Erin Papworth, founder of personal finance app Nav.it

Women in Finance: Think about Wealth Management in 3 Buckets

It took me a while to sort through all the financial products, services, and mayhem that seems to inundate you when you start to really think about your money. From what I’ve heard from fellow women in finance, we just need a better way to think about money management.

My brain likes categories so I started to think of all of the nebulous products in three categories and realized it’s also how the financial world is organized: 1) banking products, 2) debt, and 3) investments.

Once I started thinking of financial services like this I was able to deep dive into each vertical to understand each grouping better. 

So banking*.

Wow, those banks! They come up with a million products, but the bottom line is banks want your deposits, and they want to loan you money. Checking, savings, money markets, interest-bearing accounts like CDs, are the products you’re going to get from banking products. Some are actually pretty great, like high-interest saving accounts for your emergency fund, so you can make some real interest on your stashed-away cash.

Checking and savings are necessary, but the question is how can you get the most convenient product with the lowest fees. Personally, I think there’s no excuse anymore for banks not to have an awesome user experience for online and mobile platforms. You can pick your style —online, bill pay, reserve accounts —and you’ll find a bank that will match it. 

Pro-tip: the smaller banks often have great products that waive overdraft fees or incentivize high-interest savings for your kids in attempts to keep you away from the big guys. I’m a big fan community banks and credit unions. 

*Banking can overlap a little with investment if it’s a small business but more on that later. 

Now debt.

Debt can be a necessary evil, as credit is an incredible way to leverage money to make more money in the long run. That includes student loan debt if you can make more money because of the education later, credit for small business growth and management, etc. 

The place where it gets creepy is debt in the form of credit cards. I still can’t believe banks are only giving max 2.25 percent interest on savings and money markets, but charging 15-25 percent APR on credit cards. Where do you think they get the money for those credit cards? Yes, your checking and savings deposits. (But enough, let me get down from my soapbox…) 

I do love credit cards for the rewards that you can wrack up (my platinum status on Delta is 100 percent worth it because of the way and where I travel). But they are straight evil with APRs, so paying them off every month (no excuses, otherwise you may end up in credit card debt) is key to healthy wealth management.

And finally investments. 

This is the fun part. How can you make more money with the money you have? This is a huge category, and if this is the part that makes you feel overwhelmed, starting small is really all there is to it. 

The first step is usually either your 401k or whatever benefit option you have after college and through your employer (if you don’t have a 9 to 5, take a look at these options). Someone has probably told you TAKE THE MATCH, but if not, TAKE THE MATCH. It’s money that is already yours, so taking advantage of it if you can makes your money compound (aka grow) more.

The second is your own engagement in stocks, ETFs, index funds, bonds, securities, etc. These you can invest in yourself, either trading on your own or through automatic payments to a brokerage account. Financial planners love brokers like Vanguard or Fidelity because of their low fees. Roboadvisors like Betterment and Personal Capital are also disrupting the industry by reduced fees and algorithmic trading. If you’re in need of an investment platform, we’ve discussed a few options in this article.

After these two subcategories, you can get into so many other asset classes. The next typical ones in the U.S. are homes, real estate, and entrepreneurship.

All of these are great investment categories depending on your personality and lifestyle. There are always tradeoffs and risks, but the hope, of course, is to make more money than you invest in the long-term.

So, if your brain likes groupings like mine does, I hope this simplified breakdown of wealth management helps you start down the road of financial confidence and wellness.

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