Meet the #Girlboss Who Is Helping Women Invest Smarter
One of our major goals for 2016 was to start taking ownership of our finances. But breaking bad money habits and trying to save money is tougher than we originally thought — even with all the awesome millennial-focused finance podcasts we queued up in our iPhones.
B+C: In an interview with Forbes, you said, “This is my Gloria Steinem moment.” Why did you choose to create a women-only investment platform as your passion project?
SK: I never really considered myself much of a feminist until I left Wall Street. I did all the right things — such as put together gender-diverse teams — but feminism wasn’t deep in my bones. It wasn’t until I took some time off and had some space that I realized that the investing industry has been, frankly, “by men, for men” — and that has historically kept women from achieving their financial goals.
We all know money is power. And we women won’t be equal with men until we are financially equal with men. Given my background on Wall Street (and how very few women there are there), if I’m not going to work to fix this issue, who is? So I’ve made it my life’s mission to unleash women’s financial power and close the gender investing gap.
B+C: Can you explain the concept of the “investment gap?”
SK:Women don’t invest to the same extent that men do. Fewer of us have started saving for retirement, we have saved less overall and we park about 70 percent of our money in cash. This can cost us hundreds of thousands — for some of us, even millions — of dollars over the course of our lives. For some women, this can cost them more than the much-more-discussed gender pay gap.
B+C: Many women, including myself, haven’t seriously thought about investing their money. Why should the everygal consider getting into investing?
SK: Let’s take “Elle” as an example: Elle earns $85,000 a year currently. If she invests 20 percent of her salary in a diversified investment portfolio instead of keeping it in cash, in 40 years “Future Elle” may have a real reason to thank her. That’s because our calculations show that, based on historic markets, Future Elle could have anywhere between $565,000 to $2.1 million more money at that time than if “Today Elle” had kept that money in a savings account.*
You should invest because, quite frankly, investing can be life changing. That doesn’t mean that investing won’t involve some ups and downs (some of which can be stomach-lurchers!), but historically, the risks inherent in investing have resulted in superior returns, over time.
B+C: Why do you feel that women need their own investing platform? How does being gender-exclusive help bridge the gap?
SK: For years, I argued that women absolutely did not need their own investing platform. I thought the concept was vaguely insulting and, for whatever reason, I automatically equated the idea with a “junior varsity” offering. But the very fact that the gender investing gap exists is evidence that something different is needed.
Dig a little deeper, and you can note that the investing industry and most of its tools have been created by men, for men. So the “gender-neutral” investment industry implicitly has defaulted to men’s product preferences and men’s financial characteristics. (One big hint: The industry symbol is a bull — a phallic symbol if one ever existed.)
B+C: When many people think about investing, they picture a long and complicated process that only people with experience and/or education in the field should even attempt.
SK: We know! There are all kinds of myths that keep women from investing. One is that it’s all about math and guys are better at math. (Not true!) Another is that women need more financial education before they can become investors. Well, that’s pretty hard to argue with — almost everyone should be more financially literate. But men will often invest regardless (and have profited from it), while women are less likely to.
When you dig into this issue, it’s that men are more likely to invest through jargon, while women are more likely to slow down, research what the jargon means… and then not invest. That’s why we’ve outlawed investing jargon on our site and built an investing plan that you can complete in less than 30 minutes. Not 30 hours, 30 minutes.
B+C: Say you’re out for coffee with a 20-something woman who wants to start investing but has absolutely NO idea where to start. What advice would you give her?
1. Pay off all high-interest debt. That means if you can’t afford to buy something without putting it on your credit card, don’t buy it. Do not start investing until you do this.
2. Start an emergency fund. Your just-in-case fund should be three to six months of take-home pay, squirreled away in a bank account. Do not start investing until you have some cushion built in the event of an emergency.
3. Start a retirement account. This is particularly the case if your company offers a 401(k) match… in other words, free money.
4. Invest for your goals. Experts say to save or invest up to 20 percent of your salary for all your long-term goals including retirement, buying a home, starting a business and so on. Can’t do 20 percent? Then start with 1 percent, move it up to 2, then 3… you get the picture.
5. Invest regularly. That means something out of every paycheck, if you can. This may help to offset the ups and downs of investing. If you invest regularly, sometimes you’ll be investing when the market is expensive and sometimes when it’s cheap, but historically, it has evened itself out.
Are you investing a portion of your paycheck? Tweet us @BritandCo!
(Photos via Ellevest and Getty)
*See 8 Myths That Hold Women Back From Investing. The projections of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Information was obtained from third party sources, which we believe to be reliable but not guaranteed for accuracy or completeness. The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person. Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.
Welcome to Selfmade Finance School, our new money series with Block Advisors to help small business owners with their tax, bookkeeping, and payroll needs year-round. This week, we explore the tax implications of bringing family members into your business.
The question for today is this: Does hiring your family members make sense for your business? Let me be clear. This is not a piece about whether hiring your family members makes sense for your relationships with those family members. As someone who is part of a family business, I could fill up a lot more than 600 words on my opinions about that. For today's purposes, we focus on whether it makes sense from an overall "good business and tax implication" perspective. As it turns out, there is a decent amount of tax nuance when it comes to employing your family. Let's break it down based on relationship to the employee:
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Spouses Who Are In Business Together
Personally, if I had to be in business with my husband, it would not go well. However, many couples build viable, strong businesses together and I say, good for them! Depending on how you have your business entity structured, it will make a big difference on the tax treatment of you and your spouse working as partners. Because a business jointly owned and operated by a married couple is generally treated as a partnership for Federal tax purposes, the spouses must comply with filing and record keeping requirements imposed on partnerships and their partners. The election to file two Schedule C (Form 1040) forms, (one for each spouse) permits certain married co-owners to avoid filing partnership returns, provided that each spouse separately reports a share of all the businesses' items of income, gain, loss, deduction, and credit. Under the election, both spouses will be subject to self-employment tax and on net earnings from self-employment and receive credit for Social Security earnings.
One Spouse Employs Another
If you have a dynamic where your spouse is an employee of your business, then your spouse's wages are subject to income tax withholding, Social Security and Medicare taxes. If you are self-employed (not a corporation or a partnership), your spouse's pay does not have to be included in your federal unemployment tax account (FUTA) contributions and payments. However, if your business is a corporation or a partnership you must include that spouse's pay in your unemployment tax contribution calculation.
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You Employ Your Child
First, let's be clear. I work in my family business, but I am an adult, so I am treated just like a normal employee. However, if you, for example, run a family restaurant and want to hire your children under 18 to work for you, there are some tax benefits. But first, you should check with your state for rules on how many hours minors can work (in non-agricultural jobs) and reference the Fair Labor Standards Act for information on limitations on the kinds of work children can perform.
"This is an often overlooked or under-utilized strategy. Paying your children for true services they provide in your business can be a powerful tax-saving tool," says Cathi Reed, Block Advisors Regional Director. "If you are a sole-proprietorship or single member LLC, and the child is less than 18 years of age, the business is not required to withhold FICA or payroll taxes. The child can use his or her standard deduction against income you pay."
You Hire Your Parent
Oh dear. If you are brave enough to do this, know that you will need to pay Social Security and Medicare taxes on your parent's wages and make the appropriate withholdings, but you don't have to pay unemployment taxes. Now all you have to do is convince your parent that you are the boss. Have fun with that!
Is Hiring Family Members Worth It For The Tax Benefits?
"There are some positive tax advantages to hiring family members. It's important to treat a family member like any other employee. Hiring your children can result in substantial savings for businesses. Make sure your child has real, age-appropriate work to do and a reasonable pay rate, comparable to other employees. Consult with a Block Advisors small business certified tax pro to ensure that you are complying with all requirements," advises Reed. "Block Advisors, a team within H&R Block, is dedicated to meeting the tax, bookkeeping and payroll needs of small business owners year-round. To start working with the tax experts at Block Advisors, visit blockadvisors.com."
In my opinion, you should not hire a family member solely because of the tax benefits. You should always hire based on whether that person is right for the job and keep in mind how this hire could materially impact your relationship with that person and others in your family. Finally, as I mentioned, make sure you have a tax professional on your team when making these determinations. As you can see, things can get a little tricky!
*All details were sourced from IRS.gov and blockadvisors.com