Managing money never gets easy. For young professionals entering the workforce, there is a continuous battle between how much of your paycheck to spend and how much of it to save (if any!) Even for people with a little more experience in life and work, advancements like marriage, promotions and so on come with a new set of rules about money. And then, there are the questions that apply to everyone, like how finances influence friendships and other relationships in our lives. So really, managing money never gets easy for anyone; new situations will arise and circumstances will differ, but, there are few foolproof lessons that every woman (and man) should learn when it comes to money and financial stability.
The WomenWerk team fleshed out some of their most pressing questions about money and we reached out to Arese Ugwu, the founder of smartmoneyafrica.org, a personal finance blog that provides information, tools, and content about financial literacy and entrepreneurship (find out more about her on her website.) to find out a few key rules about how we should be managing our money.
WW: Money can create interesting dynamics among friends and family, especially as one becomes more financially stable. What advice do you have for women looking to balance expectations of generosity or even duty with their own financial goals?
Arese: I think it's important to be able to help family and friends in times of need and the reality is as you get older that duty and responsibility tends to increase, but it's also important to put yourself first and always have your financial goals at the forefront of your mind. So my advice is set a budget for giving. A set amount that you can afford to give or lend at any point in time without jeopardizing your own goals and be disciplined enough to stick to that limit.
WW: What are good financial habits every woman should have to set a path for financial security?
Arese: I think setting regular money dates with yourself, monthly, quarterly and yearly is always a good idea. A set time to evaluate your finances and make sure you are on track to meeting your financial goals and get a clear idea of exactly where your money is going. It’s a great way to keep yourself accountable.
WW: In your opinion, do men and women face differing financial pressures?
Arese: Well I come from Nigeria and in my opinion men and women have different financial pressures, maybe because it’s a very patriarchal society men and women are raised to think about their money differently. Most African men are taught early on that they are the providers and responsible for the family’s financial future. So they are generally programmed to want to generate enough income to look after the family and build assets. (i.e houses.)
However, African women are raised to be nurturers which means that even when they earn money they see their money mostly in terms of spending, so an extra income often translates to more money they can spend on themselves (hair, clothes, shoes and bags), extras for the kids or money to make the house a home ( i.e furniture.) Even though African women have become more entrepreneurial in their thinking, so they know how to make money, they haven’t been taught in any formal framework how to keep it or grow it. We need to reconstruct our ideals surrounding the way we think about money, because how we behave with money is deeply rooted in how we think about money.
WW: What financial safeguards should a young woman consider before moving in with a significant other?
Arese: I think that the first thing on the agenda should be a discussion about the expectations of each person’s responsibility. We all come from different backgrounds and carry our own money biases and habits and we often assume a significant other has identical thoughts on the way to approach money but this is rarely the case. For example, Sade and Femi get married and live together for the first time. Sade comes from a home where her mother was a housewife and her father the provider, so even though she works for a living her mentality is my money is my money and Femi’s money is our money. If Femi comes from a family where both parents contributed equally to the household and believes strongly that Sade should contribute to the household expenses, without a proper discussion this can cause problems.
There is also the issue of understanding each other’s money personality, so establishing who is the saver and who is the spender early on and to protect both parties it's probably best to keep personal finances separate but have a joint account for household expenses with pre-agreed amounts that each person contributes.
WW: What do you think are the biggest financial mistakes young professionals make?
Arese: Thinking that they are too young or too poor to invest, so they spend everything they earn with the mindset that they’ll eventually make more money, so building assets to protect their financial future can be put off for a few years. I generally think if you can’t find a way to save and invest when you have $10 you’ll probably never save and invest when you have $10,000,000. It’s a discipline that needs to be cultivated early. Another big mistake is the way they measure financial success. Most young professionals tend to base their financial success on how much they earn instead of their net worth, but building wealth is more about how much of that income you can keep and convert to assets because if you earn a million dollars and spend a million dollars what you have left is zero.
WW: What financial milestones should a woman hit in her 20s and 30s?
Arese: When most women are in their 20s and 30s, they are still trying to figure out who they are and their place in the world. So one of the first things to establish is HOW you want to earn money, is it by working corporate job or being an entrepreneur, what industry, what city? In my opinion whichever path you choose, you maximize your earning potential when your career is linked to your purpose because it means you wake up everyday, working in a field you are passionate about, creating value and solving problems that people will pay you for, while using skills you’ve spent time perfecting.
In this phase of life, I think it's also important for women to establish what they want the money they earn to do for them and establish clear long and short term goals, so that they can spend and invest intentionally. It sounds really simple but most people have a hard time articulating what their money goals are, which often leads to letting society, friends and family pull their money in several directions. A quick test to gauge where you are with this is, if a stranger looked at your bank statement for the last 6 months, would the money you’ve spent reflect your values and the experiences that bring you joy? For example if Amenze loves travel, she needs to budget for that and cut expenses ruthlessly on the things that don’t matter as much to her.
An emergency fund is the foundation for a good financial plan. 6-9 months of living expenses that act as a cushion when life throws you a curveball is also very necessary. If you start building and preserving this early on it removes a lot of the anxiety surrounding money and worrying about the future.
Women in their 20s and 30s need to make building wealth a priority by ensuring that a proportion of the money they earn is being converted to savings and investments that can build assets that will generate an income in the future. (i.e property or a stock portfolio. )
The key is to start early and create that discipline of saving and investing towards your long-term goals regardless of how much you earn.