5 Things To Do Before You Start Investing

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Investing can be intimidating. But if you’re looking to build your wealth, buy a house or set up a retirement fund, investing is not only one of the best money moves that you can make –– it’s a must. For most people, understanding the basics and choosing the right investment strategy is enough to get started. But the most important question to ask when it comes to planning your financial future is whether investing is right for you, given your current financial situation.

So, to have a candid conversation about making strides toward the financial future you want for yourself, we tapped Lauren Anastasio, CFP® (Certified Financial Planner) at SoFi, during our recent Money Moves Digital Summit to share some tips on building wealth through investing, including what you need to know before you start, and how to really know if investing is right for you.

She identified five financial goals to accomplish in chronological order, before you begin investing in order to build the best possible financial foundation. ICYMI, we’re sharing them below, along with Lauren’s tips to yield your best benefit.

1. Establish a Safety Net

   The first thing you want to do before you consider investing, is establish a safety net. Think about this as a cash savings equivalent to approximately one month's worth of your essential expenses. If you don't have at least enough cash to cover all of your living expenses for one month, then saving is your very first priority––that's the thing you should be doing, before anything else.

2. Seek Employer Match

   Step number two is to obtain any employer match you might be eligible for. If you're not strictly self employed or you do have access to an employer sponsored plan, you will want to make sure that you're maximizing any match that you might be eligible for––you never want to leave free money on the table!

3. Protect Your Income

   Third, protect your income. This means pursuing an appropriate amount of disability or life insurance, depending on your circumstances.

4. Attack Bad Debt

   Next, you want to eliminate any bad debt, It’s important to make the distinction between between good debt and bad debt. Bad debt includes things like credit cards or personal loans, essentially anything charging 7% interest or higher. You will want to eliminate these in their entirety before moving on to investing. The reason is, there's an opportunity cost if you're investing and you can expect realistic average annualized returns of seven or 8% –but if your credit card is charging you 20% that's compounding daily, your money is going to be far more valuable going towards paying off that high interest rate debt than it will be going into the market. This is one step you absolutely do not want to skip.

5. Build an Emergency Fund

   Step five includes establishing a fully funded emergency fund. This is when you take that safety net and build it up to a balance that's closer to between three to six months worth of your essential expenses. This is vitally important, because if you do have an emergency that comes up, including some type of loss of income, you don't want to have to take money out of the market and possibly trigger a taxable event or have to dip into that money when the market is down. You will want to make sure you always have cash on hand.

Once you’ve accomplished steps one through five, you’re likely ready to start investing! To learn more about investing and how to align your approach to your goals, visit SoFi.com/Invest. 

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ABOUT SOFI: 

SoFi is a different kind of finance company whose goal is to help people get their money right. Whether you're looking to save, spend, earn, borrow or invest, SoFi is a one-stop shop for your finances, designed to work better together. Our products are built around our members—so that they have the tools they need to take control of their financial futures. Learn more by visiting SoFi.com.

DISCLAIMERS:

Advisory services are offered through SoFi Wealth, LLC an SEC-Registered Investment Adviser.

Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Sharing Finances? Here Are 5 Ways to Do It Right

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In April of 1975, Judy Hendren Mello created the First Women’s Bank in Manhattan.

It was the first bank in the United States to be run by and operated for women, during a period where women were highly discriminated against by banks. (Fun fact: Betty Friedan had an account there.) Just one year prior, banks required single, widowed, or divorced women to bring a man to co-sign any credit application, regardless of their income.

Thankfully, much has changed since then, and more women are household breadwinners than ever before, as well as finding ways to to split costs with their partners. Given that wedding season is rapidly approaching, we figured there’s no better time to break down five different approaches to sharing finances that have worked well for couples.

The 2:1 Approach

This is a scenario in which you keep most of your finances separate, but have one joint account you both contribute to equally.

You can choose to contribute a dollar amount or a percentage of monthly earnings to that account. With one joint account, you are taking baby steps to trusting your significant other with your money. You get to see how they spend and if you’re comfortable giving them purchasing power with your hard earned cash.

Most often, couples who live together and are fairly evenly matched when it comes to income and debt favor this approach. That way the joint account is what you use for household purchases—everything from toilet paper to a new couch.

The Solo Dolo

Some couples keep all finances separate, and it works for them. If each of you are financially independent, have no desire to share finances and would rather split household expenses in a way that makes you the most comfortable, this is an easy option.

Sometimes that means splitting things 50-50. Sometimes that’s not the case. If it’s not, we suggest having a conversation, especially if one side of the equation makes a significant amount more. What you don’t want is to commit to a living or a financial situation where you feel taken advantage of, or where you resent how much the other person is making and contributing.

If you really like keeping everything solo, but your incomes are vastly disparate—we suggest the next approach to avoid future disagreements.

The Pick-and-Choose

This approach is best for couples who share everything, except comparable salaries. When you don’t want to let one person “handle it all” (which, is certainly another way to go), but rather want each party to contributing their “fair share,” each person picks certain bills and expenses.

These don’t have to be equal shares.

For instance, if you own a house together, one person pays the mortgage and the other fills the fridge. Or perhaps, one of you pays the rent and the other handles electric, gas, and the WiFi situation.

This works for both unmarried and married couples. The most important part of this arrangement, is that each person is getting a fair shake, not a shake down.

With the pick-and-choose, and all the above options, individual debts remain the responsibility of the indebted, however, this could (and often should) be considered when splitting up costs.

The Spend One, Save One

This is an interesting approach being taken by couples who have not yet made those major life purchases, but are working toward them.

They will live on one salary—typically the larger—and save the entirety of the rest. This is also a useful approach for couples who haven’t yet been able to put away that rainy day money or save for retirement. It typically involves living below your means, but is a smart investment to make in your future.  

The Merge It All

This is an approach most often used by married couples who combine their lives, finances and all, entirely. Most often, neither party is entering into the marriage with significant assets—like a house—as this is a purchase that will be made together. Or debts, like student loans, that need to pay off.

However, even within “merge it all” it isn’t uncommon for couples to share one joint account while keeping individual checking accounts. What you put into those individual accounts? It varies. Bonuses or checks from grandma and grandpa could be considered “fun” individual money. Cash that doesn’t have to go toward life expenses and allows each person to feel like they’ve got some disposable income.

This post was published on May 23, 2017, and has since been updated.

Why It's Time to Ditch the "YOLO" Mindset

Don't worry, she made that coffee at home...

These days, in our world of instant gratification (we may even be able to leverage our selfies to make purchases),  it’s more necessary than ever to be able to stay focused on saving money any way you can. So to help you monitor your spending habits and cut expenses (to put more $$$ in your pocket), here are 20 easy hacks you can use every day—starting right now. Now, that’s instant gratification at its finest!

1.     Have a weekly money date.

Commit to sitting down with your money once a week for a money date.  During this time, update your budget, review your accounts and track your progress against your financial goals.  Like any relationship, if you want your financial life to improve, you must spend time with your money.

2.     Plan out your meals for the week.

Taking a few hours every weekend to grocery shop and meal plan for the week will definitely save you money, as dining out is the No. 1 expense for most households.  By eating at home, you save money that would otherwise be spent on tax and tip—and you usually save calories, too.

3.     Cut out cable.

Gasp!  Cut out TV?! Never!  But with services like Hulu, Netflix and Amazon Prime, you can now watch your favorite TV shows and movies for a fraction of the cost of cable TV.  A study by NPD shows that cable bills will soon grow to an average of $123 per month, or $1,476 per year. By switching over to an online service or cutting out TV altogether, you can save that money for another financial goal—like paying off debt, traveling or saving for a home down payment.

4.     Host a potluck.

The more friends you have, the more money you spend on lunch dates, birthday parties and gifts.  Switch it up and instead of meeting over a fancy dinner, host a potluck and have everyone bring his or her favorite dish.  That way you can save money you’d spend on restaurant extras like tax, tip and parking—and you’ll usually have a more intimate meal together, too.

5.     Leverage Airbnb.

Finding a place to stay while traveling is so convenient when you use Airbnb.  You can often find a place that has a kitchen (so you can cook meals at home to save money) at a rate that’s comparable to hotels.  You can even rent out your own place on Airbnb while you travel to make some extra cash to pay for your own travel expenses. It’s a win-win scenario.

6.     Make coffee at home.

This one’s not my favorite, as I absolutely love going to coffee shops and drinking organic, delicious coffee.  However, spending $4 to $5 on coffee every day definitely adds up.  So try my approach and allow yourself a few days a week to buy coffee at cafes, and make it at home the rest of the time.

7.     Work more.

When you’re working a lot, there’s not much time left to shop and spend money.  Stay busy and pursue a career you love—then watch how when you’re busy hustling, you spend less.

8.     Wait 48 hours before you click “buy.”

Since we can have anything we want these days with just the click of a button (there’s that instant gratification again!), you need to find a system to help buffer your impulse purchases. Example: Wait 48 hours before spending money on things that cost more than a certain amount.  When you do, you will find that most of the time the item was more of a “want” than a “need.” Plus, you’ll save money and work toward being more mindful with your spending.

Stop spending money on things you don’t need to impress people you don’t like.

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9.  Use blogs and Pinterest to learn DIY beauty treatments.

Self-care is important—but going to spas and getting pedicures, massages, etc. can really add up.  Allow yourself a certain amount to spend on these things, then use blogs and Pinterest to find at-home beauty treatments to help you save money.  Often you can find a DIY, organic option using common household or kitchen products. 

10.  Outsource with Fivrr or Task Rabbit.

Time is a commodity, and your time is precious and valuable. And these days, there are so many tasks you can outsource that will save you time and money. But how do you figure out if outsourcing something is worth the expense? A great thing to do is to actually calculate the cost of your time, which will help you figure out if you can pay someone to do something for less than your hourly rate. Here’s an example: A monthly net income of $3,000 divided by a total of 160 hours worked equals an hourly rate of $16.75. Now that you know the value of your time, you can strategically outsource it, using a service like Fivrr or Task Rabbit, for a fraction of your hourly rate.

11.  Get creative with gifts

Find creative ways to express your love to friends and family members for birthday and holiday gifts.  After all, a handwritten note explaining why you love someone can be more sentimental than some expensive gift he or she may never even use.  Most people will appreciate the thought behind your gifts more than anything, so don’t be afraid to save money and find free ways to celebrate birthdays and holidays.

12.  Choose quality over quantity

This can apply to food, clothes, electronics and much more.  Although it’s tempting to choose the more budget-friendly version of an item, sometimes choosing quality over quantity will save you more in the long run.  Save up your money and get the best-quality product you can afford, and leverage the cost-per-wear philosophy with more expensive clothing and shoes.  This applies to food, too: Buying quality organic food can nourish you in ways that fill you up more than the pre-packaged, processed stuff and potentially save you health care costs in the future, since you’re taking good care of yourself. Find a balance that is right for you and choose quality whenever you can.

13.  Deal with your emotions.

A lot of times excessive spending is a way to avoid feeling certain emotions.  If you check in with yourself before you go on a major spending spree, you may be able to identify if you’re feeling bored, lonely or stressed and spending money as a way to avoid the underlying emotion.  Check in before you buy and be mindful with your spending.

14.  Stop trying to keep up with the Kardashians.

It’s hard to keep your blinders on and not compare your financial life to others’, especially celebrities. However, it is really important to be clear about what matters most to you and make sure you build a financial plan that supports that vision. This will keep you moving toward your financial goals and stop you from spending money on things you don’t need to impress people you don’t like.

15.  Read a personal finance book.

When you learn about personal finance, you’ll learn even more strategies to help you save money for your goals in life.  Knowledge is power and the more you know, the more you can save.

16.  Balance out your “YOLO” mindset.

With social media controlling our lives like never before, people often fall victim to the “fear of missing out” phenomenon and instead go overboard with a “you only live once” mentality.  While it is important to live in the present and soak up each precious moment of life, make sure you balance that out by saving for your financial future, too.  Without checks and balances in place, you can find yourself saying yes to everything and spending more money than you have—all because of the fear of missing out.

17.  Map out your financial goals.

Be very specific with your financial goals.  For example, saying, “I want to save for a home down payment” is not enough.  You need to map out how much you need, by when, and what you need to save every month in order to reach the goal. When you know what your targets are, you’re more likely to stay the course and continue saving for them for the long-term.

18.  Keep your eye on the prize.

Staying focused on your goals take discipline and determination. Saving can be easy and exciting at first, but after a while you may lose that initial motivation and start to find other things you can spend that money on.  To avoid veering off course, check in with your goals regularly and keep your eye on the prize.

19.  Track your progress

People in the U.S. save only 5.5% of their money compared to the 20% that personal finance teaches that you should put away. But instead of feeling ashamed about your lack of savings, just start by saving something.  Even 1% is better than nothing.  Track your progress and continue to increase the number year after year.  Step by step, day by day, you can get to that 20% savings level. The truth is there are many ways to save money.  Find the ways that work for you and slowly start incorporating the strategies into your life.

What tricks do you have for saving money?

Brittney Castro is the Founder & CEO of Financially Wise Women, an LA-based financial planning firm for women. Brittney has been featured in the Wall Street Journal, New York Times, CNBC, Glamour.com, KTLA,   Entrepreneur.com, CBS, and more. Away from the office, you can find Brittney working out, drinking coffee with steamed almond milk, reading, playing with her fur baby Arya, and, of course, dancing. Follow her at @brittneycastro.

5 Ways to Make Your Fashion Business Profitable in Year One

Year one for every business looks different. This guide is for brands that already have a strong foundation (year 0) under their belt. Year zero is your startup phase and those startup costs should be considered separately. Some of those costs may include: branding, pricing, website, samples, manufacturing, marketing plan, sales plan, assortment plan, and a cash flow plan. In year zero you are also determining if you will be a collection based brand (a brand that sells tops, bottom, dresses – i.e. a whole collection) or if you will be an item driven brand (a brand that focuses on making one particular kind of product – think Bonobos when they first launched). If you want to create a brand with a budget in mind, start with item driven products then expand later. 

To make a business profitable your revenue needs to surpass your expenses. Seems simple, but it takes strict financial planning and strategy to take advantage of every dollar spent.

KNOW WHAT YOU WILL SPEND MONEY ON THIS YEAR, AND CUT ACCORDINGLY. 

Make a list of all the activities for the year you think you will spend money on (marketing, photo shoots, etc.) then start to rank them in order of costs and potential revenue (it's tough to know exactly in year one what will make you money). Focus on only the top 3-5 opportunities. Brands waste tons of money doing a lot of marketing activities poorly. 

LEVERAGE NETWORKS TO GET THINGS DONE AND GIVE YOURSELF ENOUGH TIME TO DO IT. 

When minimizing cost you need to trade off with time. Example: The less money you want to spend on hiring a graphic designer, the longer it will take to find a good one that is in your budget. This is especially the case when looking to leverage your current networks to execute something. Your friend who is really good at "X" may not have the bandwidth to do you a favor for three months. So, plan accordingly. Start by making a list of everything you need to get done for your business, for this example we will use a selling campaign. You will need to hire Photography, Hair, Makeup, and Graphic Designers, etc. Your next list should be everyone you know in your network, including Facebook Groups and other groups you are a part of. Finally have a list of things you can do for others.  When writing the posts' message include your offer and see who is open to trade. The low end of a photo shoot done professionally can run you $5,000, so if you have the time to pull this off working within your networks, you might save a chunk of change. 

DON'T PRODUCE EXCESS INVENTORY UNLESS THERE IS DEMAND. 

I’d rather you create demand through having a strong social media profile and 2-3 units on hand per item to sell online. Instead of producing your manufacturer's minimum at a lower price and getting stuck with aging goods. These days brands are launching with strong social media 6 months to a year out before the product launches. Why? To create demand, so when the products are available for sale, there is an audience. You do need some product to fulfill demand when your site launches, but wouldn’t you rather sell out and start to build demand, then have too much on hand?

FOCUS ON SELLING IRL.

It takes time to build your ecommerce following, and to get picked up by wholesale retail accounts. I have noticed that my clients who focus on selling in real life at markets, friends and family events, trunk shows and through co-branded popup events see a far higher increase in sales right away. This is because people can touch and feel your collection and you can sell to them with your charm and passion for your product. Build each event with a 360* marketing strategy to take advantage of every dollar spent. Example: Have a friend at the event taking pics for social media, give shoppers 10% off if they follow you on IG, and sell samples/damages at a big discount to get rid of inventory you cant normally sell. 

STOP TREATING YOUR BUSINESS LIKE A HOBBY. 

Hopefully, since you are reading this, you actually want to make money in this business. This means you cannot have a 4-hour work week or magically have a business you love. It’s just not possible. You should be clocking in 60 + hour workweeks if you are really hustling. If you have a day job, that means you are working on this nights and weekends and lunches. You need a plan of action. For every dollar that you spend and every hour that you spend on your business you need to outline the 3 ROIs you are getting. Those ROIs (return on investment) won’t always have financial implications, but they might have brand awareness implications and that absolutely will help you in getting sales. It takes the average brand 18 months of selling to really see a pick up in sales and to understand their customer. 18 months means 3 seasons of pitching, product development, sample making etc.

"You should be clocking 60 + hour workweeks if you are really hustling."

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There is no magic wand to make your business profitable in year one, but there is smart planning and smart execution that can get you there. How you set up and manage your business goals and brand vision can bring you closer to profitability. But keep in mind, the industry is not set up so that the brands with the most exposure, press and sales make the most profit. In fact, many highly visible brands are in debt. But, by following the tips above you will keep yourself on the safer side of cash flow management and be a stronger, wiser CEO for it. 

Syama Meagher is the CEO of Scaling Retail, a consulting firm for fashion and retail brands. Her Launch My Brand course, 6-weeks to building your business foundation starts 3/31/16. Watch Syama in action on Scaling Retail TV, The Channel to Grow Your Fashion & Retail Business.