent and food, $1,200 for those “nice-to-haves,” and then $800 goes straight into your savings account or to chip away at any debt.
This approach isn’t just about keeping your finances tight now; it’s about ensuring your future self is sitting pretty.
4. Build an emergency fund
Ever wonder how folks like Oprah stay on top while some stars go from riches to rags? In a 2002 chat with Fortune, Oprah spilled the beans, revealing her secret weapon: a whopping $50 million tucked away just in case the skies turn stormy. It’s her way of ensuring she never finds herself financially in a tight spot.
Now, we might not all be aiming to stash away millions, but Oprah’s on to something. The idea? Keep some of your dough on the sidelines for those “just-in-case” moments. Whether it’s a surprise bill, a bumpy patch with your investments, or a sudden job hiccup, having an emergency fund is like having a financial safety net.
How much should you squirrel away? The pros suggest enough to cover your bills for three to six months. And if you can pop it into a high-interest savings account, that would be even better. Your emergency fund will slowly grow while giving you that Oprah-level peace of mind. Alright, maybe not Oprah-level, but you get the idea.
5. Use coupons
You might find it surprising, but actress Kristen Bell, yes, the star with a cool $40 million to her name, swears by couponing. And it’s not just about the thrill of scoring a deal; it’s a legit savvy financial move. Picture this: she went on Conan and spilled the beans about her love for snagging discounts, especially those 20%-off gems at former houseware retailer Bed Bath & Beyond.
It’s a brilliant reminder that stretching your dollar is always in style, no matter how much dough you’re rolling in. This isn’t just about pinching pennies — it’s about financial discipline, making every cent count, and managing your budget like a pro. So next time you’re about to pass up on clipping that coupon or using a discount code, remember, it’s not just for those watching every penny — it’s smart money management, Hollywood-approved.
By integrating these habits, inspired by the insights and experiences of financial leaders, any individual can pave their path to financial success. It’s about embracing literacy, planning meticulously, investing wisely, and living within your means, while keeping an eye on the long-term horizon and the broader impacts of your financial decisions.
