Kara Pérez is the founder of Bravely Go, a financial platform focused on feminist economics and inclusive personal finance.
Budget Smarter Using the Format/App That Works for You
People like to hate on budgeting because it feels like the end of fun. Oh no, I have to budget, that must mean I can NEVER spend any more ever again! Not true! Budgeting is simply giving every dollar you earn a job. Sometimes the job is to pay rent. Sometimes the job is to get invested. And sometimes the job is a glass of rosé. I’ve been budgeting for the last seven years and it’s allowed me to do some pretty incredible things, like save half my income and take time off work to travel.You can budget by hand, with a spreadsheet or with an app like Mint or Monarch Money.
The key is to set limits for each category of spending and stick to those limits. For example, $125 a month on eating out or $85 per haircut. Then track your spending in each category weekly to see how close you are from your limit. The tracking is the most important thing. Apps do that automatically after you link your bank account and credit card information, which makes it easier. For the nerdier among us, spreadsheets can also be totally customized to track your individual spending.
Invest early and Don’t be Afraid to Start Small
The Latinx community is up against not only a wage gap but also an investing gap. Only 8 percent of Latinx households report having an individual retirement account, and we’re more likely to own real estate than stocks. Not to knock real estate, but in order for there to be more Latina millionaires, we need more Latinas invested in the stock market! Rita-Soledad Fernández Paulino of Wealth Para Todos, shares that she used to be scared of investing, but has grown to be a passionate investor over time.
“Validate your fear and understand it’s probably coming from a place to protect you. It’s normal to fear things that are new,” she tells HipLatina. “When it comes to investing in the stock market, know that once you take the time to learn about tax-advantaged investment accounts, Target date funds, index funds, ETFs, and expense ratios the only thing to fear is choosing not to invest and losing your dinero to inflation. Now I’m 35 and I invest $28,800 a year so I can become work optional by 47.”
The best place to start investing is a retirement account. If your job offers one like a 403b or a 401k, start there. Otherwise, you can open an Individual Retirement Account (IRA) or Roth IRA. This is available to anyone 18+ who has an income, so it’s an amazing resource for Latinas.
Plan For Your Happiness
Another big problem in the world of personal finance is the message that you shouldn’t use money for fun. That’s because a lot of old school personal finance experts have built their career on telling people that buying a cup of coffee everyday is the reason they will never retire. This has spiraled out to a lot of people shaming others for spending on anything besides investing or saving. We’ve only got one life to live y’all, and sometimes I want to take my hard earned cash and spend it on a trip to New York, or a massage!
Soledad advises people to “Budget for joy. Anything that feels like deprivation isn’t sustainable. Besides tracking your savings rate, ensure that you are spending money on things that bring your pleasure.”
By creating space in your budget and in your life for things that bring you joy, you’re more likely to stick to your budget, and you’ll enjoy your life more. Try setting up an automatic deposit to your savings account nicknamed “Thailand 2023” to keep you motivated to save that money, and excited to spend it when you get to Thailand.
Eliminate high interest debt
Debt is a downer and it’s also one that affects the Latinx community with 43 percent relying on credit cards to pay for basic necessities. It’s money that you have to give to someone else, instead of saving it for that trip to Thailand. For a lot of us, paying off debt is all about mindset. Vanessa Menchaca Wachtmeister of Wander Onwards, a wealth and wanderlust platform, shares that she tricks herself into both saving and debt payoff, by automating her money
“First I pay myself when I get paid by transferring money immediately to my savings and investing funds. Next I try to live off 40 percent of my income by using a separate checking account from my savings, where the goal is to spend 100 percent of what’s in that pot,” she tells HipLatina.
This is a great strategy for people paying off debt; set aside what you NEED to live off of, and put the rest towards debt and investing! Focus on paying off your highest interest debt first; this is called the debt avalanche payoff method. You’ll save the most money by paying off your high interest debt first.
So if you have a credit card with 16 percent interest and $4,000 of debt, and a student loan with $12,000 of debt but only 3 percent interest, pay off your credit card first.
Latinas with money is a powerful thing; we’re a force that can change the world! Using these tips, you can start your financial planning for 2022 and have the best money year of your life.