If you attended our Moms & Money event in May, this quote from panelist Shaang Saavedra may be ringing in your head:
“Money is like a knife,” she said. “If you use it poorly, it can kill you. But if you use it wisely, it will feed you for the rest of your life.”
Sounds scary. The point, though, is that money is simply a tool you can learn to manipulate. The more you learn, the better able you’ll be to wield it in a way that serves your goals.
NextAdvisor was founded one year ago this month, in partnership with TIME, to help readers take ownership of their money during one of the scariest times in recent memory. It’s been anything but simple. After a year of long-term unemployment, unprecedented stimulus spending, and numerous financial cliffs, our latest national survey finds the majority of people still feeling anxious about their money. Many of us have been confronting the legacies of discrimination, racism, and inequality that pervade our financial system and everyday money transactions. Meanwhile, the housing market turned insane.
Through it all, we’ve focused on small, discrete actions you can take right now.
“You’re just learning,” Saavedra continued. “You’re just getting data on how you’ve behaved in the past. And then little by little, we take that one little next step. We do things a little bit scared to move to a new mindset.”
Last year, we brought 50 smart money moves. Now, here are 40 more expert-approved ways to take ownership of your finances today—even if you’re doing it scared. It’s time to make a move.
Illustrations by Elisa Faye
Buy an index fund
If you had $500 to invest right now, where would you start? Our answer: an index fund. It’s a big group of stocks that’s designed to track the entire market. With this strategy, you’re not betting on a single company — you’re getting a piece of all of them. The other good thing about index funds is that they carry zero or very low fees at every major brokerage. And in study after study, index funds beat the performance of high-fee stock pickers. Make it easy.
Start a passive income stream
Making money while you sleep doesn’t have to be a pipe dream. Earning passive income is easier today than ever before, and many of our NextAdvisor contributors are making a killing. If you want to level up your financial life and you know that cutting expenses will only get you so far, start thinking about ways to add income. Investing in the stock market, whether on your own or through a 401(k), counts as one. Here are seven others you may not have considered — presented by contributor Jannese Torres-Rodriguez, who has made money on every single one.
Find your “freedom gap”
You could also call this number “the gap between your monthly income and your monthly expenses,” but that’s not as fun. Plus, freedom gap really gets to the point. The strategy here is to calculate the amount of money you have left over each month once all your bills are paid. When you know that figure, say $750, you can intentionally deploy those funds toward your goals. Maybe $250 goes toward paying off debt, $250 toward savings, and $250 for investing in index funds. The bigger your freedom gap, the more you can do — and the more power you have to build wealth and ultimately achieve financial independence. Credit to Mahlet Amaha, a NextAdvisor contributor and creator of @blackwomxnarewealthy, for the turn of phrase.
Take an hour to name your beneficiaries
We call this the gateway drug of estate planning. Creating a will is something 60% of U.S. adults haven’t done, possibly because it can be a daunting process. You should do it anyway, says Jill Schlesinger, a CFP and NextAdvisor contributor. But if you want to knock out a win today, there’s a more straightforward way to get started. Naming a beneficiary on your financial accounts — such as 401(k)s, 403(b)s, traditional and Roth IRAs, brokerage accounts, and life insurance policies — is often easy to do online in 15 minutes or less. There’s peace of mind at stake: even if you don’t have a will, naming a beneficiary will ensure that your assets avoid legal probate and go directly to whomever you designate.
Download YNAB (or one of these other apps)
You’ll take any help you can get, right? If a good app can help you track your money more easily, or integrate financial management into your daily routine, take advantage. Some of our favorites are Personal Capital, which allows you to track your net worth for free with graphs and charts to help you visualize your goals, and Acorns, which is a relatively frictionless way to start investing. But an absolute favorite among our contributors and experts is You Need a Budget, or YNAB. It helps you with zero-based budgeting, an extremely effective way to cut expenses and raise discretionary income. And you can start with a free version.
Find out if you’re underpaid…
Are you willing to have an awkward conversation? When NextAdvisor contributor Erin Lowry asked seven career and negotiation experts the secret to negotiating a higher salary, they all agreed on one thing: you have to be armed with information about how much your colleagues and peers make compared to you. And sometimes the only way to find out is to ask. Finding ways to have these conversations can help you discover whether you’re underpaid and give you the data you need to make your case. Check out Lowry’s piece for a copy-and-paste script that will help break the ice.
…and know your value
For every dollar a man makes, women make $.82, on average. The gap is wider for Latinas, Black women, and Native American women. For Vanessa Menchaca-Wachtmeister, a tech professional who managed to double her salary in two years, that statistic inspired an aggressive negotiation mindset. “The real game-changer was seeing through the female feeling that I’m not worthy of my money and going hard with my negotiations,” Menchaca-Wachtmeister said during a Latina Women on FIRE event hosted by NextAdvisor. “I portrayed it in my head like this: how would a straight white male who owns the world take this challenge on?” Read on for her negotiation tactics.
Delete Robinhood
When this controversial trading app became one of the most popular Apple downloads of the year, we knew we had to try it. So we asked our contributing editor Farnoosh Torabi, a financial journalist and host of the podcast “So Money,” to write about her experiences using Robinhood over a period of six months. Her conclusion: the app may be fun and easy to use, but its emphasis on short-term trading over long-term investing will cost you. For investors with time and compound interest on their side, Torabi says a low-fee brokerage such as Vanguard offers a surer — and frankly, easier — path to long-term wealth.
Calculate your FIRE number
Retirement isn’t an age anymore. It’s a dollar amount. Specifically, it’s the amount of money you need to have invested in order to live off your returns and become permanently work-optional. And there’s a relatively simple formula that helps you identify yours. We asked contributor Rita-Soledad Fernandez Paulino — a married mother of two who didn’t start investing until she was 33 — to show us how she calculated her FIRE number (which stands for Financially Independent, Retire Early) and how she’s using it to retire early at 47.
Refinance your mortgage — there’s still time
Mortgage rates have been historically low for nearly a year, and plenty of people have taken advantage. But there are still 14 million homeowners who can save at least $250 a month by replacing their current mortgage with a new one at today’s low rates, according to a recent study from the mortgage data firm Black Knight. Experts predict that mortgage rates will stay low for the rest of the year, so you don’t have to rush into it. Start by learning how refinancing works.
Check your housing budget using the 28/36 rule
We love a rule of thumb. There will alway be exceptions, but it’s nice to have an expert-approved guideline. When it comes to determining how much home you can afford to buy, the 28/36 rule comes highly recommended. The idea is that your monthly mortgage payment (which you can estimate using a mortgage calculator) shouldn’t be more than 28% of your monthly pre-tax income, nor should it be more than 36% of your total debt. Unexpected costs are practically guaranteed when you’re a homeowner, so knowing that you can comfortably afford your monthly payments will help you shop for a home with confidence.
Check your credit report for free
Want to know what the credit-reporting agencies really think of you? You can find out for free, and it’s worth a look. Your credit report is a summary of all your interactions with the financial system: the debt you owe, the credit cards you’ve opened, your record of making on-time payments, and more. It’s this report that determines your credit score, which in turn determines what kind of a deal you’re going to get the next time you want to borrow money. Because of a special COVID-19 provision, you can check your credit report from each of the three reporting agencies for free every week until April 2022.
Increase your credit limit — and your credit score with it
Raising your credit score doesn’t have to take a long time. One of the quickest ways to boost it is to manipulate your credit-utilization ratio, which accounts for 30% of your credit score. The ratio is found by adding up all the debt you owe and dividing it by the amount of credit you have access to. The lower, the better. So if you’re carrying a $2,000 balance on a card with a $10,000 credit limit, you have a credit-utilization ratio of 20%. But if you raise your credit limit to $20,000, that same balance is now 10% of your total credit. For customers in good standing, raising your credit limit can be as easy as filling out a form online or making a single phone call.
Have a money talk with your partner
We hate to jump to a worst-case scenario. But if you’re married, this story by NextAdvisor contributor Dasha Kennedy is not to be missed. In it, Kennedy shares her regret that she never talked about money in her marriage, a lack of communication that ultimately led to a financially devastating divorce. “Failing to have conversations about money and marriage is a surefire way to find yourself discussing debt and divorce,” Kennedy writes. Now she’s making it her mission to help more women become financially empowered.
Invest for a child in your life
We call them the million-dollar babies. This year NextAdvisor talked to two moms who are investing for their children so early that they’ve basically guaranteed the kiddos a multi-million dollar retirement. Compound interest is the key here: over a long period of time, even a relatively small investment will grow exponentially. Contributor Mahlet Amaha plans to invest her Child Tax Credit of $2,000 a year into a brokerage account in her name with her 2-year-old son as the beneficiary. Even if she stops when he’s 18, that $36,000 contribution will multiply to a shocking $8 million when her son is 65. Check out the math. Then read financial advisor Dominique Broadway — whose 18-month-old daughter Dawsyn is on track to be a millionaire by 16 — on how you can get started, too.
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