You’ve probably already heard of Sallie Krawcheck, cofounder and CEO of Ellevest, an online investment platform tailored to women, and the first of its kind to realize we might have needs and goals different from men. For years now, Sallie has been leading a narrative on women’s financial topics, cutting through the typical trite advice shoveled our way and encouraging everyone to take a more thoughtful look at the structural economic issues that keep women out of the investing game.
Krawcheck’s article “Just Buy the F***ing Latte” blew up across the Twitterverse and media outlets this summer. It rang out as a call to action to stop masculinizing money and to change how we talk to women about finances. “Even from a young age, women are treated and talked to differently about money,” Krawcheck said. “Men are taught an abundance mentality, and women — it’s a scarcity mentality. We’re told we’re not good with money. We get into these voyeuristic money diaries and shame women. Ooh, look what she’s spending on! We need to stop that.”
Krawcheck sees investing not only as a critical tool for getting women on the path to achieving their goals, but also as an important way to contribute to changing society. “Investing is a path to greater equality,” she said. “We have to work our way through this patriarchal society and not let ourselves get socialized into the idea that we’re not capable with money.” And in Krawcheck’s mind, capable isn’t just doing the best with what you have. It’s knowing your worth and maximizing your earning potential.
Making More Money… And Putting it to Work
Part of Krawcheck’s mission has been to empower women to take steps to close the gender investing gap and the earning gap. “Women invest less than men do, holding more assets in cash,” she pointed out. “It costs women hundreds of thousands of dollars over their lifetime, in addition to earning less. The gender pay gap still persists.” She encouraged all women to work hard and track your impact meticulously, then ask to be compensated accordingly.
“Negotiate your salary every time,” Krawcheck said. “There’s not a person in the world who hasn’t kept something back for negotiation when making you a job offer. And I’ve never heard of an offer getting pulled because you negotiated. Even in your current role — no one’s going to fire you for asking for a raise.”
Krawcheck went on to remind us not to skip over one of the most obvious partners in our quest for greater salary equality. “Women are putting a lot of work into understanding salary transparency — using Glassdoor, other websites, trying to triangulate where they should be,” she noted. “Go to HR! That’s their job. It’s completely appropriate to find out if your company has pay bands, and understand where you fall. Am I at the middle or the top? What kind of performance will get me there?”
Sallie’s Three Rules for Money Allocation
How do we make sure what we’re earning goes to the best possible use for our goals? Krawcheck starts her rules with some comforting wisdom affirming that even those of us who haven’t served in the C-suite of the world’s largest financial institutions (#careergoals) are just as capable of making these straightforward money moves. “The good news is, there aren’t that many levels of action to take,” she explained. “You don’t need a Ph.D. in personal financial management to get your investments right.”
Relieved that we can keep our day jobs and pass on doctoral pursuits, Sallie shares a couple of simple steps. “Three rules get you there. Put 50 percent of your income to your needs — groceries, rent, basics. Then 20 percent goes to future you, the aunt or grandma version of yourself. You’ve got to take care of her,” she added. “This is your savings, investment, paying down credit card debt can even go in this category. Then that last 30 percent is for fun, and for funding the things that bring you joy.“
Here’s How to Prioritize Your Financial Action Items
We can put our finances in order so that we’re best prepared to spend on joy and tackle investment goals with a little prioritization. Krawcheck suggested starting by paying off high-interest debt. “If your student loans or any other debt are greater than 7 percent, pay that off first! This includes your car loans too,” she said. Next up, building an emergency fund is key. “Three months is a good place to start, work toward six when your life becomes more complicated with kids or a mortgage,” she advised.
Sallie emphasized the important order of these first two steps, noting that women often get bad advice to build up an emergency fund before they pay down high-interest debt. “If you’ve got 18 percent credit cards and a 1 percent savings rate — that’s a really expensive insurance policy! You’re basically paying 17 percent for the off chance that something happens and you need all that cash,” Krawcheck explained.
With debt and short-term savings underway, be sure you’re funding your retirement or 401k. In fact, Krawcheck recommended crushing your 401k savings goals when you have an employee match, even if you might have some debt still outstanding. “Be sure you’re maxing that out. That’s like getting a 50 percent market return, which is unheard of,” she explained. “Take complete advantage of any match.” Anything left over in this “future you” category after funding your 401k can be invested elsewhere and puts you on track to achieve those big life goals.
Investing as an Act of Self-Care
Sometimes we can feel like taking time to put these plans in place, or to educate ourselves financial issues takes away from other important areas of our lives. But that’s absolutely not the case, and financial wellness takes self-care. In fact, smart investing and financial management are exactly what enable our goals, and sitting on the sidelines can be the real cost. Asking questions and feeling empowered to wade through financial jargon is an important step in feeling like you understand how to get from where you are today to achieving any major financial milestone.
“Investing is about financial stability and financial confidence,” Krawcheck reminded me. “It’s really a selfless act. You’re taking care of you today, and future you. It’s not how much we have, it’s the act of investing that makes us powerful.”
Speaking with Sallie, it’s clear that building a company that helps women find that power and achieve their financial goals brings her joy. Ellevest delivers investing to women by using data that acknowledge gender differences in pay, career, and lifespan. Through some simple questions, you outline your goals and get a customized investing plan that you can adjust as your lifestyle, financial objectives, and income change.
Wherever we are on our financial journey, we should feel confident that we’re capable of making our financial goals a reality. Let’s grab a latte for the road, powerful is just around the corner.