Sallie Krawcheck, CEO and co-founder of Ellevest, a financial health company built by and for women, has made it her life's mission to get more money in the hands of women. After serving at the helm of big financial firms like Merrill Lynch, Smith Barney, and Citi Private Bank, she noticed a big gap. "The rest of the investing industry is built by men—and it's done a better job for men than for women and has had higher client satisfaction for men than for women."
Ellevest, on the other hand, is built by women and helps women invest by meeting them where they are and taking into consideration often-overlooked factors like pay gaps and average lifespans (women generally live longer).
As a working mom, Krawcheck has a deep understanding of the world of investing and how your financial literacy has a ripple effect for a generation's worth of women to come. Whether you're already in charge of your investments, have just started tossing money into a 401(k), or are not quite sure where to start, here is Krawcheck's financial advice for women—and her daughter.
1. Strategically Pay Down Debt
When it comes to finances, debt can be hugely stressful. Krawcheck suggests getting things in order before arbitrarily paying things down. What to start with: debt with the highest interest rates. "That is the biggest subtractor of wealth and financial well-being that's out there," she says. Specifically, start paying off any debt you have with an interest rate above 7 percent first, leaving debt with interest rates below 4 percent to be paid after, she suggests.
Also important: Ask questions about bills and loans and fees. Many of today's landlords have more of a flexible understanding and utility companies have been known to lower bills for customers in need. It doesn't hurt to make a phone call to see if a company will, for example, lower an interest rate, she says. "The worst thing that happens is you lose 30 minutes. The best thing that happens—and we hear about it more and more—is you get a reduction because you've always paid on time."
2. Split Up Your Paychecks
Do you know where your take-home pay is going? While it's easy to lose track, Krawcheck suggests breaking up your paycheck into three categories: needs, fun, and money for the future. She suggests 50 percent of your paycheck goes to "needs" (rent, gas, clothes for the kids), 30 percent toward "fun" (what brings you happiness?), and 20 percent toward a "future you" (investing, for example). Setting aside money into these three buckets helps form a habit of saving—something that contributes to both behavior change and wealth.
3. Expose Inequities in Money
Money is that final taboo for women, says Krawcheck. "We talk about the gender pay gap. It's 82 cents to a man's dollar. But the gender wealth gap is 32 cents to a man's dollar." Knowing that this gap exists and showing your children that it exists matters. "There are inequities out there and to hide that from your children or pretend like it's not there can be a real disservice," she says. For example, she's talked about certain experiences like being fired throughout her career with her children, explaining the gender differences and biases that exist so that they can be properly prepared.
4. Manage Your Own Cash
One of the biggest hopes Krawcheck has for a future generation of women? That they learn to manage their own wealth. "There are certain things that lead to a well-lived life," she says. "You are healthy. You're emotionally healthy. You are physically healthy. You are spiritually healthy. We need to add financial health to that list. If you don't have that, the other stuff just doesn't matter as much." One small step you can take: Make sure you're involved in both managing your family's budget and investing. "Wealth for women needs to last longer," she says. Women tend to live longer than men and, by some counts, 80 percent of women die single.
It's important to manage money to show your daughter that she can do this, too, she says. "If your daughters see you as proactive, positive, and engaged with money, then that becomes very natural to them."
Financial independence will also help the next generation of women, well, be more independent. "We do not want our daughters to be caught in a job they hate because they don't have the money to quit or caught in a relationship that doesn't work because they don't have the money to divorce," says Krawcheck. "And that's why the gender wealth gap matters. It's not just about money. It's about the life that we each can live."
5. Invest Holistically
You don't just invest for more money—you invest for financial goals, says Krawcheck. But in order to understand how and where to invest, you have to have an accurate idea of both where you are starting and where you want to be. For example, you might want to have $50,000 for a down payment in five years but you might also be in the midst of starting a business. Knowing all of the factors that go into your finances and what your goals are can help you know how much to invest and when and where to do it.
6. Find Your Mission
Krawcheck remembers an early day with Ellevest when she was questioning her current environment with her startup comparing it to what she was doing (working as an executive at Citi). One day, her daughter said to her: "This is so much better because you are going to make a real impact on women in their lives," she remembers. "It just floored me that she had picked that up and was communicating it back to me. It was probably one of my most important moments as a mother."
What gives your life richness? What do you want to work toward? The answers to those questions are, of course, different for everyone, but finding them can help you hone in on values that matter to you as well as what you want to work toward—key factors in helping both business and happiness thrive.