Matters: The Positive Economic Impacts of Paid Family Leave for Families, Businesses and the Public,” Rutgers Center for Women and Work (January 2012), https://www.nationalpartnership.org/our-work/resources/economic-justice/other/pay-matters.pdf.30 29. Rosie Colosi, “Paternity Leave Is a Lifesaver for Working Moms … But Are Dads Taking It?” CBS News (July 20, 2019), https://www.nbcnews.com/know-your-value/feature/paternity-leave-life-saver-working-moms-are-dads-taking-it-ncna1036226.
31 30. Elly Ann-Johansson, “The Effect of Own and Spousal Parental Leave on Earnings,” Institute for Labour Market Policy Evaluation (March 22, 2010), https://www.ifau.se/globalassets/pdf/se/2010/wp10-4-The-effect-of-own-and-spousal-parental-leave-on-earnings.pdf (p. 28).
32 31. Julie Anderson, “Breadwinner Mothers by Race/Ethnicity and State,” Institute for Women's Policy Research (September 2016), https://iwpr.org/wp-content/uploads/2020/08/Q054.pdf.
CHAPTER 3 Your Money Goals
The whole point of having money is to have and experience what you want, and that looks different for each of us. To you it might mean financial freedom and peace of mind, giving to organizations you believe in, being able to take care of your parents, buying new sneakers each month, or traveling a few times per year.
I call these your goals. They can look like more traditional money goals – build up a rainy-day fund, pay down your debt, and save for retirement. But they also can include lifestyle upgrades and using your money for good.
Why Have Financial Goals?
You know all those things you've always wanted to do, have, and experience? You should do, have, and experience them!
Getting clear on your goals is one of the most important parts of being a financial adult. When you have goals, and realistic plans to achieve them, you can feel confident that they will happen.
Goals are also motivating and can drive you to take the actions you need to make them happen.
The key is not only understanding your goals but building them into your financial plans. Otherwise, you can have the goal of saving $200 per month toward your rainy-day fund, but will have no idea if that's feasible or can actually happen given your income and expenses.
Remember, while we can always make smarter money moves, try not to compare yourself with others. You may have things in common, but gender and race/ethnicity add differentiating factors of privilege. You have no idea what another's journey has been like or where they started financially.
Start by Listing Out Your Goals
Set a timer for 10 minutes and let yourself dream about what you want. These can be smart money moves, fun things that bring you joy, and both short-term and long-term aspirations.
Even think about the feelings you want to experience. What would you need to achieve financially to feel financial freedom, peace of mind, or stability? Write down anything that comes to mind. We'll narrow the list down later.
List out your goals.
Important Goals to Consider
Here are some important money goals to consider adding to your list:
Rainy-day fund (a.k.a. an emergency fund)
Retirement (a.k.a. work-optional)
Paying down high-interest debt (a.k.a. paying off credit cards)
Investing (a.k.a. making your money grow)
Time to Prioritize
Prioritizing means deciding which goals come first. Rank each of the goals you listed in the previous exercise in order of priority, with number one being your highest-priority goal. Consider which goals are most important to you, what's most urgent financially, as well as your timeline.
Do you want to pay off all of your student loans before saving for your future home? Do you want to aggressively save for retirement (and retire early!) or take an extra vacation each year? This is an extremely personal choice that each of us needs to make for ourselves. Some want to retire early and are willing to forgo some spending to do it. Others would rather spend more now and retire at a more typical age.
That being said, there are some commonly accepted financial guidelines to help you with prioritizing your money goals.
Priority #1: Some Rainy-Day Funds
Having some savings for emergencies is of top priority. If we don't have any money in savings and an emergency expense comes up, we'd have to either put expenses on a high-interest credit card or borrow. And in some cases, we wouldn't be able to pay because with certain expenses, like rent, paying with a credit card is not always an option.
Now, that doesn't mean you have to fully fund your rainy-day fund before anything else, but you definitely want a few months of emergency expenses saved up (more on how much you need later). In my conversation with Lauren Anastasio, a CFP and director of financial advice at Stash, she made the distinction between a crisis fund and a rainy-day fund. You want to have your crisis fund saved first and foremost, which might be a month's worth of expenses or $1,000. I call this your minimum rainy-day fund. Then once you max out your 401(k) match (priority #2) and pay off high-interest credit card debt (priority #3), you can focus on fully funding your rainy-day fund (or your ideal rainy-day fund).
Priority #2: 401(k) Match
401(k) matching, when available, is free money your employer gives you when you contribute up to a certain amount to your 401(k). But really it's part of your total compensation. If your company matches 3%, then for any amount you contribute toward your 401(k), up to 3%, they match it dollar for dollar. That's a 100% return. I talk about this more in Chapter 7.
