Financial wellness: how to lean into your financial dreams

Written by Hatch co-founder, Kristen Lunman, first published in Good magazine. Read the original article here. Republished with permission.

Our brains crave certainty. It gives us clarity and purpose. When we focus on aspects of our lives that we can control, we thrive.

Taking charge of our hard-earned money is empowering and rewarding. Research shows when we look after our financial wellbeing we elevate our entire wellbeing. And it starts with defining our dreams. What fires you up when you think about the next five or ten years? Starting a business? Growing a house deposit? Shooting off on a year volunteering? Or do you want a retirement lifestyle you love? These dreams give shape to your financial goals.

You may already have good money habits. New Zealand women spend less and save more than men, according to 2021 ASB research. We’re less likely to live payday to payday, and a third have a rainy day fund. Where we falter is making our money work harder through investing. But the tide is turning. In the US, since 2018, female investors have increased from 44 percent to 67 percent. And women have been shown to be better investors than men, but we need to back ourselves. 

Following record 2020 low interest rates, many acknowledged that investing could grow bigger returns than savings or term deposits. Historically, the US share markets have averaged annual returns of 10 percent, with a fund like the S&P 500 returning an average of 13.6 percent for the last 10 years. While there’s no crystal ball, history shows us that having a long-term view when it comes to investing is the best approach.

Hands-on experience builds know-how and strengthens confidence. Lean into your investing potential with these four simple steps:

1. Fill the rainy day fund 

Having money in a savings account makes sense. It’s instant to access and buffers against surprise expenses. If the last couple of years have taught us anything, it’s that being prepared for the proverbial rainy day is important. Fill your rainy day pot with 2-3 months of living expenses.

2. Find your community

Learn about investing with a friend and be each other’s champion. Google popular investing books, podcasts and webinars, and seek out online communities of like-minded investors. Try looking for a mix of relatable Kiwis who inspire you with achievable goals, and some international investing all-stars who’ve learned by doing and are generous in sharing their insights on the share markets. Then share what you’ve found with your investing buddy.

3. Learn by doing

Just $100 is enough to experience the psychology of investing to understand how share prices move and how you respond. You’ll naturally see parallels in world news reflected in your shares, sparking curiosity. You could choose the brands you already use, like Lululemon, Allbirds, Apple and Netflix. Not ready to choose a company? Learn about ETFs (exchange traded funds), which are baskets of companies, some grouped by themes, like green energy or gender diversity. Or broad ETFs like the S&P 500 that own a slice of 500 of the top companies on the US share markets.

4. Pay yourself first

Set-and-forget automatic payments every payday are your best friend when it comes to investing. Small and frequent investing in funds and companies means you create lifelong habits, are more likely to choose buying shares over shoes, and you’ll grow knowledge and potentially your nest egg over time. You may even love it! 

You hold the power to fulfil your dreams when you lean into investing. Just take your first step today!

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