“Life changes fast. Life changes in the instant.” —Joan Didion, “The Year of Magical Thinking”
It’s that time of year for everyone to compile their end-of-year list of tax and personal financial moves. AAII’s Tax Guide is now online for those who want to get a head start. My check-in is going to be a little different, with emphasis on the personal.
1. What goals did I achieve this year?
The year 2023 was not an easy one for most. I began the year reviewing my portfolio and my credit card habits, thinking I would be able to conquer the overspending of the holidays and get myself back on track. Though this didn’t happen immediately, I successfully did my taxes for the first time since I started investing. Taxes were my biggest anxiety about investing, because we all know nothing related to the government is easy. I managed to not commit tax fraud, and I no longer dread what 2024 tax season will bring. I also reached a behavioral goal of mine: looking at my brokerage account so infrequently that I saw it in positive territory more often than not.
2. What surprised me about my finances?
In 2023, I discovered that saving consistently is more important than saving the “right” amount each month. I became a little competitive with myself, so when I couldn’t put away the full amount allotted for savings in my budget, I still saved as much as I could from what I had left over. Because of this, and higher interest rates, I am significantly closer to reaching my short- and intermediate-term goals through my high-yield savings accounts than I was at the beginning of the year!
3. How did my relationship with money change this year?
Before this year, I had a lot of fear around money: running out of it, not saving enough of it, spending too much of it on rent and retiring with only enough for cheese and crackers in my later years. It took a while, but I discovered that money is malleable. When I wanted to make a large purchase but my usual means of spending weren’t available to me, I got creative and built room in my budget to take out a loan. Likewise, I lowered the goal amount I will put in savings until the loan is fully paid off. I granted myself so much freedom in this decision, and it enabled me to improve my current life while still improving my future.
4. What would make me and my money happier in the new year?
Now that I have my finances in consistent good standing, it’s time to take advantage of good ol’ compounding. By staying invested in the stock market through index exchange-traded funds (ETFs), the money my investments are making will continue to make money on top of that. Gaining more traction on my goals is my top priority for 2024, even if it means cutting back on spending in some areas. Though I am doing well on my short- and intermediate-term goals, my long-term retirement goal could really use some more attention—and money!
How was your 2023 in finances? Though it was a rough year for humanity and the majority of stocks, what are you looking forward to in 2024?
My grandfather Earl Kuntz passed away last week at age 94. He was my only grandparent for most of my life, and I’m so thankful he was able to stick around for a while. Not only was he a man who set an admirable example for everyone around him, but he was also incredibly supportive. He was a subscriber to this blog and an AAII member for many years before I started working here. Every time I saw him in recent years, he would ask, “How’s the blog?”
For a minute there, I didn’t have much to say on the topic of hereditary financial habits. I thought I had already distilled so much of how I was raised into how I manage my finances. My money is working for me in a few different investing vehicles, which gives me the opportunity to be even more independent should something happen to me. I have enough in savings that it doesn’t all have to be delegated to the scary emergencies anymore, it can be for the fun emergencies too!
As my family and I decided how we would honor my grandfather, we gathered old photos and shared memories of how he was thrust into the family telecommunications business at a young age, how he met his wife at work and made his work his life. Here are a few lessons I learned from him over the years. I hope I can do his wisdom justice.
Baby Anine with Earl on a boat, his favorite place to be.
Everything is an investment. During my lifetime, we helped my grandpa move twice. Both times, trying to get rid of things that were old, expired or downright dangerous to have lying around was like taking away everything he owned. To my grandpa, everything was an investment. He was born in 1929, months before the stock market crash that same year, and he was raised by two immigrants who were trying to get their business off the ground. In his eyes, clothing, furniture, plates, glasses—any material thing—was something that could appreciate in value and be sold for more than he bought it. Though there were things he held onto that were worth a pretty penny, many times this wasn’t the case, and we would have to negotiate with him to sell at lower prices or to give up on the sales completely. He even considered the things he passed down to me and my family to be investments and encouraged us to seek out more money for things.
Everyone has the right to be a customer. One of the first stories my grandpa told us was about a time when he was a kid at the soda fountain and a Black customer was turned away. My grandpa recalled that he was sitting enjoying his drink and a Black man came in ready to buy something. However, the man behind the counter said, “We don’t serve you here.” My grandpa was appalled at this already, but even more so when the Black customer said, “But I’ve got money, sir!” He was forced to leave without buying anything. It was in this moment my grandpa came to the conclusion that there was no difference between him and the Black man, that the man behind the counter was the problem in this equation, not the customer who had every right to pay for and receive goods and services. If my grandpa could solve all of the socioeconomic problems in the U.S. to put everyone on equal footing, he would. He carried out this sentiment not only when it came to business, but also with how he treated everyone in his personal life. He spoke to people about who they were and what made them tick with the same level of interest he had in business.
Earl and Mary Kuntz, the dreamer and the realist.
Sometimes you have to dream a little. My mom will say of her parents and how they ran their telecommunications business that my grandma was the realist and my grandpa was the dreamer. More specifically, business decisions were driven by my grandpa’s willingness for everything to work out and were made possible by my grandma, the treasurer, crunching the numbers. He would buy up accounts, answering service companies and locations, and he would merge them in order to grow the business. My grandma was the one who kept his feet on the ground and the company profitable.
When I say my grandpa made his work his life, I mean that quite literally: He never retired. Work was the one thing that “pushed all of [his] buttons.” Though I don’t have the same focused feeling about any one thing in my life—finding joy from art, music, dancing, reading and writing—I admire just how much of his life he gave to what he loved. It has been an honor to know him and tell his story.
I haven’t been thinking much about my investments recently. To be frank, there is a lot going on that demands my attention and my portfolio isn’t at the forefront of what I care about right now. I check my Charles Schwab brokerage account very infrequently, to the point that I have seen some green where there used to be red. This behavioral technique of looking at my account less has given me an illusion (or delusion?) of hope.
However, it has been a minute since I checked in with the sustainable investing world. My sustainable investing strategy requires a review twice a year, so I will be analyzing my portfolio at the start of the new year. One of my rules is anything I choose to invest in should have an As You Sow gender equality grade of C or better, since many of the promising candidates that I found in the past are lagging in that area. Only two of the five index exchange-traded funds (ETFs) in my portfolio have A grades for gender equality. So, I went to As You Sow to find the top gender equality funds with grades of A to see how they compare and if they’re suitable investments.
The top four funds on the list as of November 12, 2023, were the Impax Ellevate Global Women’s Leadership Investor fund (PXWEX), the Boston Trust Walden Balanced fund (WSBFX), the Green Century Balanced fund (GCBLX) and the Amana Income Investor fund (AMANX). All four have grades of A for gender equality and civilian firearms, meaning stocks held within the funds do not support the production of civilian firearms with their investments. The gender equality score looks at gender balance in the leadership and workforce of a company and equal pay for employees.
Here’s a breakdown of the gender equality score for Impax Ellevate Global Women’s Leadership:
The further score criteria analyze the holdings of the fund based on how safe a company is for workers, whether there is sexual harassment in any form, how the rights of employees are protected, if business practices are both ethical and compliant and how diverse the company’s suppliers are, including women-owned businesses. Gender equality isn’t just about women, it encompasses the well-being of all genders.
When it comes to the other As You Sow grades, these funds vary widely. Many have high grades for tobacco but are inconsistent on the prison industrial complex. Deforestation and fossil fuels aren’t as big of a concern for some of these funds either. Amana Income Investor has a military weapons grade of F, while the rest of its grades are A and B.
Every time I look at these As You Sow grades, I am reminded of the meaning of intersectionality, something I mentioned in a previous blog post about why I care about sustainable investing. Intersectionality is the acknowledgement that everyone has their own unique experiences of discrimination and oppression, considering gender, race, class, sexual orientation, physical ability, etc.
Though these funds are focused on investing in companies that are promoting gender equality, some seem to be literally missing the forest for the trees, with deforestation and fossil fuel grades of C and D. Just because a company is doing its part to change in one area of environmental, social and governance (ESG) doesn’t mean it will do so across the board. The impact of deforestation and fossil fuels on the earth is one of the largest contributing factors to climate change. In turn, the people who bear the brunt of climate change are those who don’t have access to resources needed to survive due to gender and class inequality, racial oppression, lack of physical ability and homophobia. Everything is connected, and we are all individually impacted by the world in our own unique ways.
Now let’s look at these funds using AAII’s Fund Compare tool. Something interesting I noticed right off the bat is that most of these funds were incepted in the late 1980s or 1990s. Most of the funds that fit my investing strategy are much newer funds on the market, so they don’t have as much return history to look at. The two funds with better return grades are also less risky compared to their category: Amana Income Investor and Boston Trust Walden, with category risk indexes of 0.89 and 0.90, respectively. Green Century Balanced and Impax Ellevate Global Women’s Leadership have poor return grades and are riskier investments compared to their category. This usually isn’t the case with investing: If you take more risk, you are usually rewarded with higher returns.
Unfortunately, none of these funds fit my current investing strategy. All four have expense ratios of 0.77% or higher, while my cutoff is 0.60%. When it comes to As You Sow grades, the only fund that comes close is Green Century Balanced, with just a military weapons grade of C dragging it down. I have said previously that gender equality will be the hardest category for funds to grade well in. It is the longest-standing, most deeply ingrained issue in our society, and will therefore be the hardest to counteract and eventually dismantle through investing. The rest of the grades for fossil fuels, deforestation, civilian firearms, the prison industrial complex, military weapons and tobacco are all for man-made, more tangible things that are somewhat easier to pinpoint and avoid. The act of isolating gender equality as an issue on As You Sow instead showed just how connected every aspect of sustainability is and, to me, makes sustainable investing all the more important.
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About one year ago, I began my journey through the AAII PRISM Wealth-Building Process. Created by AAII Journal editor Charles Rotblut, PRISM is a five-step method for aligning my investing decisions with my goals. Though I went through the entire PRISM Process, I have recently been thinking about how I want to spend my money next year. This caused a shift in my goals, so in the words of Ron Weasley: “She needs to sort out her priorities.”
When I last performed the first step of PRISM, my short-term goals included amassing enough for ongoing lump-sum investments in my portfolio of index exchange-traded funds (ETFs) and saving up for international travel. My intermediate- and long-term goals were eventually buying property and funding my retirement.
I revisited the Prioritizing Your Goals worksheet, which makes it easy to visualize and plan for how much I’ll need for each of my goals.
In an exciting turn of events, my favorite band the Kills is releasing a new album this week, which means a tour next year! In their words, “it’s been a long time coming.” I’m planning to travel to see some shows so I can visit friends. International travel is still folded into the estimated cost, but I’m not sure if it will be as extensive as I previously planned.
At the beginning of 2024, I plan to do another portfolio assessment to see where my investments are at. If I make any changes, I will invest another $2,000 in my Charles Schwab brokerage account. However, if I don’t need to make any changes based on my strategy, I will be leaving my portfolio as is. That’s what makes this goal a lower priority than traveling, it’s more flexible. Sometimes the best thing to do with your investments is nothing!
I’m also planning to move next year. My current one-bedroom apartment has served me well for most of the pandemic, but I’m ready for a change. A new place in a new area (with a dishwasher 🤞) is in order. My estimated cost for moving includes first and last month’s rent, a security deposit/move-in fee and what I’ll need to pay the movers. I’m inflating this estimate a bit to account for the ridiculous rent prices I’ve been seeing.
Buying property in this economy has proved to be extremely difficult, so I changed my time horizon for this goal from three to five years to a range of five to 10 years from now. Who knows what the future holds, I could be living on the moon in 10 years! But I’m sure someone will still figure out how to charge me property taxes 😅.
My high-yield savings accounts are the primary investing vehicles for funding my short- and intermediate-term goals. My SmartyPig account is designated for my short-term goals: travel, investing and moving. I’m currently earning a 4.25% interest rate on my savings in this account, and SmartyPig has a goals feature that helps to gamify the saving process. I keep rounding up on what I think I’ll need just in case. So if I have money left over after paying for my highest-priority goal, it’s like a little gift I’m giving my future self, and the money will go toward my next short-term goal that needs to be funded.
The other high-yield savings account I have with LendingClub is for my solitary intermediate-term goal: buying property. With an interest rate of 4.50% on this account, I’ve saved about 25% of my goal. Though it’s designated for buying somewhere to live, I’ve been thinking of broadening the category for this account. If I choose down the line to not buy, I could use the funds saved up in this account for paying my rent. I could also use it to buy or rent a studio space for making art that’s separate from where I live.
I didn’t change anything to do with my retirement goal. For now, it will sit there looking at me like a joke until I can allocate more of my paycheck to my retirement account. Technically, my investment portfolio is also going toward funding my retirement since I’ll need all the help I can get. Even though this long-term goal feels so far away, I don’t want to lose focus on it just because I’ll always have more short-term goals. Hopefully, everything I’m doing to save while still being able to live my life and enjoy what I have will result in a retirement I don’t have to fear.
AAII just launched a newsletter called AAII Retirement Investing, so I’ve had “retirement brain” for a few weeks. Specifically, I have been thinking about how people could possibly retire early, based on the Financial Independence, Retire Early (FIRE) movement. Back in 2019, the AAII Investor Conference featured a presentation by a couple, Tanja Hester and Mark Bunge, on how they retired around age 40.
Why retire early?
One of the benefits that draws people to retiring early is being young enough to do all the things you would otherwise be doing when your knees and back are in worse shape than they are now. If you want to travel the world, why wait until it’s more difficult to breathe and move? It’s a nice idea, but when I think about the possibility of retiring early, I could see myself taking a “retirement break” and choosing to work when I’m older and sitting down is more the vibe. (Although it would be more difficult to reenter the job market at an older age.)
If you have a lifestyle in mind for your adult years that doesn’t involve working full-time, there are ways you could “fake” an early retirement. You could work part-time for a while or do some other kind of work that requires less commitment, like freelancing. This is something that many parents do when they have kids, splitting their time between life and work. The hard thing about working part-time in the U.S. is that no employer is required to provide health insurance to part-time employees. There are some companies that offer health coverage at the part-time level, usually large corporations like Starbucks and Costco.
How do you retire early?
The first thing you have to do for anything close to an early retirement is save—big time. Many in the FIRE movement suggest saving up to 70% of your income. This is no easy feat, especially for people early in their career just starting to make enough money to make ends meet. Essentially, you will be uncomfortable and living below your means as much as you can for a while so that you can be comfortable for the rest of your life. It’s up to you to decide if it’s worth it.
But it’s not just saving that gets you to an early retirement, you have to invest those savings wisely. Those who retire early likely make a large salary from the start of their careers, but it’s not necessary. Like any financial goal, if you can stick to a disciplined plan, you can make it happen. You have to really want it, and you would have to forgo the majority of everything else you could possibly want in the meantime. What do you really value? It might help to look around your dwelling and determine what you would save in an actual, non-retirement-related fire. I would grab the linen sheets off my bed and my poetry collection (some of the books are out of print and would be hard to replace). OK, I would probably also bring a laptop and my phone, but we can pretend 😂.
An article by AAII Journal editor Charles Rotblut discusses “Five Major Considerations for an Early Retirement.” One of the more complicated parts of retiring early involves having health insurance even when you’re too young to qualify for Medicare. The Affordable Care Act (ACA) is something of an answer to this problem, but some have struggled to keep their plan with turnover and health care reform. Especially now that we are living in a world where viruses can spread anywhere and anytime, making sure you have health coverage prior to age 65 is more important than ever.
Retiring early means that everything in your finances and life has to shift. If one thing is happening earlier, everything else has to accommodate for this change. If you crunch the numbers and decide you’d rather ride it out with your 9-to-5 job, then so be it. An early retirement isn’t for everyone, and some following the FIRE ideology also own multiple properties to maintain a steady cash flow. Being a landlord and exploiting people certainly isn’t my dream, but if I figure out a more sustainable way to retire early, I’ll let you know!
Another budgeting blog post, already? Yes, I regret to inform you that I’m getting extra cozy with my budget this fall. Now that my rent is too high for my liking and groceries cost the same amount of money as going out to dinner, it’s time to get real.
I’m also revisiting my budget since a few things have shifted in my expenses and income. My power bill is still going to be in the $40 range in October (the email came through yesterday, thanks to ComEd’s impeccable timing), but I got a call from Xfinity with an offer to lower my monthly internet bill for the next year! I’d rather look up the phone number of who’s calling me than actually answer the phone, but I know when Xfinity calls that it means money, honey! My internet will cost around $61 per month instead of $72, with no change in service. At this point, I’ll take any discount I can get.
My utilities for October still come out to just over $100, but with a lower base price for my more expensive utility, I know I’ll have more breathing room in the winter months.
I checked in with the budgeting zeitgeist for any new tips surfacing and stumbled on this article from the Good Trade. One of the hacks suggests asking your utility company about budgeting plans: “If you have very high electricity bills in one season and very low bills in another, reach out to your utility company to see if they offer budget plans. During a particularly cold winter in a basement apartment surrounded by concrete, our heat bill came out to nearly $400. We were able to pay closer to $120/month through a budgeting plan, rather than $400 chunks in the winter and $80 bills in the summer.”
My most expensive power bill in the summer has been close to $60, while the low end in the winter is around $20. This isn’t quite drastic enough for me to be on a budgeting plan, but if the horrors persist and costs increase over time, it’s something I can keep in my back pocket. It just strikes me as another thing that falls on the individual to take action in order to live comfortably, rather than the companies with the money and services making things easier for their customers from the get-go.
Another piece of advice from the Good Trade is to “make checking your budget a ritual so that it doesn’t cause you stress.” The article recommends having your budget with a side of wine or dessert to trick yourself into enjoying the process. Reviewing your budget more often also increases your tolerance for dealing with it. I wish I could say the same for grocery shopping, but I still have to mentally prepare myself before leaving the house and make sure I don’t accidentally spend $80!
The main reason I need to redo my budget is that I recently took out a loan to buy a new mattress. (It was so worth it, and I’m sitting on it as I write this—getting my money’s worth!) Since I’ll be paying it off each month for the next year, I added the loan payment to my fixed expenses:
Much of the budgeting advice I have found pushes you to prioritize paying down debt whenever you can, and I intend to follow it. Especially since my monthly loan payment will be coming from my checking account, I have to literally be tighter with the purse strings to ensure I have enough funds without overdrawing.
Though it’s not included in my monthly budget, I received a sizable one-time payout from being involved in a litigation claim with a skin care company. I used the brand’s platform that analyzes your skin and recommends corresponding products to treat acne, discoloration, etc. Apparently, my biometric facial data was stored by the website and exploited elsewhere. In addition to the payout, I received a voucher that can only be redeemed for buying the company’s products. I put this payout directly into my emergency savings account and will be sharing the skin care wealth with friends and family. Stay tuned for a post where I figure out how taxes work on this income!
All of these changes led me to make the tough decision of lowering the monthly amount I’ll be putting into savings until my mattress is paid off. My monthly expenses are now over 50% of my income, so something had to give (in September, they were just under 50%). I determined my savings amount by subtracting the loan payment from what I was previously saving per month and rounding it down to $500. However, I have been able to build up my emergency savings with the payout, so anything I save going forward will be allocated to my high-yield savings accounts that are making me more money than my regular savings account.
The more familiar I get with my budget, the more I realize that everything is temporary and in flux, and there’s always something I can do to make the numbers work for me. Now that I have a few different investing vehicles to take advantage of, it makes me feel less trapped by this monthly loan payment. I have the freedom to save a little less since I was consistent with my savings. My present self would like to thank past Anine, and you all, for encouraging me on this journey. I hope it inspires you to get your finances in order so you can do the things you love!
I did a scary adult thing and I want to tell you about it. I decided to take out a loan for a large purchase, even though it was my last resort. It all started when I offered to give my grandpa my old full-size bed for when he moved into a new, smaller place. For a while now, I’ve wanted to upgrade to a queen-size bed, but didn’t feel I could justify it until I moved. Who would take the old bed? How would I, just a girl, move an entire bed into my current apartment?
When the date was set for my uncle to take my old bed to my grandpa’s new place, I started frantically looking for mattresses in a box that would be easy for me to maneuver. My parents gave rave reviews of their mattress in a box, but as I searched around, I noticed something glaring: None of these websites took Klarna, my primary pay-later option that splits larger payments into four and charges to my credit card every other week. However, they all offered Afterpay, which I knew did not take Discover (my only credit card). If I wanted to use Afterpay, I would have to connect my checking account or use my debit card. This defeated the purpose of making a big purchase; I wanted to be able to add it to my credit card balance so I could pay it off over time instead of having it directly taken from me.
I even went to Klarna’s website to see if any of the mattresses I wanted were available at the source, but all I could find were cheap alternatives that wouldn’t fly. I wanted a good-quality mattress that I could have for a while, and I was willing to shell out a little extra for it. But I didn’t want to be saddled with payments I couldn’t afford—I had to find something that struck a happy medium.
I chatted briefly with my mom about it, mulled it over for a couple days, then made my decision: I would take an Affirm loan and pay off my mattress on a monthly basis over the next 12 months. The money would come directly from my checking account, but I wouldn’t have to deplete my savings all at once to pay for it. This gives me the advantage of continuing to save for my other goals while paying off the mattress. But I was still nervous about not having enough money in my checking account at the time the payments would be processed—the fear of overdrawing loomed, so I had to take action.
The minute my loan was confirmed, I opened my phone calendar and added each monthly payment as an event on the day it will be due all the way until 2024 when the loan is paid off. This both solidified the dates in my head (thankfully, they’re all on the seventh day of the month) and gave me the peace of mind of knowing exactly when the payments would be taken so I could ensure my checking account had enough funds.
On the last payment, I added a note for my future self:
Affirm gave me the flexibility I needed to pay smaller increments of the full purchase amount over a longer time period, but the catch is that, unlike with Klarna and Afterpay, I will be paying some interest. However, I will not be paying compounding interest (which would increase over time), according to Affirm. On my loan confirmation email, I can see exactly what I’ll be paying and what the charges are—and nothing about that amount will change!
Essentially, I am paying around 2% interest on the entire purchase, but the amount of interest decreases with each monthly payment:
When making this tough decision to take out a loan, I found that it was still the most cost-effective and reasonable way for me to buy the mattress I really wanted (Nectar hybrid mattress, if you’re interested—great for side sleepers!). The mattress was also on sale the weekend I bought it; I didn’t want to wait and possibly open another credit card that Afterpay allowed when the mattress price would likely go up and I would be spending more anyway.
I will be adjusting my budget accordingly to incorporate this monthly loan payment, another behavioral finance hack that should help me visualize how much I’m spending so I can continue building up my savings. If anything goes wrong, I’ll keep you updated on the process! But for now, no news is good news 😅.
Back when I was uncovering my hereditary financial habits, I learned that my dad’s mom was an avid dividend investor. When my dad was 15, his mom bought him stock in IBM Corp. (IBM) to get him interested in investing. She also put him to work and had him oversee her dividends. My dad would have to maintain a manual bookkeeping spreadsheet to verify which amounts were going into her account and match the dividend depending on the company and the month. All of this was done on paper, adding another level of difficulty.
These days, the process is much more automated, to the point where you might not even know when you receive dividend income unless you regularly check your brokerage account. After years of reading about reinvesting dividends in articles for AAII Dividend Investing, I couldn’t help but wonder: Should I stop reinvesting my dividends for a little extra income in these hard times?
A dividend is a payment that companies make to their investors using excess profits, usually on a quarterly basis. Much like an annual cost of living adjustment in salary, companies are expected to increase their dividend annually to keep up appearances and keep their investors around.
My portfolio is invested in five environmental, social and governance (ESG) exchange-traded funds (ETFs). I don’t require any dividends as part of my investing strategy, but when I started investing, I chose to reinvest the dividends that each of my ETFs pays. The most common way investors reinvest their dividends is through an automated process called a dividend reinvestment plan (DRIP). These plans require that you hold at least one share of the dividend-paying security in a brokerage account.
The main advantage to reinvesting your dividends is the magic of compounding: An investment that reinvests in itself will make more money in the long run. When a dividend is reinvested, it means that you are buying more shares of the security with that dividend. I can tell which of my investments have dividends in my brokerage account by looking at the number of shares I own under “Quantity”:
Most of my share counts are not whole numbers, even though I initially bought whole shares of each ETF. Some investments don’t allow you to buy fractional shares, so this is another advantage of reinvesting dividends. There are also no fees involved in the dividend reinvestment process, which used to be more of a flex before most brokers made investing commission-free.
According to Investopedia, one of the times you should consider not reinvesting your dividends is when you are in or nearing retirement and need the extra income. Likewise, if an investment is not performing well, it’s not a good idea to reinvest more money in that holding.
Now for the moment of truth: How much dividend income is my portfolio receiving? In 2022, I got a whopping $4.03 in dividend payments. So far in 2023, I’ve received $20.08 in dividends, which was a direct result of adding more money to my investments. My Charles Schwab brokerage account estimates that I will receive a total of $48.53 in dividends this year.
Unfortunately, I don’t think $50 would make that big of a difference if I chose to stop reinvesting my dividends. (It certainly wouldn’t buy Carrie Bradshaw a new pair of shoes, but it might cover her drive-thru order below!) Regardless, the money would still be sitting in my brokerage account cash balance waiting to be invested, so I don’t see much of an advantage to interrupting the compounding process.
For now, I’m going to continue reinvesting my dividends and keep an eye on how that income increases as time goes on. If one of my ETFs performs so poorly that I don’t want to invest more money in it, it would be a candidate for deletion before I would consider stopping the dividend reinvestment process.
“This is going to sound harsh, but you literally cannot afford not investing.” —Tori Dunlap
When I started planning this blog back in 2021, Tori Dunlap’s “Financial Feminist” podcast was the first resource I found that was speaking directly to me. Through her company Her First $100K, Dunlap has made it her mission to educate women on investing and empower them to take control of their finances. As someone with the privilege to grow up with parents who taught her about money (and had enough money to constructively talk about), Dunlap made it her prerogative to take up space as a woman in an industry dominated by men, providing information catered to women. It’s not just a title; by definition, she is a financial feminist.
These days, I tend to consume podcasts more for entertainment, so having access to Dunlap’s brain in the form of the book “Financial Feminist” was exactly what this overstimulated millennial needed. The book covers the emotions of money, spending, making a financial game plan, debt, investing, earning and living a financial feminist lifestyle. I found the chapters on the emotions of money and investing to be the most fruitful, but if you are just starting to get your finances together, this book has everything you need.
In the first chapter, Dunlap discusses how women learning about money is a direct threat to the patriarchy: “The patriarchy realizes that when a woman gains the knowledge to build wealth, soon it will have no control over her life or decisions. Her financial independence is a threat to the status quo. So, the patriarchy demands we tax ourselves. It weaponizes our altruism. Recent research suggests that women are expected to behave altruistically and, given that they disproportionately occupy societal roles involving caregiving and subservience, are punished for deviating from that norm to a much greater extent than men are. Thus, women may internalize altruism as their instinctive response, even at their own expense.”
Even if a woman doesn’t identify as a caregiver, the roles that have been established in the body politic dictate that if she doesn’t pour her life and money into helping people, she is selfish. Meanwhile, there is no expectation for men to fill this role. They are taught to get a good, high-paying job and let the rest fall into place. I wonder if this is partly where my passion for donating came from, this inherent need to … just care about other people? Wow, revolutionary!
Dunlap continues that women “need to challenge men’s gender roles in the process, or we’ll be left with a society of individualistic assholes where no one cares about anyone. Financial feminism isn’t just about a woman’s right to decide what she does with her money, without the current socialized pressure to exist in service of others. It’s also about each of us demanding that the people who have access to the most money (i.e., men) actually start thinking about their existence in service of others.”
Men have taken advantage of women’s physical and emotional labor for centuries. Ever since women joined the workforce during World War II and were given access to “the world of men,” they have been shifting their role in society. No longer are women forced to be caregivers, secretaries or teachers in service of others. Now women can, quite literally, do anything they want for work (while still getting paid less than men). However, men haven’t had any reason to change their societal roles along with us; some men still expect their women coworkers to serve as their secretaries, believing that all women have this need to serve, even if that is not in their job description. Instead of having women “lean in” and act more like men in the workplace, Dunlap believes this should be flipped, and men should level the playing field by doing the emotional labor that women do every day. Now that’s feminism, baby!
In the words of Bobbie Barrett from Mad Men:
When it comes to spending, women are more often shamed for spending money. I’ve seen countless videos of women hiding their spending habits from their husbands, getting rid of the evidence before he comes home, thinking this is peak humor. Instead, it makes me physically ill! Dunlap says, “The real kicker here is that the spending power of women drives the majority of the economy. We’ve been marketed to since we were young girls, a constant narrative to get us to spend money … Women are the most marketed to but then are shamed for spending!”
Not only are women trained from a young age to consume, told that spending money on ourselves will improve our lives, we are stimulating the economy as I write this. Somewhere, right now, a woman is getting her nails done, and I’m sure they look incredible! By doing so, she is contributing to someone else’s living wage. Another woman is buying something overpriced at Anthropologie just to feel something. Me? I’m just trying to finish this blog post, but I’ll probably buy some collagen gummies I don’t actually need at Target later (they taste really good 😆).
But seriously, if it weren’t for women spending money to be respected by society, there would be no $580 billion beauty industry, and there would be no stocks for companies like Target, Ulta or Sally Beauty. These are stocks that I’ve read news about in some of AAII’s model portfolios—men spend money in the beauty industry in their own way, knowing that it’s a lucrative investment, and then women are shamed for carrying the economy on their backs. What’s the difference? Both are investments: Men are making money on that money, while women are investing the money in themselves first, and investing in another person or establishment for those beauty services.
Dunlap does a great job of cutting through the patriarchal, financial jargon in this book to simplify how we think about investing. She says, “When it comes down to it, investing is simply putting money into financial products … with the expectation that they’ll make us more money.” She also squashes anyone’s fear about losing money in their investments, “Investing for the long term—twenty or more years—raises your prospects of seeing a return on your investment to 100 percent … In fact, during every single twenty-year period (yes, even during the Great Recession), investors made money. Long-term investing—steady, patient, consistent—does not lose. It never has.” It was great to see such an important and frank discussion of long-term investing after hearing about it for years at AAII (just a tinge of confirmation bias here!).
So far, I was loving this book, but to my dismay, there wasn’t much airtime given to environmental, social and governance (ESG) investing. Having a sustainable investing strategy, to me, is the most financially feminist thing you can do with your money. Not only did it make investing so much easier for me when I was starting out by narrowing the field of investments I could consider, it also cut through a lot of the patriarchal bullshit I knew I would have to deal with as a woman starting to invest. It gave me the ability to say, “No, I’m not going to invest like every man has told me to. I’m not going to just throw all of my money into an index fund that’s filled to the brim with companies that couldn’t care less about me, my community, the earth and our well-being. I’m going to do things my way.”
As Dunlap says, “We work to increase our income and get paid fairly: for our mental health, our financial goals, and our own stability, and to make society better.” Being financially independent isn’t about making the most money in the world (millionaires and billionaires are gross, and they should definitely pay dividends). Ultimately, investing is about making your money work for you so that you can live your life without worrying about your next paycheck. A girl can dream!
For the August 2023 issue of the AAII Journal, I revived the Beginning Investor column with the article “Starting on the Road to Investing.” If you’ve been following along with me but haven’t started investing, I hope the article serves as a helpful distillation of what I’ve learned about my own finances so far!
Writing the article forced me to go back to basics and determine how each stop on the road to investing built the foundation for the next one. My investing journey was nowhere near as linear as the article’s order suggests, and yours doesn’t have to look perfectly tidy for you to start now.
I discuss each step, the tools required and the difficulty level below, along with my own experiences. Each section has a link that will take you to my first blog post on the topic. None of these are destinations, but ongoing processes you’ll have to revisit as you make progress.
Tools required: Pen, paper, computer
Creating a budget, though I long dreaded it, is an easy place to start. Not everyone has a budget or sticks to it, but it helped me demystify where my money was going and how much I truly had to play with. It also doesn’t require you to speak to a professional, unless you really want to, so this is a step that can be taken entirely on your own or with your partner. When I first started budgeting using the percentage budget, it was a huge relief to know that my fixed expenses were less than 50% of my monthly income. If I hadn’t started a budget, I would still be living in the dark, not understanding how much I was spending until it came time to pay the bills.
Tools required: Computer, savings account, discipline, time
Building up my emergency savings fund was the first thing I did when I graduated college and started working. Before I even heard the adage “pay yourself first,” I was saving as much as I could in a kind of competition with myself. (I’m not usually competitive, but I guess my worst enemy is myself!) Whenever I wasn’t spending money at Sephora was a good time to slide some of my leftovers into savings. Your emergency savings fund should have three to six months of living expenses—for the good, the bad and the fun things you’ll need it for in the short term.
Tools required: Computer, government-issued ID, Social Security number
I can’t tell you much about opening my regular savings account, but I believe it was done in person at an actual bank. This isn’t necessary, but if you’re unsure about opening a savings account, there are professionals who can help you virtually as well. When I opened my high-yield savings accounts, it was simpler than I thought it would be, but required a lot of front-end research on my part to find the right account for what I wanted to do with my savings. Interest rates are still increasing, so this is a great time to shop around for savings accounts with higher yields than your regular bank savings account, if you have one.
Tools required: Computer, materials from your employer, your budget, some mutual fund knowledge
Starting to invest in my retirement account wasn’t just hard logistically, it was also a very difficult decision to cough up the money from my paycheck. My employer-sponsored 403(b) account was eligible for contributions when I filled out the paperwork and chose which mutual funds to invest in. Except I made all those decisions without factoring in my own contribution. I couldn’t afford to live and save for retirement at the same time, so I put it off. When I created that budget I was talking about, I realized I could finally make it work.
Tools required: Cold hard facts, your budget
Only you can determine how much you need to start investing, based on what you decide to invest in and what you have available to spare. You could start with $5 if that’s all you have, but it would limit you to fractional shares or very small stocks. If you have $1,000, you could potentially invest in a mutual fund or a few exchange-traded funds (ETFs).
First and foremost, you have to invest in yourself, which means building up your savings and thereby your net worth. When you have your financial foundation of savings, any excess can be allocated to your investments and other goals. You can do hard things! Go forth, invest!
