The New Year is prime time to set goals, including our financial goals. While many tend to think about general life and career goals, few really devise an approach to tackle their finances in the new year. Hence why many find themselves repeating the same negative cycles of financial loss year after year…
As working women and moms, setting appropriate and achievable financial goals is all the more important as many of us tend to manage the finances in our homes. This is without mentioning the many single working women and moms who are sole earners in their households. Furthermore, as moms, we’re often partly or entirely responsible for the financial education of our children, hence compelling us to have a solid financial vision for the future.
I know in my own experience, it has taken me quite some time to get in the habit of setting strong financial goals every year. Despite my business background and growing up in a single-parent household where money had to be carefully managed, setting financial goals didn’t always come to mind. It is with time, experience, and through conversations with fellow women that I actually started paying more attention to the importance of financial objectives in our lives and careers.
If you’re thinking of setting financial goals in the New Year, here are three I would like to suggest to your attention:
Develop a more positive money mindset
As women often socialized to aspire to less in terms of remuneration (hello wage gap!) and money in general, we may be inclined to think of finances and money in a negative way. As a matter of fact, many may develop a scarcity mindset when it comes to money, not feeling like we deserve to be paid fairly in the workplace, or that we should not aspire to reaching higher levels in terms of position and compensation. When we add to it suffering from imposter syndrome as working women, having a positive money mindset can become a daunting prospect. Many women also suffer from being raised in families and environments where money was not discussed, let alone with the women in the family.
All these factors, and so many others, speak to the importance of mindset when it comes to setting financial goals. Developing a positive money mindset rooted in abundance instead of scarcity is the first step to achieving any desired level of financial success.
Yet, how do we go from a negative, or lukewarm money mindset at best, to a positive one? It’s a change that requires re-training our minds to think differently. One of my favorite tools to re-train my money mindset is through financial education, mostly financial books geared at women, such as “Women and Money” by Suze Orman or “Get good with money” by Tiffany Aliche.
Understand and own your money
The second financial goal that I’d like to propose is that of understanding and owning your own money. Too often, we have no, or very little of an idea, of the ins and outs of our own money. As busy working women and mothers, we can be so caught up in our daily commitments and duties that our own money slips through the cracks. This can translate into financial debt, loss, overuse of credit and overall disastrous consequences for ourselves and our families.
This is where setting a goal to better understand, own and manage our money can make a world of difference. This means committing to a consistent practice of taking inventory of our money, being aware of and accountable for our expenses, and setting up a reasonable budget that fits our personality and lifestyle. Personal finance software such as Quicken, Mint,YNAB, or TurboTax for taxes, can help in the process.
Plan to create generational wealth
Last but not least, the third financial goal I’d like to propose may sound like a lofty one, but is one most of us should think about when it comes to our finances. As working women and moms raising the next generation, impacting our communities and creating a legacy, our finances can serve as a powerful tool to create change and make a lasting difference. This is why it is so important to have a long-term financial view that includes planning to create generational wealth.
Generational wealth is wealth that can be passed on to future generations. Contrary to popular opinion, it is not something only reserved to the rich families and communities of this world. It is actually possible to build, starting with each and everyone of us. It can be done through investing in children’s education, in the stock market as well as in real estate. It also can be achieved by creating a business, and taking advantage of the benefits of life insurance. However, all this requires setting solid financial goals and having a clear plan.
Overall, setting financial goals is an important part of starting a new phase or season of life such as the New Year. Among these, developing a strong money mindset, understanding and owning your money and planning to create generational wealth are three of the most important goals we can set as working women and moms.
What financial goals are you setting this year?
With Gratitude,
The Corporate Sis.
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When times get a little, or a lot tougher economically, we often start thinking about our finances first. As working women and mothers, many of whom are the primary breadwinner in charge of the finances of our house, or on the other end of the financial spectrum, suffer from not being involved enough in the household’s finances, knowing how to manage our finances and budget during challenging economic times is crucial. Not only does the welfare of our families depend on it, but our own ability to thrive and not just survive is also linked to how well we can maintain and grow ourselves financially.
As an immigrant coming to school in the United States, I had to learn very early on to budget in an effective and often even creative manner. Knowing how to stretch a dollar was a necessity as I grew up into adulthood. Growing up in a one-parent household in SenegaI, I watched my mother budget in an efficient way so as to keep food on the table, clothes on our backs and even private school tuition paid. That’s where the foundation of my financial knowledge started, and continued into my educational background as an accountant and Certified Public Accountant (CPA).
So how do you budget effectively when tough times happen? Here are a few principles I’ve learned and kept on using to adequately handle my finances during challenging economic times:
Don’t wait for tough times to budget for tough times
Budgeting for difficult economic times happens before the challenges even arise. This means getting in the constant and consistent habit of budgeting. One budgeting rule that I often follow is it 50/30/20 rule. According to this popular rule, we are to spend 50% of our income on essentials, 20% on savings including investments, and 30% on everything else. While there are variations of this rule depending on each individual’s situation, the main principle here is to develop a consistent habit of giving your money a place to go, and enforcing the discipline to save resources over time.
Categorize your money
I once heard from someone that money that doesn’t have a name is money unloved. In other words, if you don’t assign your money a qualifier and a job, you have more chances of losing it. In a culture where we’re so used to instant gratification, where we can purchase anything at the click of a button, it’s never been easier to lose track of your spending and hence your money. This is why it is so important to categorize your money as soon as it lands in your bank account.
I like to assign my money at home as soon as I receive it. By home, I mean specific accounts destined for given purposes. While some bank accounts are for general spending or savings purposes, others are for longer-term purposes, creating an investment or dream vacation fund, for instance. I have found the practice of assigning my money a home and labeling my accounts as specifically as possible, allows me to avoid over-spending while increasing savings, especially in tough economic times.
Shift your mindset.
Many of the challenges we face during tough economic times are not just related to money but also, and most importantly, to our money mindset. For many of us, managing our money during tough economic times turns out to be a painful exercise, because we haven’t made up our minds around our finances. Making a conscious decision to save money, or to reach a certain financial goal, is highly dependent upon our mindsets. The good thing about mindsets, thankfully, is they can be changed.
Throughout the many challenging economic periods of my life, I have taught myself to think about money not as a scarce, but an abundant resource. This has allowed me to feel less powerless in the face of rough economic times, and to keep working at bettering my money habits and mindset.
Another mindset shift that has been really important in my experience has been too learn to distinguish oh between my wants, needs and dreams. By order of impact, I have made it a habit to prioritize essential needs and dreams, and be especially vigilant around wants. Very often, our wants are punctual and not really reflective of what truly matters or has the longest-term impact. Compare wanting a $1,000 brand name purse to a lifelong dream of starting a business, taking a dream vacation, or retiring our spouse or parents early, for instance. Funding our dreams almost always ends up providing a greater return and satisfaction in the long run.
All in all, tough economic times are an excellent opportunity to train ourselves to manage our money more effectively. As a matter of fact, managing our money in difficult times should not be all that much different from managing our money at any time. The same principles apply, albeit with some level of variation, depending on our personal circumstances and environments. As such, learning to budget before tough times arise, assigning our money at home, and changing on money mindsets are the three most essential tools to effectively budget our money when crisis hits.
Now let me ask you, what are the tips and tools do you recommend to manage your money and budget effectively during top economic?
Question: My husband and I have been enjoying earning more over the years in our careers. However, our tax bill has also been going up. What can we do to avoid paying so much in taxes?
Signed, Overtaxed Mama
Hi Overtaxed Mama,
I so hear you! As we grow into our careers, so do our incomes over time. If we add to this being in relationships and counting our partners’ income jointly, chances are our earnings can grow even more as the years pass. However, with our incomes, also grows another less fun side-effect, that is the taxes we end up owing on our tax returns. After all, doesn’t the popular saying confirm only two things are certain, death and taxes?
As you may have watched your earnings grow, you may also have watched your tax bill get larger as you file taxes. Since you’re taxed on your raising income, it’s hard to avoid. However, there are ways to offset the tax increase that comes with earnings growth. I’ve grouped these in 3 categories, that you may remember under the mnemonic RED:
R is for the Retirement savings you should maximize:
One of the most effective ways to reduce your taxable income is to increase your retirement savings. You can do this by maximizing your contributions to your 401k employer-sponsored plan, up to $20,500 in 2022. Individuals 50 and olderSince these contributions are made before before tax, they directly reduce your income.
You can also contribute to an Individual Retirement Account (IRA), up to $6,000 annually ($7,000 for 50 and older).
Another way to reduce your taxable income is to use flexible spending plans, offered by some employers. One of these is the Flexible Spending account (FSA), in which employees can contribute and set aside funds up to $2,850 in 2022 for medical expenses.
Similar to the FSA, the Health Savings account (HSA) is dedicated to employees with high-deductible health insurance plans, whose pre-tax contributions go toward healthcare costs.
Lastly, yet another way to bring your taxable income down is to deduct business-related expenses such as the home office deduction for instance. Other available business deductions include health insurance costs, as well as other deductible expenses.
These are all effective ways to reduce your taxable income, especially as it increases over time. Consider using one or a combination of these to lower your tax burden.
Ask a CPA is our periodic column addressing accounting and financial questions for working women and moms. Got an accounting or financial-related question? Please email us at corporate@thecorporatesister.com
Q: I often feel defeated and disempowered in my personal finances, as if I were trapped. How can I be more empowered and create more freedom in my finances?
A: Great question! And you’re definitely not the only one to wonder about creating more freedom in your finances. Increased financial freedom not only allows you more peace of mind, it also helps you have a better quality of life, and create a solid financial legacy for yourself and your family. Not having to worry about your finances, and instead working to build wealth can be a rewarding experience in and of itself. For working women and moms, many of whom are disadvantaged when it comes to wealth-building and financial freedom, this can also mean increased time, opportunities and better work-life balance.
Here are 3 tips that may help:
Have a vision for your finances
Having a vision for your finances is the first step to wiring your mindset towards having more ownership and freedom in your finances. What does your ideal financial situation look like? How much money would you like to see in your savings account? How would you restructure your expenses?
However, it’s not enough to just have a vision for your finances. Writing down your financial vision is a powerful way to solidify it into a concrete plan and turn it into reality. It can be as simple as journaling about it, creating a basic budget, and/or setting up milestones to reach.
Set up a system
Creating freedom in your finances also involves setting up an effective system allowing you to focus on your main financial goals. This is especially important for us as working women and moms carrying so many responsibilities and commitments.
An effective system can start as simply as reminders, a monthly budget, or a financial app. It can also take the form of automating your monthly expense payments, hiring a financial advisor, or and/or devising an elaborate financial strategy for yourself and loved ones.
Learn through the process
Last but not least, gaining more freedom in your finances largely comes from educating yourself. Learning about the many options at your disposal to make the best out of your money puts you at a distinct advantage. Whether you choose to take classes, read books or learn on social media, the goal is to be knowledgeable about the best options for you.
Using dedicated resources like Certified Public Accountants, or financial advisors can also further your education in a more direct way. Working with a financial professional can not only help you solidify your finances, but also help you grow through the process.
Overall, creating more freedom in your financial situation is far from being a luxury. In a world threatened by economic instability, having a vision for your finances, setting up an adequate system, and learning through the process are effective ways to be freer when it comes to your financial situation.
As you file your taxes every year, have you ever wondered if there is an element of gender bias embedded in the tax policy? As a Certified Public Accountant and a working woman and mom, I’ve often asked myself the question. And if you have, then you definitely are on to something.
While tax policy can certainly contribute to increased gender equality, which translated into significant economic dividends, the reality is, in many countries, it’s actually doing the very opposite, thus fueling the gender tax bias. When it comes to gender tax bias, there exists a distinction between explicit and implicit bias. Explicit gender tax bias occurs when there is a legal link between tax code provisions and gender. Implicit gender tax bias, on the other hand, happens when existing gender inequalities cause tax policy outcomes have different implications for women and men. Even when gender tax biases are not overtly explicit, implicit bias remains embedded in factors such as earned income, property ownership, consumption choices, wealth, along with differences in gendered societal expectations.
According to the Organization for Economic Co-operation and Development (OECD) first cross-country analysis of 43 G20 countries’ approaches to tax policy in the report entitled “Tax Policy and Gender Equality: A Stocktake of Country Approaches”, gender tax bias is not ignored by governments. As a matter of fact, gender equality appears to be an important factor in the design of tax policy in most countries, with half of these having already passed tax reforms in favor of increased gender equity. Despite these efforts, a high risk of implicit tax bias was noted in most countries. In order to remedy this situation, more detailed gender-differentiated data is necessary. Unfortunately, much of this data is only available and accessible around income and labor participation, and more scarce around property ownership, wealth and consumption choices. As such, this scarcity of available data makes it more challenging to resolve these issues.
Watch this short YouTube video on the Gender Tax Bias:
One example of the gender tax bias, especially in our COVID-19 times, targets part-time workers, which are largely women. According to the OECD’s “Taxation of Part-Time Work in the OECD” working paper, women are more likely to hold part-time positions than men, at a rate of almost three to one. Along with this, there has been a decrease in the earnings level of part-time workers relative to full-time workers, as well as variations between part-time and full-time workers’ taxation attributable to said differences in earnings levels.
Another more implicit example has to do with the availability of deductions for unreimbursed work expenses incurred by men, more so than those incurred by women, including childcare and transportation costs for instance. Another example yet is embedded in consumption taxes such as the Value-added tax (VAT) in many developing countries, which end up raising the cost of services such as household services, thus disincentivizing women from working outside the home. Lastly, an unfair bias also exists in corporate tax incentives that do not favor sectors such as hospitality, the garment industry, micro-entrepreneurship, where women predominate. While these constitute a few instances of the gender tax bias, here are many more examples across countries and economies.
Overall, the onus is on governments, but also us all, to consider and implement measures in which tax policies and practices better promote gender equality. These measures could and should reduce both explicit and implicit gender tax bias, while supporting, prioritizing and giving tax access to women and households impacted by the COVID-19 crisis.
In the world of entrepreneurship, funding is a vital source of growth. However, for many, if not most female entrepreneurs, it’s also a major obstacle. As a matter of fact, one third of the world’s female entrepreneurs face gender bias when attempting to raise capital for their businesses, according to HSBC Private Banking’s research. Women face the most gender bias in the UK, the United States and Singapore. Further research shows female-led ventures are at a greater disadvantage when raising funds for businesses in male-dominated fields as opposed to female-dominated ones.
As the COVID-19 pandemic has resulted in a large number of businesses created by women entrepreneurs, it has also predominantly negatively affected the latter. Faced with the scarcity of funding opportunities for women entrepreneurs, several lenders and corporations are lending a hand to help reduce disadvantages experienced by women entrepreneurs. As such, these organizations are offering help and support to female entrepreneurs by making these 15 small business grants available:
This business grant program through Visa is dedicated to Black women-owned businesses. In order to qualify for this grant, applicants must be Black women business owners for at least two years, be a business-to-consumer company, and reach a minimum revenue of $24,000. Specific location restrictions also apply.
This grant is directed at female entrepreneurs planning to start a local small business. To apply for this grant, all that is required is for the applicant to explain their business’ purpose. One women-owned business is selected each month to receive a $10,000 grant. In addition, one of the monthly winners is then selected at the end of the year to receive a $25,000 grant.
Through this initiative, FedEx engages the public to vote for the business of their choice. Candidates who receive the most vote win a $75,000 grant. To sweeten the pot, the winner also benefits from free exposure through FedEx’s media outlets.
This grant allows prospective women-owned businesses to be eligible for a federal government grant for research and development needs. In order to qualify, female-led businesses must employ fewer than 500 employees. Eligible businesses can receive over $750,000 if the research produces positive outcomes.
Speaking of research and development needs, the Small Business Innovation Research grant applies to female-owned businesses boasting cutting-edge ideas. Eligible companies can earn a $150,000 grant, and can receive up to $1 million in the span of two years
For any women-owned businesses whose mission is focused on furthering the cause of women and girls, grants are made available from the Ms Foundation for Women. Examples of businesses who have benefited from these grants include businesses advocating for affordable childcare, against domestic violence, and for reproductive health, to cite a few examples.
The Cartier Women’s Initiative Award is bestowed upon 21 female entrepreneurs each year by Cartier. As a prize, winners get one-on-one expert coaching, media coverage, as well as business workshops, in addition to other rewards ranging from $30,000 to $100,000.
These 7 business grants for women entrepreneurs, among others, are a good start to begin the process of helping women-owned businesses overcome the barriers in their way.
Welcome to our #AskACPA feature where we answer financial, accounting and business questions.
Question: As a woman small business owner, what are tips to transition into the new year?
Entering a new year as an entrepreneur, whether you have a side hustle or full-time business, is not just a fresh start, but an opportunity to transition into a more fruitful business season. While it is important to set goals for your business, it is also crucial to effectively make the transition from one year to the other, especially as related to your finances and accounting. This is especially important considering the many disadvantages faced by women-owned businesses as a result of the current COVID-19 pandemic, despite the increase in new entrepreneurial ventures started by women during this period.
As an entrepreneur, how you finish one year, and start another year sets the tone for the future of your business. Many, if not most important metrics by which your business’ performance are measured, including budgets and benchmarks, are set at the beginning of the period. The goals set ahead are also defined at the beginning of the year, which all make the transition from one period to the other a particularly critical time.
If you’re working through your business transition from one year to another as a female entrepreneur, here are a few steps that may help:
Re-awaken your business’ WHY
Before even delving into financial and accounting figures and projections, the first step is to refresh your business’ WHY. That is your business’ purpose, the reason why you started it all in the first place. Your financial and accounting processes are only significant enough to the point where they are aligned with your business’ WHY.
After all, all your financial and accounting performance does is tell the story of your business, defined and embodied by its purpose. It’s the same purpose that ought to drive your strategy, and ultimately your financial results.
What is your business’ WHY? Has it changed from last year to this period? If so, in what ways? Are you still in alignment with it or have you lost sight of it?
Be honest about where you stand financially
This is especially important if your business is on a fiscal year calendar, which means it reports its financial results on a calendar year basis. As such, year-end financial statements and reports constitute an excellent barometer to assess the business’ performance in the course of the prior year.
As you closed the prior year a few days/weeks earlier, where do your business’ revenues stand? Have your revenues increased or decreased in the course of the prior year? How have your business’ expenses changed? What other parts of your financials have been affected? What are the reasons behind these changes, if any?
Being honest about, and understand where your business stands financially, allows you to transition into a new year with a better sense of the modifications needed to further your WHY.
Make a plan
Last but not least, relying on a refreshed sense of your business” WHY, as well as a clear understanding of where your business stands financially, allows you to confirm any goals you’ve set. Even better, it lets you devise a plan to reach these goals in a way that aligns with your business’ WHY, and address any gaps identified when reviewing your prior year performance.
Transitioning into a new year as a business requires a bit of a process. These 3 steps can help smooth out the transition and set you up for a successful year ahead.
