Build Your Financial Foundation

In order to be a smart, confident investor, you need some baseline knowledge and tools to make sound investments. That is true whether those investments are values-aligned or not. Since our society has not done a great job of educating women about basic investment concepts, investing can be intimidating or overwhelming for a lot of us.

Knowledge about a few key investment concepts can go a very long way toward empowering individuals in making wise and informed investment decisions. This is true for all types of investors, such as recent graduates new to saving and investing, midterm careerists, newly single, recipients of new wealth, and women entering retirement.

  • Your income comfortably covers your ongoing expenses
  • You have manageable debt, which means you can avoid high-interest debt and comfortably afford your monthly debt repayments
  • You have at least three to six months of readily available (e.g., “liquid”) funds to cover needed expenses in case of an emergency or other unexpected even

If you’re not quite there yet, don’t worry or be ashamed. Whether you are young or old, you’re not alone. A study by Charles Schwab found that only 28% of Americans have a written financial plan. Those who do, however, feel more financially stable and demonstrate better saving and investing behavior.

Know what you own

It’s going to be impossible for you to invest your money wisely if you don’t know how much money you have and where it is. You’d be surprised by how few of us actually know where all our money is being held and what it’s invested in. So, the first thing to do, if you haven’t done so already, is to take inventory. To help you do this, you can download the What You Have Worksheet and watch the 5-minute demo that explains how to use the worksheet.

Understand why diversification is a key to success

One of the keys to successful investing is diversifying your assets across several different types of investments to mitigate risk. This Nerdwallet article does a great job of explaining what diversification is, why it is important, and how to do it. The post includes a table that shows how different asset classes performed relative to each other year-over-year and contains a neat little tool that shows you what basic, intermediate, and advanced allocations of cash, fixed income, and stock could look like.

When you know what you own and how your money is diversified, it is much easier to determine whether your investments are aligned with your values or undermining them. You can look at your investments asset class by asset class, starting with your cash, which you will learn about in the next resource.