Read Part 1 of this series, “Like a billionaire boss mom - a look at Tory Burch”here.
Is your big vision Tory Burch-like wealth of $1.06 billion, or are your financial aspirations more modest? How does your family define wealth? Does some pre-defined monetary goal define financially wealthy in your mind, such as a million dollars in the bank?
One definition of wealth includes the idea that if your assets are earning more than you are spending to maintain your ideal lifestyle, then you have the option to never work purely for money again.
Like Burch's global vision that began with a single small boutique, this idea is scaleable and includes two of the most important components of the financial equation - what you put away for the long term and what you spend in the short term. Using this definition, a prudent teacher who has saved and invested consistently while living within her means could be wealthy while a high-earning banker with homes in three cities and no money in the bank could be poor.
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Regardless of your definition of financial success, the following basics should give you an idea of where to focus your financial efforts:
1. Put on your glasses (Tory Burch or not) and determine your current financial situation. How much do you have? How much do you owe? How much do you spend? If you have no idea, this is the first item to put on your already crowded to do list, right after picking up the kids and finally making it to a spinning class. You can’t make good decisions or progress without doing this step first.
2. Spend less than you make. Use a budgeting app, an excel spreadsheet, a monthly auto-draft deposit into savings - any method that works for you - to control your expenditures. Remind yourself that research has confirmed that money does not buy happiness if you are searching for your bliss in the Nordstrom’s shoe department, even if you’re buying Tory Burch’s riding boots. Happiness has been shown to increase due to experiences (like travel), close relationships and a life purpose (which financial health can allow you the freedom to pursue).
3. When Tory Burch divorced in 2006 she probably wasn’t expecting a lawsuit from her ex-husband over his 28 percent stake in her company. Her ex’s launch of a too-close-for-comfort preppy clothing company probably came as a surprise as well. Everyone’s life has challenges and unexpected bumps in the road (no matter how perfect they appear to be at Parent-Teacher night). Having a financial rainy day fund can prevent a challenge from turning into a crisis. In addition to a a rainy day fund, make sure you have insurance (health, property, car, and life if you have dependents). There are places to save money, but insurance is not that place.
4. Don’t have debt and pay off any debt you owe. Although not as glamorous as Tory Burch, another famous person - Albert Einstein - described compound interest as the eighth wonder of the world. Investing harnesses the power of compound interest - making your money work for you to make earnings, and then having those earnings work for you as well, over and over again. Debt is compound interest working against you. Before you invest, pay off your debt.
5. Save and invest your money. Educate yourself on finance and investing. When you first begin investing, stick to Warren Buffett-like basics of purchasing exchange traded funds (which are based on broader indexes of underlying stocks and have low fees). Be honest with yourself about your true risk tolerance, ability to sustain a market downturn, and expected returns on your investment. Advisors are available to help your process, but like hairdressers and fashion trends, some are better than others. Tory Burch has a team of talented professionals helping run her empire, but she has carefully chosen and vetted those advisors.
Choose the one area mentioned above that will make the biggest difference in your financial life and take action on that step until it is completed. If needed, choose one small realistic step, like listening to investing audiobooks in the carpool line or using a budgeting app on your phone, which will help you achieve your financial goals. Like Tory Burch launching her brand at 37, it’s never too late (or too early) to begin taking the steps necessary to write your own success story.