Tag: financial health

6 Investing Tips for Gen Z and Millennials

Published in: Resources |

Your 20s is a great time to get into the stock market. Whether it’s in a taxable account or retirement account, investing early gives your money lots of time to grow and lets compound interest work its magic.

Why Start Now?

To understand the consequences of waiting to invest, consider this example. Let’s say you start contributing $100/month at age 25 to your retirement, and you do so for 40 years. Assuming a 7% return, you’ll end up with $260,000 in your retirement account at age 65. If you wait until you’re 35 to begin that contribution, all else being equal, you’ll have only $120,000 in your retirement account at the same retirement age. That ten-year delay would cost you over half of your retirement savings! (Check out the SEC compound interest calculator to play with the numbers for yourself.)

Tips for Investing in Your 20s

Here are our tips and strategies for investing in your 20s:

  • Invest in mutual funds, not individual stocks. The days of old-fashioned stock-picking are long gone — mutual funds offer both diversification and professional expertise, two vital components of investing.
  • Diversify. Buy funds that invest in US equities, international equities, large cap, small cap, fixed income, real estate, etc. to give yourself exposure to all areas of the market and minimize risk.
  • That said, don’t overthink it or worry about picking the “wrong” fund. How soon you start investing is more important than what you invest in.
  • Set up automatic contributions. By investing a consistent amount on a regular basis, you’ll sometimes buy when the market is low, and sometimes buy when it’s high. This strategy will ultimately allow you to buy shares at a lower average cost over time and hopefully help you avoid any temptation to “time the market.”
  • If you’re wondering what account to open first, look to your employer and see if they offer a retirement plan like a 401k or 403b. If they offer an employer match, contribute at least as much as is required to take full advantage of it. If you don’t, you’re essentially leaving free money on the table!
  • If your employer doesn’t offer a retirement plan, consider an IRA or Roth IRA. Roth IRAs are generally advantageous for young people but do keep in mind that there are income limitations involved.

Investing Mistakes to Avoid

Here are investing mistakes that 20-somethings should avoid:

  • Monitoring your investments too closely. Instead, you should set it and (kind of) forget it. Check your account quarterly to give yourself a sense of how much you’ve saved, but don’t check it regularly, especially during market swings. That will just lead to unnecessary anxiety and might prompt you to feel like you have to sell your investments when you should simply be riding out volatility in the market.
  • (Literally) buying into the latest trend. Don’t be seduced by financial sensationalism. The sooner we learn that smart financial decisions are usually not very exciting, the better!

The Advantages of Investing in Your 20s

When you’re in your 20s, your needs are likely much more straightforward. Investing for yourself now gives you more space and financial wherewithal to attend to your other goals when you get older.

People in their 30s and 40s have a lot of competing financial priorities: childcare, saving for their children’s college, saving for their own retirement, maybe beginning to help elderly parents… the list goes on. It’s a lot to juggle and can be overwhelming to decide what to prioritize.

Financial Planning with The Humphreys Group

Interested in learning more about investing and how you can get started early? Reach out to our team today.

Credit Card Habits During the Pandemic

Published in: Resources |

In our six-month reflection, we talked about how the pandemic has changed our spending behavior. For instance, we’ve noticed anecdotally that we’re spending less on travel and entertainment, understandably; instead, our discretionary income is increasingly going toward improving the creature comforts of our homes. Now, Money and Morning Consult’s new survey gives us insight into our credit card behavior with data.

Americans’ Credit Card Habits During the Pandemic

The good news is that over half of those surveyed said that they’ve put money toward a debt as a direct result of the pandemic, or plan to in the future.

But even though Americans are decreasing their balances, there’s a lot of anxiety around it; 25% of Americans said credit card debt is a source of daily stress. The high interest rates that credit cards carry is likely one of the main stressors.

With money worries on everyone’s minds, we wanted to answer common questions about credit cards: 

FAQ about Credit Cards

What is a common credit mistake?

A common mistake is relying too much on credit cards. It’s tempting to bridge any gaps between your income and expenses with a credit card. But because most cards have interest rates over 20%, if you aren’t able to pay off your balance in full every month, your debt can snowball out of control quickly.

How can people avoid relying on credit cards too much? 

If you’re on a tight budget, use them only for fixed, recurring expenses, and pay off the balance every month.

Doing this has a positive impact on the two most significant factors of your credit score: payment history and how much of your credit limit you utilize. This will get your credit into good shape should you eventually decide to buy a car or home, and won’t put you in danger of incurring a mountain of debt.

How can people recover from using their credit card too much? 

Seek credit counseling. Through close examination of your cash flow, credit card balances and interest rates, a counselor can help you identify the best strategy to handle your debt. Most credit counseling agencies are nonprofit organizations that offer free phone appointments. Find an agency near you by visiting www.nfcc.org/locator.

Can closing a credit card affect your credit score?

There are two reasons why closing your credit card can affect your credit standing.

First and foremost, one of the biggest factors on your credit score (second only to payment history) is your amount of available credit — in other words, how much you could spend until you hit your credit limit. And it’s good for your credit score to have a lot of available credit.

For example, if your credit limit is $10,000, and you typically keep your balance around $3,000, your available credit is around $7,000. If you were to pay off that balance, your available credit would increase to $10,000, and you might see your score slightly improve. However, if you close your card, you’d then be decreasing your available credit to $0 — and that will negatively impact your score.

Of course, the impact of closing one account also depends on the other open credit accounts you have. If you were to close a card that has a much lower limit compared to your other accounts, the impact on your score might be negligible. But there is another factor to consider: length of credit history. 

The age of your accounts is the next biggest factor on your credit score, and typically the longer the account history, the better it is for your score.

Let’s say you’re 50 years old, and you decide to close that old credit card that you opened back when you were 18. Unfortunately, your credit score is probably going to suffer as a result — even if you hadn’t used that card in several years — because it was one of your oldest accounts.

Keeping your credit cards open doesn’t mean you have to use them, of course. If your credit score is important to you, you can simply keep your unused credit cards somewhere safe and (more or less) forget about them. Some credit card companies may close the account if it’s been awhile since you’ve used it, so you may want to get in the habit of charging a small purchase to that card once or twice a year. But otherwise, you can stop using those cards and still benefit from the available credit they’re providing you with.

That said, your credit score isn’t everything. If the card comes with high annual fees, or if having lots of available credit makes you feel tempted to overspend, that open credit card probably does more harm than good. Closing the card might hurt your score temporarily, but in some situations, it could be better for your overall financial picture.

Financial Planning with The Humphreys Group

Want to learn more about credit card best practices? Check out Part 1 and Part 2 of our series from last year, “Mid-Year Wellness: The Credit Vs. Debit Debate.”

Gaining Control of Your Personal Finances in an Uncertain World

Published in: Resources |

Right now during this pandemic, many of us are feeling overwhelmed, stuck, powerless, out of our depth. We’re dealing with unprecedented levels of uncertainty during this COVID-19 crisis, and it can make us feel like we don’t have control over anything — at work, in our relationships, in life in general.

But we can make moves to gain more control in different facets of our lives — including our financial lives.

And one way to gain control of our financial lives is through tracking expenses and budgeting.

Expenses

Why Track Expenses?

The single most important thing you can do to improve your financial health is track your income and expenses. When we track our expenses, we become more aware of where our money goes. Are you underearning or overspending? Some of both? You can see if you’re working toward your goals or against them. Armed with this knowledge, you can make course corrections and feel more in control of your finances.

Tracking and categorizing your expenses can be tedious and daunting, so we encourage you to approach it with the mindset that it’s just data. Clarifying your income and expenses will give you the information you need to evaluate trade-offs, make informed decisions, and feel confident. There’s no secret sauce, but it all adds up to better financial outcomes.

How to Track?

Check your online bank statements — most provide expense summaries or a tracking function. You can also use an expense tracking app like Mint, You Need A Budget, or Tiller or just use paper and pen. The more frequently you check, the easier it is.

Consider dividing your expenses into categories:

  • Foundation Expenses: Expenses you can change eventually (e.g. rent/mortgage, utilities, groceries)
  • Discretionary Expenses: Expenses you can reduce quickly (e.g. concerts, movies, sports, dining out, clothes)
  • Intermittent Expenses: Expenses that don’t happen monthly; add these up and divide by 12 and set this amount aside each month in a separate account (e.g. car payments, home repairs, gifts, vacations)
  • Subsidized Expenses: Expenses that are paid by an outside source (e.g. software, work-from-home supplies, courses)

Set goals for each category so that you can monitor your progress.

Also, establish an emergency fund. We all know how medical bills and car repairs tend to happen when you least expect it. Saving for those expenses before they happen is vital to building your financial security. Borrow from this fund instead of using a credit card. Build this fund to equal more than 3 months of your Foundation Expenses.

Budgeting

Why Budget?

Budgeting allows you to make conscious choices about what is important to you — and then translate what’s important to you into measurable goals. Through budgeting, you can know if you can have it all, and if you can’t, identify trade-offs to make an informed, intentional, and conscious choice. Overall, budgeting lets you be in control of your financial life.

How to Budget?

First, find what budgeting system works best for you — whether it’s pen and paper, online worksheets, Excel, or budgeting apps. Start even if you don’t have all the answers. Schedule a time to revisit your budget and make changes as you learn more. Set short-term goals so you can celebrate your success.

Lastly, know that “done is better than perfect.” It is okay if you don’t have all the answers right away. At first you will be making estimates, but as you become more aware of your spending, you will be able to make adjustments.

Financial Planning with The Humphreys Group

During this COVID-19 crisis, there are still ways we can find control in our lives — whether it’s going for a walk without any distractions or taking a new class. With these tips on how to find control within your personal finances, we hope we’ve helped you find some peace of mind during these challenging times. Reach out to our team if you’d like to further discuss taking control of your finances and creating a financial road map to success.

Being Resilient During Turbulent Times in Your Life — and in the Markets

Published in: Resources |

Between the coronavirus, the stories emerging from the #MeToo movement, and the extreme market volatility we’ve seen in recent weeks, it’s hard to stay afloat. It takes resilience, and fortunately women are good at it. 

What Do We Mean When We Talk About Resilience? 

We’re talking about how we respond to or manage change. We can think of our response to change in phases:

  • Realization: We see the change coming (or we don’t). We may have a long time, or a very short time to prepare. In this phase, we might be resisting or reacting — or be in complete denial.
  • Change happens: It can be abrupt, or there can be continuous change over a length of time.
  • Recovery: The worst may be over, but we find ourselves in a new place (physically or metaphorically). At this point, we are taking stock and figuring out what to do next.
  • Adapting and embracing change: We learn from the experience and adapt to new circumstances.

The good news is that women are good at resilience — some say we learn it from an early age.

Why Women Are Good at Being Resilient

Women learn how to be resilient at a young age because they have to deal with unique stressors — and this continues throughout women’s lives as they carry different burdens and expectations from men. “They carry more of the emotional load in families. The gender biases that exist either beat you down, or you develop a sense of yourself and others as being OK,” says UC Berkeley professor Andy Scharlach

Here are some ways that women are resilient:

1. Preparation

  • They’re good at setting goals and able to see advancement toward a goal in small steps.
  • They’re good at anticipating roadblocks and finding workarounds or recalibrating goals to accommodate new circumstances.
  • They gather information before they take a risk — in investing and other areas in life.
  • In high-intensity athletic events such as marathons, it’s been noted that men have higher drop-out rates than women. One theory regarding why women have better completion rates is that they are more likely to show up prepared in the first place.

2. Endurance

  • Research also shows that women are better at enduring adverse circumstances such as marathons, long-distance swimming, and of course childbirth.
  • The more terrible, cold, wet, and windy the weather, the more women persevere relative to men. In the Boston Marathon, when compared to the sunny marathon the year before, the drop-out rate for men increased by 80 percent, while the drop-out rate for women increased by only 12 percent.

3. Recovery

  • There are a lot of contributors to our higher success rate. One you may not have thought about is that women have a tendency to be collaborative (even in competitive events). Supporting each other and sharing our struggles gives us strength to keep going, and to get back up.

4. Adapting and Embracing Change

  • Women seem to do better at reinventing and retraining themselves. Following the Great Recession, it was found that although women made inroads into traditionally “male” roles, men were much less likely to take on “women’s work.”

All this is to say, we are good at this. In difficult times, it can feel like you’re barely hanging on, but remember that you have the tools to succeed.

Resiliency in Your Financial Life

At The Humphreys Group, we talk a lot about the importance of resilience with our clients — financial resilience, emotional resilience, physical and health resilience, spiritual resilience, community and social resilience, and vocational resilience.

Financial resilience refers to your ability to withstand life events that impact your income and assets. While it’s often not pleasant to think about, developing this resilience before a financial emergency happens can be a huge help to your future self.

If you’d like to talk more about resiliency and how you can further apply it to your financial life, reach out to us today.

IWD 2020’s Theme Is #EachforEqual — It’s Time We Aimed for Gender Equality in Finance

Published in: Resources |

The theme for this year’s International Women’s Day (IWD) on March 8th is #EachforEqual, promoting that “an equal world is an enabled world” and that “collectively, each one of us can help create a gender equal world.”

This theme especially applies to the financial services industry. As InvestmentNews notes, only 14 percent of advisors are female. With 32 percent of all wealth (about $72 trillion) expected to be controlled by women in 2020, it’s time we built a financial services industry that actually reflects the world we live in.

How We Can Achieve Gender Equality in Finance

So, what are some concrete steps we can take to reach gender equality in the finance industry? New research from LeanIn.Org and McKinsey & Co found that helping women move beyond entry-level positions in their financial services careers could be the solution.

Even though women and men enter the financial services workforce in roughly equal numbers, men outnumber women by nearly two to one when it comes to that first step up into manager roles. And that first step is the bridge to more senior leadership roles.

That early drop in the number of women earning promotions creates a gender gap that continues to grow with every step up the career ladder.

Support Women in Finance

How can we fix this? Firms need to recruit more women financial advisors; mentor women and prepare them for that first level of management; boost the diversity of their leadership development programs; and review their current policies and take steps like conducting a pay equity audit.

If you’d like to continue the conversation about gender equality in finance, consider joining us at one of our Conversation Circles.

4 Ways Millennials Are Getting Money Right

Published in: Resources |

Millennials experienced the financial crisis first-hand. And many of us were unlucky enough to graduate college during the worst job market since the Great Depression.

But through these challenging experiences, we were taught a unique set of money lessons that have helped us thrive. Here are some ways millennials are getting money right:

1. We learned the importance of budgeting and saving for a rainy day.

According to a 2017 survey from Earnest, Amino and Ipsos, 71% of millennials use a budgeting tool or keep a budget (compared to 41% of Americans overall), and 68% of us can cover a $500 emergency without going into debt (compared to 43% of Americans overall).

2. We’ve taken advantage of online financial resources and education, which makes us more confident about making decisions about money.

Women ages 25-34 are more likely than their elders to report they learned about finances from one or both parents (62%, compared to 45% of older women), and over half (51%) say they are very confident in their investing skills. This final statistic is in stark contrast to their elders: Only 36% of women ages 35–49, 14% of women ages 50-69, and 11% of women ages 70-84 said they feel confident in their investing skills.

3. For the better part of our adult lives, we’ve been told not to expect all the Social Security we’re entitled to — so we’re saving more aggressively for retirement.

Although many often-cited statistics lament that we’ve accumulated less wealth than Gen Xers did at our age, this is primarily because Gen Xers were able to gain access to the housing market sooner. When you look at our liquid financial assets, in 2018, millennials held 40% of their money in retirement accounts. This is pretty impressive compared to Gen Xers, who held just 28% of their liquid assets in retirement accounts in 2002, when they were the same age (22-37).

4. Student loans have made it more difficult for us to save for a house, of course, but even that is looking more promising these days.

In the first three quarters of 2019, the largest increases in the homeownership rate came from people under the age of 35.

Continue the Discussion at one of our Conversation Circles

Millennials are being careful and responsible when it comes to money, and it’s time we challenged that popular belief that they make poor money decisions (i.e. spending it on avocado toast). If you’d like to talk more about personal finances, money messages, and generational differences when it comes to finances, consider joining us at one of our Conversation Circles.

Rewriting the Rules: Emotions Should Play a Role in Money Matters

Published in: Resources |

Most financial advisors say that you should keep emotions and investing separate:

“Emotions cloud your judgment.”

“Emotions have no place among the pie charts and annualized returns reflected in your financial plan.”

“It’s best to compartmentalize your feelings and save them for your therapy appointments.”

But we’re here to say that this is a myth, and that emotions SHOULD play a role in money matters.

Where the Myth Comes From

This myth is partially derived from the conventional wisdom that thinking and feeling are two separate processes guided by different regions of the brain.

But modern neuroscience research has shown that those areas of our brains are actually highly interconnected by neurons that translate both cognitive and emotional messages.

For this reason, it’s nearly impossible to completely disentangle our thoughts and feelings. One pair of researchers highlighted a common experience that emphasizes this point: You may justify a car purchase by claiming you got a good deal, but the true determining factor may have been that you liked how the car made you feel.

Does That Mean We Endorse Making Panicked Decisions Every Time The Market Swings? Of Course Not.

Even when the market has our stomachs in knots, we provide much-needed objective reasoning to our clients. In fact, regardless of the market environment, nearly every big choice in our clients’ lives involves plenty of dialogue, analysis and projections to estimate how it would affect their future.

But both intuition and emotion play important roles in this process. A person’s history, their current situation, and their future ambitions influence every money decision they make; disregarding this is doing a disservice to their lived experience.

Rewrite the Rules with The Humphreys Group

Investments are so much more than just figures and statistics. They represent our security, independence, values and legacy. Some clients may view their investments as validation that they worked hard in life; others use them to support causes they believe in and give back to their communities. Some investors see their investments purely as assurance that their loved ones will remember them and live well after they’re gone.

While most advisors would prefer to focus on the analytics of the investments, it takes a special advisor to acknowledge the values behind the numbers.

We must talk more about our feelings in the context of money. We have seen that embracing our emotional side and having those pivotal conversations can lead to better financial outcomes. If you want read more about common money myths and how we can break them, download our free eBook, “Rewriting the Rules: Telling Truths About Women and Money.”

Women, Men and Investing: We Debunk the Myths

Published in: Resources |

There’s a myth that has permeated the financial services industry for decades: that men are better investors than women. But it turns out that assumption is simply not the case.

According to a 2016 Fidelity study, female investors tend to outperform male investors by an annual average of 0.4%. This doesn’t seem like much, but it accumulates to a significant financial difference over time.

For example, let’s say a man and a woman each invest $100,000. Assuming a 4.6% average annual return for the man and a 5.0% average annual return for the woman, her investment will have grown to $432,200 after 30 years, while his will be valued at only $385,400. That’s nearly a $50,000 difference and is half of the original investment!

Why Are Women More Natural Long-Term Investors?

First, men tend to buy and sell their investments more often. The same Fidelity study found that men made an average of 55% more trades in 2016 than their female counterparts. This can be financially injurious because the more an investor trades, the more he risks making an investment right before it decreases in value or selling the investment right before it gains momentum. Because women are more likely to hold on to their investments throughout market fluctuations, they capture more growth over time.

Digging deeper, why do women hold on to their investments longer? There are a lot of reasons. As women, we usually conduct more research before investing and maintain a long-term perspective more often. We tend to view investing less as a game to be won and more as a means to accomplish our goals. Regardless of the psychology, women’s success in the investment world is good news.

Rewrite the Rules with The Humphreys Group

The media portrays investors as men in suits walking down Wall Street. But the data tells a different story. Let’s keep breaking the money stereotypes that have held women back for way too long. Read more about common money myths in our free eBook, “Rewriting the Rules: Telling Truths About Women and Money.”

Socially Responsible Investing: Aligning Your Money with Your Values

Published in: Resources |

Previously on the blog, we’ve talked about the importance of investing with intention.

We’ve also talked about how women tend to do more investment research and maintain longer-term perspectives on their financial plans than most men do.

Today, we’re going to take this a step further and talk about socially responsible investing (SRI), a topic that’s important to many of our clients.

What is Socially Responsible Investing?

US SIF: The Forum for Sustainable and Responsible Investment (US SIF Foundation) defines SRI as “an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact.”

Examples of ESG criteria used by sustainable investors include green building/smart growth, climate change/carbon, water use and conservation, community development, human rights, board diversity, avoidance of tobacco or other harmful products, and anti-corruption policies. SRI investors can be anyone from individuals and family offices to universities, foundations, pension funds, nonprofit organizations and religious institutions.

Source: US SIF Foundation

“Socially responsible investing” is also referred to in a variety of terms, according to the US SIF Foundation. These terms include “sustainable, responsible and impact investing,” “community investing,” “ethical investing,” “green investing,” “impact investing,” “mission-related investing,” “responsible investing,” “ethical and green investing,” “sustainable investing” and “values-based investing.” No matter the terminology, they all aim to accomplish the same thing: to grow money while doing good.

A New Wave of Socially Responsible Investors: Millennials

Sustainable investing has been around since the 1970s, but a new wave of millennial investors have entered the scene who want to make sure their investments are making a positive impact on society. They want to align their money with their values. According to US Trust, 76 percent of high-net-worth millennial and Generation Z investors have reviewed their assets for ESG impact. And according to Morgan Stanley, millennial investors are twice as likely as others to invest in companies that incorporate ESG practices.

Socially responsible investing has continued to grow astronomically over the years. At the beginning of 2018, $12 trillion in assets were invested in sustainable, responsible and impact investing strategies across the United States, according to the US SIF Foundation.

Investing Responsibly Today

At The Humphreys Group, many of our clients are invested in ESG funds, such as the Pax Ellevate Global Women’s Leadership Fund (PXWEX). The Pax Ellevate Global Women’s Leadership Fund is “the first broadly diversified mutual fund that invests in the highest-rated companies in the world for advancing women through gender-diverse boards, senior leadership teams and other policies and practices,” as described on their website.

Socially responsible investing can be a great way to align your investment portfolios with your values. If you’re interested in learning more about SRI, reach out to us today.

Negotiating for What You’re Worth

Published in: Resources |

It’s often assumed that women don’t ask for raises, that they act less assertively in negotiations for fear of upsetting the relationship with their boss or colleagues. Books like Linda Babcock and Sara Laschever’s Women Don’t Ask and Sheryl Sandberg’s Lean In have tried to back this claim.

But new research from Harvard Business Review refutes this belief.

Women Are Asking for Raises — They Just Aren’t Getting them

Harvard Business Review found that women do ask for raises as often as men do — they just don’t get them:

“Women ask for a raise just as often as men, but men are more likely to be successful. Women who asked obtained a raise 15% of the time, while men obtained a pay increase 20% of the time. While that may sound like a modest difference, over a lifetime it really adds up.”

This is frustrating to hear. We already know that women earn less than men do (when comparing equally qualified people doing the same job, most estimates by labor economists put the gender pay-gap at 10% – 20%). Now, we hear that when we try to negotiate for a raise, we don’t get it. Our “shortcoming”? Being female.

“The bottom line is that the patterns we have found are consistent with the idea that women’s requests for advancement are treated differently from men’s requests. Asking does not mean getting — at least if you are a female,” Harvard Business Review writes.

Tips on How to Negotiate for that Raise

After hearing this research, you’re probably feeling discouraged. “What’s the point of asking for a raise if research shows I won’t get it?”

Yes, this news is gloomy, but knowledge is power, and now that we know what we’re up against, we can better prepare for asking for that raise. So, now we’d like to provide some research-backed strategies you can use to negotiate for that salary increase, also echoed in Ellevest’s recent article, “The Trick to Negotiating That Raise? Science.” Here are tips they recommend:

1. Get data (internal and external data)

Learn about the internal pay structure of your company. Ask your manager how pay ranges are determined or find out where your position falls relative to others in the company.

For external data, ask your friends and people in your network to find out what other companies tend to pay for the role. Ellevest recommends using resources like Salary.com and PayScale, while other reputable compensation reports can also be helpful. We also love the site, Ladies Get Paid.

2. Group your priorities

Negotiate bonus, benefits, equity, flexibility and, of course, salary as one group. That way, you’re not compromising on every individual ask, and it also won’t seem like you’re asking for too much.

3. Make it a win-win situation

What value — risk avoidance, brand value — do you bring to the company? Bring up these points.

4. Remember why you’re there

You’re there to get paid what you deserve. And research shows we negotiate more effectively when it’s for something bigger than ourselves. When negotiating, think about how a raise would help you, your family and loved ones, and causes you care about.

If you want a chance to talk to other like-minded women about these issues and other challenges that arise around money, please join us at one of our Conversation Circles.