Miracle Olatunji is a public speaker, content creator, entrepreneur, and author of Purpose: How To Live and Lead With Impact. She is the founder of OpportuniMe, a mission-driven company which helps people and organizations to realize and reach their full potential. She is also building Her Wallet Media, an inclusive and shame-free coaching and financial education platform to help women build their net worth, network, and self-worth. Miracle joins The 411k to share her personal money story and inspire her Gen Z peers to find their purpose!
HENRY stands for High Earner, Not Rich Yet
HENRYs work hard to land that six-figure salary but they are consumed with consumer spending, education costs, and housing costs. Despite making between $250,000 to $500,000, they have not saved or invested enough to be considered rich. Of course, you should enjoy the salary that you earn! However, HENRYs are living well beyond your means.
The lifestyle creep is when you start spending more when you earn more. You upgrade your apartment, you buy your friends more rounds of drinks, you travel every weekend for fun, or buy a nicer wardrobe. It’s super fun to live in the moment and feel like Carrie Bradshaw in SATC. But you’re leaving yourself at risk! What if your car break down? What if you lose that job? What about retirement?
Is that money really going where you want? What do you want? Where do you see yourself in 5 years? 10 years? How are you going to get there? More salary comes with more opportunity to set yourself up for a stable and independent life down the road. Instead of treating yourself to costly dinners every night this week, start your emergency fund, pay down your debt, lower your bills, start saving for retirement. You can be rich now if you start being intentional with your money!
Check out our new episode with Jen Smith to learn more about the lifestyle creep!
A cost of living raise or adjustment makes up for inflation. When the cost of living goes up (see CPI) by a certain percentage, employee wages should increase by the same percentage. For example, if the cost of living increases by 2% this year, employee wages increase by 2%.
Consumer Price Index – this looks across the market at prices to measure inflation. You know your aunt that always talks about how she could go to the movies for $1? Or when grandma used to get groceries for nickels and dimes? That’s inflation! The prices on goods went up (inflated)!
Inflation is the general rise in prices over time. The combination of supply shortages and pent-up consumer demand has prices soaring right now. Overall, prices increased 5% in May 2021. We are seeing price increases in airfare, housing, restaurants, rental cars, women’s clothing, and nearly every other industry.
SO MY RAISE?
The end of the calendar year is when most companies host performance reviews and set budgets (and salaries) for the next year. The most recent CPI report showed that the U.S. inflation rate for 2021 reached 6.1% (highest in 30 years). With prices rising across the board, an increase in pay should be a given— otherwise, it’s effectively a pay cut!
With the tight labor market and high inflation, don’t forget to ask for a well deserved raise based on current rates. A 6% adjustment should be the base for your discussion and then talk performance bonus plus market rates!
A credit score (also known as FICO score) are numbers that represent the creditworthiness of a person, the likelihood that person will pay their debts. Lenders, such as banks and credit card companies, use credit scores to evaluate the risk of lending money to consumers.
Your credit score is made up of several factors that have a different weight on your score.
PAYMENT HISTORY is a large contributing factor to your credit score. Banks and credit card companies want to know that you can pay back your loans on time.
AMOUNT OWED (also known as credit utilization) refers to how much credit you are using at any given time compare you how much is available to you. If you have a credit limit of $10,000 and you’re spending close to that limit each period, you are going to look more risky, even if you are making payments on time.
CREDIT HISTORY meaning the length of time that you’ve had access to credit (number of years you’ve had a credit card or loan). This is one that you might have less control over but the key part is to keep your accounts open so you have years of proof that you are a responsible borrower.
CREDIT MIX (# of loans vs credit cards) and applying for NEW CREDIT are also contributing factors. A variety of credit is good but always applying for new credit accounts can look risky.
As you can see, there are a lot of contributing factors to consider. The general rules are (1) make your payments on time and (2) keep balances low.
BONUS: WTF is a Credit Limit?
Increasing your credit limit is an easy way to improve your credit score and all you have to do is request an increase! CNBC reported that Americans have an average of $22,751 in credit available to them across all their credit cards.
A credit limit is the amount of available credit you have or the amount of money you would have access to on your credit card. By itself, it doesn’t have much impact. But credit utilization, the ratio of amount owed against the amount available, can make a big difference.
Some credit issuers automatically increase your credit limit if you have made 6-12 months of on-time payments. If you do not receive an automatic increase, usually all you have to do is ask! You can usually request an increase in the banking apps or call the customer service line for the credit card. The bank will check if you have a healthy credit history and then let you know what you are eligible for. It’s as easy as that!
If you are not regularly making on-time payments or you know you are a big spender, increasing your credit limit might not be the best idea. Consider your whole financial picture before making big moves across all your credit cards.
When used in a healthy manner credit can be useful and rewarding. To learn more about credit scores, check out our episode with Gerri Detweiler available on Apple Podcasts, Spotify and iHeart Radio.
ARM stands for Adjustable Rate Mortgage. An adjustable-rate mortgage (ARM) has an interest rate that changes with the market.
Fixed-rate mortgages and adjustable-rate mortgages (ARMs) are the two popular mortgage types.
A fixed-rate mortgage charges a set rate of interest that does not change throughout the life of the loan. The 30-year mortgage is the most popular choice because it offers the lowest monthly payment. However, the trade-off for that low payment is a significantly higher overall cost.
An adjustable-rate mortgage (ARM) has an interest rate that changes with the market. ARMs have a fixed period of time during which the initial interest rate remains constant, after which the interest rate adjusts at a pre-arranged frequency. The fixed-rate period can vary significantly—anywhere from 1 month to 10 years; shorter adjustment periods generally carry lower initial interest rates. After the initial term, the loan resets, meaning there is a new interest rate based on current market rates. This is then the rate until the next reset, which may be the following year. ARMs can be complicated so you’ll want to review all the different factors that impact the interest rate changes. ARM mortgages can often be cheap for the first few years that the lower rate is locked in but you will need to be prepared if interest rates rise when the adjustment kicks in.
AKA ‘a qualified tuition plan’ – A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. Usually a college fund!
The 529 plan can be set up by a parent and designate a child as the beneficiary of the account. And fun fact – you don’t have to wait until a child is born to start saving money for their education! You can start a 529 plan with yourself as the beneficiary and then add your child as a beneficiary when they are born. There are annual limits on how much you can put in a plan for someone else without paying a gift tax but for the most part, you can contribute what you want.
It is important to note that 529 plans are considered in financial aid packages. This means that your child could receive less financial aid for having money in a 529 plan. Not all savings vehicles are like this. For example, financial aid does not look at ROTH IRAs and you can withdraw this money to pay for education penalty free.
In addition, you will have to pay taxes on the money if it is withdrawn for a purpose other than the intended purpose.
Interested in learning about other ways to pay for school? Check out our episode with Nikki Wells on different ways to fund college education.
An expense ratio (ER) or management expense ratio (MER) is the cost or the amount charged by a mutual fund or an ETF (exchange-traded fund). Funds have to pay for portfolio management, administration, marketing, and distribution, and other expenses. The cost is always expressed as a percentage of the fund’s average net assets (instead of a flat dollar amount).
HUH? An expense ratio measures how much you’ll pay over the course of a year to own a fund. For example, a fund may charge 0.2 percent. That means you’ll pay $20 per year for every $10,000 you have invested in that fund.
Funds can be actively managed (meaning a person or team are actively picking which stocks, bonds, etc are in the portfolio) or passively managed (meaning they mirror the market or existing benchmark like the S&P 500). Actively managed funds cost more because someone is actively trying to beat market returns.
SO WHAT’S LOW COST? A reasonable expense ratio for an actively managed portfolio is about 0.5% to 0.75%, while an expense ratio greater than 1.5% is high. For passive or index funds, the typical ratio is about 0.2% but can be as low as 0.02% or less in some cases. Robo-advisors typically invest in low-cost ETFs with much lower expense ratios, ranging from 0.05% to 0.20% in most cases. Or you can do it yourself! The cheapest option would be to open an account and invest in low cost index funds or ETFs.
WHY IS THIS IMPORTANT? Expense ratios significantly affect a fund’s return and an investor’s profit, especially over time. 1% doesn’t sound like a lot but it is!
Check out our episode with Amanda Holden to learn more about the importance of low cost investments.
“On Women’s Equality Day, as we recognize the accomplishments that so many women fought so hard to achieve, we rededicate ourselves to tackling the challenges that remain and expanding opportunity for women and girls everywhere.” – Barack Obama
Women’s Equality Day is celebrated every year on August 26 in the United States to mark the American women’s continued efforts to achieve equality. The U.S. Congress officially acknowledged Women’s Equality Day in 1971. It is also celebrated in memory of the ratification of the nineteenth amendment of the US constitution, which guaranteed the American women their right to vote.
Although we appreciate how far women have come, it’s important to remember how far we still have to go.
The U.S. system is financially unwell. The APA’s 2017 Stress in America survey reports that 62% of Americans are stressed about money. A Federal Reserve Board survey reported almost half of Americans (44%) can’t cover a $400 emergency without borrowing money or selling something. 34% of Americans say they have $0 in savings (up from 28% in 2015) and 69% of Americans have less than $1,000 in savings. The Economic Policy Institute reports that half of all Americans have nothing put away for retirement. The average household with student loan debt has accumulated $46,597 in student loans. The average household with credit card debt has $15,654 in credit card debt.
Spoiler alert! It’s worse for women. According to the American Community Survey (ACS), the average woman in the United States makes 82 cents for every dollar a man makes. The gap widens for black women (62 cents), American Indian or Alaska Native (57 cents) and Hispanic women (54 cents). USA Today reported that globally, women may not receive equal pay for another 257 years. The gender pay gap leaves women in the U.S. less prepared to weather a financial blow than men.
Cue a global pandemic (plus the market uncertainty and low job security it brings) and we’ve got ourselves a perfect storm.
Beyond the gender pay gap, across all classes and races, women are getting hit the hardest by the economic impact of COVID-19. According to Bloomberg, the industries almost entirely shut down by the virus are disproportionately staffed by women. Women hold 53% of restaurant, hotel and accommodation jobs which are seeing layoffs and reduced hours due to social distancing directives. Even more, moms working remotely are taking on the majority of unpaid labor at home while balancing their virtual workday.
Still not angry? In addition to earning less than their male counterparts for the same job, and being more at risk during market and life disrupting moments, like scary viruses, women also pay more for…wait for it…basic household items. That’s right. The “pink tax” is the extra cost on many products marketed directly to women, like clothing or hygiene products. $1-2 per item over a lifetime adds up to thousands of dollars extra each.damn.year.
What Can You Do?
Many of these issues are systemic, outside of our direct sphere of influence, and are expected to take decades to solve. But don’t despair. Now that we got you good and angry, let’s channel that energy into things we can control, starting today.
Be Intentional: Without a system of financial education in place, we need to seek out the answers on our own. Take a course, listen to a podcast, and find the financial resources you need to make values-based decisions with your money. Since women are paid less, our money needs to be working harder to keep pace with our male counterparts.
Don’t be shy…talk money: Start talking about it…because not talking about it is costing us big time! Challenge the taboo, open the lines of communication with friends and family and lift the veil of secrecy. Transparency around salaries helps women negotiate for equal pay and achieve their goals.
Paycheck Check-In: Research average salaries for your industry, location, and experience level to see if you’re earning what you should. If you’re making below what you should consider requesting a pay increase.
Always Negotiate: Unless you’re told otherwise, there’s often more money behind a job offer. Research average salaries, prepare your value-add pitch and practice making the ask. 55% of women say they have never asked for a raise. You could miss out of $600,000 to $1.5 million over a lifetime by never negotiating your salary.
And then negotiate some more: Consider negotiating non-salary items like vacation days, professional development funds, flex work arrangements (hello, four-day workweek!), or your job title. Some of these things can benefit you greatly in the future.
What a difference a year makes! Katie and Katherine discuss the life events and big financial moves they’ve made over the last year. As a reminder, our hosts are not know-it-all experts. They are living and learning as they go. In this episode, they share some successes, some strange turns, and a few mistakes that got them through this year.
Amanda Holden, aka Dumpster Doggy, joins The 411k to get real about investing. Starting at 21, everyone is telling you to start putting money into a retirement account. Yes, we know that we are in a retirement crisis but there is so much more that we can learn about how to make our investments work for us. Amanda makes money fun and relatable so tune in to learn more about how to better understand how investing works.
Jen Smith, creator of ModernFrugality.com, joins The 411k to talk about what it means to live a frugal life in the modern world. Yes, being frugal can mean saving $5 at the grocery store by shopping sale item but this conversation centers around the big frugal moves like moving to a more affordable city, buying a more modest house on one income, saving an old kitchen table instead of buying a new one. Big frugal moves can save you hundreds or even thousands of dollars. You won’t want to miss this conversation on the benefits of a frugal life.
Erin Chase, founder of the blog 5 Dollar Dinners, is on a mission to help busy, overwhelmed home chefs learn to spend less money on groceries. Erin joins The 411k to talk food budgets and how to save money on groceries, so that you can do more with the rest of your budget.
You can find more information about Erin and her money saving resources at 5DollarDinners.com.
Jennifer Barrett, the Chief Education Officer at Acorns, is an expert at helping women shift their money mindsets and take control of their finances. She is also the author of “Think Like a Breadwinner,” a manifesto for the working woman, with tips on building wealth and finding balance. Barrett joins The 411k in this episode to share her own money journey and the research that she is seeing about breadwinning women in the workplace.
Britny Lawhorn joins The 411k to teach us how to make informed decisions throughout the home-buying process. Buying a home is often the biggest financial decision that a person makes and so it’s important to understand as much as you can about the factors that impact that purchase. In this episode, we are talking specifically about what a first-time buyer should know about mortgages.
Rodney Sinclair, the owner and operator of Sinclair Real Estate Group, joins The 411k to share advice for first-time home buyers. We are seeing a turbocharged housing market right now with prices surging and home on the market selling quickly and far above the listing price. Rodney joins us to share real examples of what he’s seeing in the market right now and how first-time home buyers are staying competitive.
Melody Wright understands that a financial plan isn’t one size fits all! In this live episode with Ithaca College’s Women in Finance and POC in Finance groups, she talks about her new book, Start Here, a personal finance guide to move past living paycheck to paycheck. When faced with $212K of debt that didn’t include their mortgage, Melody used the analytical skills learned from her time in science to develop a framework that helped her family pay off over $100,000 in debt in less than three years. Now she’s living her version of a Rich Life! Through bold conversations, coaching, and the creation of strategic money management systems, she has helped thousands of people stop being Aimlessly Broke and transform their mindset, behaviors, and practices related to money.
Naseema McElroy is the founder of Financially Intentional, a platform about personal finance and living life intentionally, as well as the host of the podcast, Nurses on FIRE. Naseema joins to share her personal money story. Like many health professionals, Naseema found herself with a lot of student loans and even though she got a great job, she was still living paycheck to paycheck. In this episode, she shares how she break the cycle, paid off over $1 million in debt, and grew a six-figure net worth in just 3 years without living in deprivation.
Sarah Li-Cain is a finance writer and host of Beyond The Dollar, where she and her guests have deep and honest conversations about how money affects your well-being. In this episode, Sarah joins The 411k to talk about practical tips and mindset strategies so that those trying to change their financial life can forgive their mistakes and start to trust themselves with money.
We are so grateful to have Leisa Peterson join us to talk about scarcity and abundance. No matter how much money we end up earning, saving or investing, deep inside we can still hold on to a sense of lack and deficiency about who we think we are. Leisa Peterson shares some insight into her 7 Step Prosperity Ladder to help us develop an abundance mindset. Check out this episode as well as her book, The Mindful Millionaire, to learn more!