Today is the New Moon, which means it's an awesome time to start new projects and perfect time to start learning and implementing some good money habits!
First, I want you to acknowledge yourself for even reading this blog, to get educated!
Next, I want you to lean in to doing the work that you LOVE! The saying "Do what you love and you'll never work another day in your life" is so true!!! Not because doing what you love isn't hard work, at times, but because if you're passionate about it, the energy flows in that direction and it will help you get through the hard times and bring in more money!
Finally, let's continue our Financial 101 lessons. In last week's blog, we covered networking and debts, so go back and start with that one, if you haven't done so. Today, let's discuss savings, compounding interest and getting paid what you're worth!
SAVING UP FOR A RAINY DAY
If your income isn't consistent, an emergency savings account is your best friend and one of my best tools against worrying. So, as soon as you've paid off your debts, open an account and start stashing money away. I promise it will give you more peace of mind. It will also prevent you from using your credit cards and racking up more debts.
Now, what do you need? Well, it depends on your particular circumstances and how risky you are. Minimum should be 3 months' worth of expenses, and max is a year's worth of expenses. You don't want too much money sitting in a savings account since even the accounts with the highest interest rates are earning less than inflation.
Personally, I have 12 months' worth of expenses saved up because it gives me the most peace of mind, and because the entertainment industry is very inconsistent. The emergency savings account is also good for those of us starting new businesses. Having a year's worth of expenses gives me the freedom to try out different methods of building my business during this first crucial year.
Last week, we talked about compounding interest as it applies to your credit card. It really boggles the mind how that interest on a $1000 on your credit card really adds up when it's compounded daily! So, if you've paid off your debt, and you're ready to start saving money, either in an emergency fund or in an investment fund for future goals, like buying a house or for your retirement, it's important to utilize the same principal of compounding interest towards building your wealth! Here's a video a friend of mine just sent me last night that explains it pretty succinctly. Or basically, the idea is this... (Let's use 2% in this example):
Month 1 = Save $1 in a savings account that earns 2%. At the end of the month, you've earned $0.02.
Month 2 = You have $1.02 to start. You put in another $1. But instead of 1+1=2, you now have $2.06!
Month 3 = $2.06 to start. You put in $1. Now, you have $3.12, instead of just $3.00.
Let's say you're investing money in a retirement fund, so hopefully you're making about 7%. Here's how that breaks down:
Month 1 = You put in $458.34. At the end of the month, you've earned $32.08.
Month 2= You start with $490.42, and you put in another $458.34. Now, your total is $1015.17.
Month 3 = $1015.17 to start. $458.34 goes into the account. Your total is now $1576.66.
Isn't that cool? If it wasn't compounding, you would only have $1375.02 instead of $1576.66 after 3 months. Now, imagine what that would be in 5 years, 10 years, or 15 years! This is why it's important to save and invest in something that earns you the most interest!
GETTING PAID WHAT YOU'RE WORTH
One of the most frightening (to a lot of people) aspects of freelancing or having your own business is telling your client or potential employer your rate. Now, there are a lot of calculations out there for what others think you should be making, but if you don't feel confident in saying that number to someone, there's no way you're going to earn that amount. So, get really, really, really clear about what your rate is and why you should be earning that rate. It shouldn't be just because other people you know are making that amount, although it IS a good idea to check and see what your peers are making, so that you're not short-changing yourself. If you're a logical, math person, then think back on the last job you were doing or the job you're doing now. Calculate how much time you're spending doing your job...make sure you don't forget that hour each day you're answering e-mails when you're at home or the hour or two or even three you're spending driving into work each day. Seeing the number of hours you're truly putting into your gig will hopefully light a fire to help you say, with conviction, what your rate should be.
Now, let's say you're not a logical, math person and seeing the numbers doesn't help you. Then, the next time you're in a job...write down what the circumstances were and how you felt every time you thought..."Hey I'm not getting paid enough to do this!" Every job requires you to go "above and beyond," and for most extremely conscientious employees or business owners, we always go above and beyond, sometimes to the detriment of our own sanity, health, family time or something else. We're not great at setting boundaries, so we MUST raise our rates to match how much we truly give...and give...and give.
Finally, to truly own your rates, we must also practice self worth and self love, and that does mean practice setting boundaries. To increase our own self worth, we must know when to say "no." We must also know how to say it, in a gracious way, so there's no resentment. If we are only saying no out of extreme tiredness or at a point when we just.can't.take.on.one.more.thing...then the person on the receiving end of that "no," won't receive it well, which will only make you feel guilty for saying "no"...which will only make you eat more, drink more, worry more, or [insert] any other unhealthy habit. When you take care of yourself (by eating right, exercising regularly, meditating, breathing, and taking the time to do the things you love), then you can say "no" from a place that's full of grace and giving... "My plate is full right now, but thank you so much for asking. Please do ask me again next week, next month, or next year (whatever works for you)."
That person really knows herself, and the person on the receiving end probably wishes she was more like her.
With so much Gratitude,