Money Cheat Sheet

What do I wish I’d learned about money sooner?

So much. Mostly, that money is power, independence, freedom, and living the lives that we want — lives that our mothers and grandmothers couldn’t have imagined.

Want to start your own business? Go on a trip around the world? Get an advanced degree? None of it’s possible if we’re not in control of our money or working toward these goals financially.

That’s the good stuff. The not-so-good stuff: I also wish I had known that 90% of women are solely responsible for our money at some point in our lives — whether we want to be or not. That’s because we marry later, we live five (or more) years longer than men, and 40-to-50% of marriages end in divorce.

I learned this the hard way when I handed my husband control of our money — even though I worked in finance — only to go through a humiliating divorce. I didn’t know how much money we had, or where it was. I had ceded my power, and almost ceded my future.

It’s a story that repeats itself again and again, even today we tend to give that power up in a relationship when we can only imagine a happy future.

Being in financial control is about playing offense. And it’s about playing defense. Money is power, and knowledge about money is power.

So what do I wish someone had told me? Here are 10 pieces of financial advice every woman should know.

1. Don’t Buy Into Myths About Women and Money

You’ve heard (and perhaps felt) the dated myths around women and money: Boys are better at math than girls. Men are better investors than women. Women need more financial education to invest. They’re wrong, and completely outdated.

Girls receive math grades as good (or better) than boys’. Women are as good — or better — investors than men. Sure, everyone could use more financial education but it doesn’t hold guys back from investing anyway, and it shouldn’t keep women from investing either.

The financial services industry has traditionally been built by men, for men. Investing, all the jargon, the sports-like feel to the markets, financial news that looks like ESPN, the focus on “outperforming” and “beating the markets” and “picking the winners." It’s all pretty macho, and it’s made financial planning and investing feel out of reach for so many women.

I promise you: It’s not us, it’s them. We’ve been held back from engaging financially — and it costs us, big-time.

2. There is Good Debt and There is Bad Debt

We’ll start with bad debt. The old rule of thumb for “too much” is when interest payments exceed 20% of your take-home pay and you can’t see your way to repay it.

One form of potentially good debt can be student loan debt. A great education can lead you to a more interesting job and can forever increase your earnings. The interest rates tend to be on the lower end (generally between 3.4 to 6.8%), and a portion of the interest payments may be tax-deductible, up to $2,500.

Another form of “good debt” can be a mortgage to buy a home. It’s good because, well, you have a home. That can also be a form of investment over time. Again, the interest rates can be low (say 4%), and the interest payments can be tax-deductible.

One type of debt that is never good is credit card debt. Never ever. Interest rates here can range from 12% to 22.6%. It’s just nuts. And there’s no tax break on that interest, so buy something for $1,000 on a credit card in the middle range of that interest rate, and a year later it will cost you $1,270 — or more — to pay it off. It’s like you bought it on “un-sale.”

The best rule on credit card debt: If you need to rack up credit card debt to buy something, just don’t buy it. Seriously. Just don’t buy it.

3. Your Most Important Asset is You. So get that raise!

Make sure you’re earning what you’re worth. A higher salary now sets you up to earn even more later, since future raises start from a larger base. That also helps us close that frustrating, infuriating, irritating, can’t-believe-we-still-have-this-in-2016, are-you-kidding-me gender pay gap.

I personally hate asking for a raise. I was brought up in the South, where such a conversation simply wasn’t ladylike. And that’s before you get to all the insecurities that such a conversation can churn up. And we all have them.

Well, I just got over it. Because let’s put it in context: Say you’re making $85,000 a year. If you are like the typical woman in the U.S., you are making a whopping 78 cents to a man’s dollar. If you get the raise to what the guys are making, that’s a 28% increase. So now you’re making $108,974 a year, just to what’s “fair.” Great. Even greater? Over the next 40 years, that means over $1 million (with inflation)*. Worth an awkward conversation or two, right? (And if the answer from your boss is “no,” changing jobs for a fairer pay check is always an option.)

4. Save 20% Of Your Salary

Some of the dopiest financial advice I ever heard was that it’s okay to put off saving for retirement — and other life goals — until I got older, when I would earn more.

Wrong. Wrong. Wrong.

Instead, you should target saving 20% of your salary from your very first paycheck. This may sound like a lot — particularly because so many people save nothing. But years of research shows that people who save at this level are much better equipped to ride the ups and downs of the economy — and life — than others.

The trick here is to take this amount out of your paycheck first, and only then figure out how much rent you can afford, how much car you can afford, how much vacation you can afford, and how big your clothing budget can be.

If you really can’t save 20%, how about 15%, 10%, or 5%? Start at 5% and gradually increase it. It doesn’t have to be all-or-nothing to have an impact.

Your first savings milestone is to build an emergency fund. This should be at least three months of take-home pay, in case you get fired (hey, it happens — more than any of us like to think), or in case you have to take time away from work for, you know, an emergency. That money should be held in cash, for safety.

And the next step is…

5. Invest. Even If You Haven’t Received the Raise Yet.

With the Gender Pay Gap being such a huge issue especially this election year, you’d think women’s primary money issue is that we don’t earn as much as men. Yes, it’s a big problem. But the Gender Investing Gap could be even bigger.

Let’s go back to our example. Let’s say you’re earning that $85,000 a year. Sadly, you didn’t get the courage to ask for the raise — or you did and you struck out. It happens. But you did decide to take your annual 20% savings and invest it in a diversified investment portfolio instead of leaving it in the bank (except for your emergency fund, of course).

How much more money will you have in 40 years? Our estimates say anywhere from an additional $565,000 to $2.1 million more*, depending on markets. So, on average, let’s call it $1.4 million more. That's more than the incremental $1 million you get over time from getting that raise.

So yes, absolutely ask for the frickin’ raise. But also invest the money you make already.

6. Invest in Your Life Goals

If you have a goal you’re not investing in, it’s just a dream.

For example, starting your own business: You should give yourself two years to get it to profitability. So, you may want to save enough to live on for a couple of years while you get your empire off the ground.

Want to have a kid? Those little suckers are expensive (financially and emotionally — but we’ll only address the financial part here). Expand your emergency fund to hold at least nine months of take-home pay.

Want to retire well? Aim to save 11 to 15 times your annual take-home salary, so that you can live like a boss when you’re a grandma. A grandma boss. This last one seems like a lot, I know — that’s why it’s important to start saving for retirement early to give your money time to grow, and for your returns to compound.

I found that investing toward individual goals — and this included opening up an account for each goal and parceling out my savings among them — was the ticket to getting me on track for them, rather than looking at my money as one big, nameless blob.

7. Plan for a Career Break. They’re More Expensive Than You Think.

This is true whether you’re taking time off to have a child, find yourself, switch careers, or because you’ve simply had enough and can’t take it anymore.

“How expensive??” you’re probably asking.

Let’s go back to that $85,000 a year you’re earning. You decide you want to take a two-year career break. Ok, you think that cost will be about $170,000, before taxes.

Um, no. Not even close.

That’s because women who take career breaks typically don’t return to their old salary levels; they typically come back at lower salaries — on average 20% less (!) And the impact is long-lasting, because their future raises are based on these lower salary levels.

So that $170,000 figure? In 40 years, the total cost can be close to $1.6 million*.

That’s not to say you shouldn’t take that career break — just make sure you’re 100% aware of how much it will cost you in the long run.

8. The Best Time to Invest is Now

Actually, it’s yesterday, but don’t be defeated. I’ve heard all sorts of excuses not to invest: “The market is down, and that makes me nervous.” “The market is up, so there isn’t as much upside.” “I have a whole bunch of stuff I want to read before I get started.” “The markets are rigged for the big guys.” “The market is uncertain.”

There is truth to all of it, but none of it justifies not investing. Especially since historically the stock market has provided a superior return compared to keeping money in cash, over time. A really interesting study has shown that if you took a systematic approach to investing, downturns weren’t as damaging as we typically think. And by systematic, that means you keep investing, in up markets and down.

For example, if you invested $1,000 in the stock market at the beginning of 2008 (and what an awful year that was for stocks), and then you put in another $1,000 at the beginning of 2009 (essentially “buying low”), you would be back in the black by the end of 2009, with more than $2,000.

How about the Market Crash of 1929? With $1,000 in at the beginning of 1929, then another $1,000 at the beginning of 1930 and so on — it would have taken seven years to recover. From the Crash of 1929. Better than you would have guessed, right? The '70s recession? Just three years till recovery.

The key here is to systematically invest; and sometimes that means you “buy high” and sometimes that means you “buy low.” Of course past performance is not a guarantee of future return, but steady investments into the markets has historically won the day.

9. You Can Invest In Your Values

Remember “money is power?” Well, increasingly, we can harness that power for issues we care about.

Today, by some estimates, trillions of dollars — not millions, not billions, but trillions — are invested in what is called values-based investing. This includes socially responsible investing, or sustainable investing, or impact investing, and, my personal favorite, gender-lens investing. In a nutshell, this type of investing directs our dollars to companies that, say, do business in a socially responsible way, or advance women in their companies — and avoids companies that don’t.

Chances are you won’t be hearing about this proactively from your financial professional. Historically, there’s been a view that some immutable law of nature meant these types of funds had to underperform, that somehow they represented the junior varsity of investing. (Frankly, that’s pretty much what I thought when I was running Merrill Lynch. But I’ve dug into the research and come to the conclusion that I was wrong. Or at least not right.)

In my opinion, this is worth looking into: Companies that do business the “right way” are also companies that can deliver good business results, as well as fair returns for investors. And by investing in them, we can not only earn a return, but also have an impact.

This post previously appeared on Ellevest.

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Sallie Krawcheck is the Co-Founder and CEO of Ellevest, a digital investment platform for women. You can sign up for early access here. She is also the Chair of Ellevate Network, the global professional women’s network.

For information about Ellevest, a Securities and Exchange Commission (SEC) registered investment adviser and its financial advisory services, please visit the firm’s website (www.ellevest.com) or the SEC’s Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov).