NEW YORK (CNNMoney) — Adulting is rough. Especially when it comes to money.
Navigating your first paycheck, paying for rent and health care on your own, saving for your future — all while buried under student loans — can be overwhelming.
But getting your finances in order at a young age is important for setting up a life of financial success, especially for women who face certain obstacles when it comes to building wealth.
Sallie Krawcheck, who became one the highest-ranking women on Wall Street, says women still aren’t on equal ground with men when it comes to finances.
“Until we are financially equal with men, the work of feminism isn’t complete,” she wrote in her guidebook “Mind the Gap” that details the impact of the gap between men and women on pay, work achievement, debt, investing and funding.
Krawcheck, who recently launched Ellevest, a money management firm targeting women, has a few tips for young women:
1. Get out of (high-interest) debt
It’s common for young adults to be saddled with debt, and while not all debt is necessarily bad, it’s important to prioritize repayments.
Pay down your debts with high interest rates first, Krawcheck advised.
Loans that carry interest rates above 7% can be a major financial drain over the long run. Credit cards are often the culprit.
“Do nothing until that is paid off,” advised Krawcheck, who admitted she graduated with a “chunk” of credit card debt herself.
2. Build an emergency fund
Once high-interest debt is history, start stashing away money for emergencies.
“Some people out there recommend building your fund before paying off debt. That is truly stupid advice,” said Krawcheck. “Then you have cash that is earning close to zero, but you owe cash that is costing you 20%.”
She recommended saving one to three months of living expenses to help provide a cushion for unexpected events or expenses that might pop up.
Krawcheck recalled feeling stuck in a job despite being harassed because she didn’t have a financial buffer to fall back on.
“On a day to day basis, there were Xeroxed copies of male nether regions on my desk,” she said. “I couldn’t quit — I couldn’t pay my rent.”
Having a stash of cash gives you more freedom and control over your life, whether it’s leaving a bad job, starting a new career or exploring a new hobby or business idea.
3. Figure out what you really want
Creating concrete goals can make a financial plan more realistic and successful, said Krawcheck.
“The idea of ‘I am investing to make more money.’ Or ‘I am going to outperform the market’, does nothing for [women].”
That’s why she takes a goal-based approach to investing when creating a client’s financial plan.
Setting goals — for example, I want to buy house in six years, start my own business in two years, or have a kid in the next decade — allows you to tailor your budget and set specific savings and spending targets.
4. Open a 401(k)
Time is your best friend when it comes to saving for retirement. So the earlier you get started, the better.
And opening a 401(k) offers many other benefits to young savers.
First, the money comes out of your paycheck before taxes and also grows tax free, so you won’t owe anything to Uncle Sam until you withdraw it.
Plus many companies offer to match part of your contribution. That’s like getting free money, so don’t pass it up.
“A 401(k) is a powerful means of building wealth very early,” said Krawcheck.
5. Get over your investing fears
Too many women leave the bulk of their assets in cash, which means they aren’t earning much from it, Krawcheck noted in her guidebook.
Women can be more hesitant when it comes to investing, she said. That fear can mean missing out on opportunities to grow and create wealth.
She pointed out in her guidebook that a woman making $85,000 a year and saving 20% in the bank could lose out on more than $1 million over the next 40 years.
Keeping a diversified portfolio with broad market exposure can help alleviate investing jitters.
While a 401(k) is a great way to invest, Krawcheck recommends saving outside of retirement accounts as well.
To get started, she suggested investing 1% of your paycheck and increasing the amount regularly.
“Pay yourself first. Do it every paycheck.”
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