Running Your Finances Like a CFO: A Woman's Guide to Financial Empowerment
- Davina Jackson
- Feb 1, 2024
- 6 min read
Updated: Mar 8, 2024
Welcome to The Woman CFO – a space crafted just for you, where we embark on a journey of financial empowerment.
We all know the Chief Financial Officer (CFO) as the financial maestro behind successful corporations. But what if I told you that you could be your own CFO?
Imagine having the financial confidence and acumen to make strategic decisions about your money.
In this blog post, we'll explore 6 invaluable strategies of running your finances like a CFO - because the CFO mindset is exactly what you need to take charge of your financial landscape.
Manage Your Finances Like a CFO with these 6 Strategies:
Current Statistics on Women's Financial Status
Before we dive into CFO strategies, let's look at the current financial landscape for women.
According to Pew Research Center studies conducted in 2022, women over the age of 16 earn 82 cents for every dollar earned by men - a minor increase from the 80 cents earned in 2002. That's 2 cents in 20 years. (W-o-w)
If we break this down by race, Asian women earn the most at 93% of the median, White women earn 83%, Black women earn 70%, and Hispanic women earn 65%.
And to add another layer (because why not), women's earning potential decreases as we age. Women ages 25 to 34 earn 92% of the median earnings of men, women ages 35 to 54 earn 83%, and women 55 to 64 earn 79%.
So... if you're paying attention to this lesson, women earn less money as whole, AND numbers further decrease as we break it down by race and age. Do they know that women outlive men by approximately 6 years (men average 73 years while women average 79 years)? (Make it make sense, please.)
All of that to say, the gender wealth gap persists and significantly impacts our ability to build long-term financial security. However, armed with the right financial knowledge, we have the power to shift this narrative. It's called Financial Literacy and that's precisely what we're here to achieve.
So, now that we've level set... Let's dive in to key CFO strategies that will change your financial life.
CFO Strategy #1: Know Your Numbers
Knowing your numbers is a fundamental CFO strategy.
A CFO would never make decisions without a clear understanding of the financial landscape, and neither should you. Take a moment to track your income, understand your monthly expenses, assess your debt, and calculate your net worth (assets minus liabilities). Think of this as your personal profit and loss (P&L) statement.
Money Tip: Use budgeting apps or old-fashioned spreadsheets to create a snapshot of your financial situation. This will be your compass as you navigate your financial path.
CFO Strategy #2: Set Your Financial Goals
CFOs are goal-oriented individuals.
One of the CFO's primary responsibilities is strategic planning. They map out the company's financial future, set goals, and devise a roadmap to achieve them.
Similarly, managing your personal finances demands the same level of planning. Start by setting SMART goals - a mix of short-term wins and long-term aspirations - and revisit them often.
SMART Goals for Women
SMART goals are specific, measurable, achievable, relevant, and time-bound.
For example, instead of a vague goal like "save money," a SMART goal could be to "save $500 per month for a year to build an emergency fund."
Money Tip: Research shows that individuals who set clear financial goals are more likely to achieve them. So, grab a notebook and jot down your short-term and long-term financial aspirations. This is your time to write it all down, whether it's building an emergency fund, paying off debt, planning a dream vacation, or (finally) saving for retirement.
Your financial goals are uniquely yours, and the more tailored they are to your life, the more likely you are to stay committed.
CFO Strategy #3: Develop Your Budget (aka Financial Roadmap)
CFOs excel in allocating resources, and tracking revenue and expenses meticulously - to ensure resources are optimized.
Picture a CFO managing a company's budget. Now, apply this principle to your personal finances and think of your household budget in the same sense - to distribute income to cover expenses, savings and investments.
In other words, a budget is your financial roadmap. It helps you understand where your money comes from, where it goes, guides your spending, prevents overspending, and frees up money for your goals.
Money Tip: Start by categorizing your spending as essentials, non-essentials, and savings; and allocate a percentage of your income to each category. For example, the 50/30/20 budget rule suggests allocating 50% to necessities, 30% to non-essentials, and 20% to savings. Make sure you adjust the percentages to fit your lifestyle and revisit them every month.
Budgeting doesn't mean sacrificing all joys. It's about mindful spending and aligning your expenses with your goals.
CFO Strategy #4: Invest for Long Term Growth
A good CFO will always seek opportunities for growth and investment.
CFOs strategically invest company funds to ensure long-term growth. In personal finance, this translates to smartly allocating your money for the future. We're talking retirement accounts (401K, IRAs, Pensions, etc) and, of course, good old investments.
We admit, investing can be intimidating, but this is where it's ok to start small. If you haven't started contributing to your 401K at work, do that first. Set up allocations from each paycheck and watch the balance grow over time. (Compound interest, baby!)
If you already have a 401K, you can set up a second retirement account in the form of an IRA. There are contribution limits to both 401K and IRA accounts, so make sure you stay within bounds.
Once your retirement accounts are set up, we recommend establishing an investment account. Again, this is where it's ok to start small and grow from there. Start with low-risk options such as a balanced portfolio of stocks and bonds. (Note: We don't recommend starting with high-risk investments. There is a learning curve and you must make sure it aligns with your investment strategy)
Money Tip: Robo-advisors or investment apps make it easy for beginners - and they often have resources that teach you how to invest wisely.
Women who invest early and consistently tend to accumulate more wealth over time.
CFO Strategy #5: Protect Your Financial Future (aka Risk Management)
CFOs are seasoned risk managers.
They assesses risks, make informed financial decisions, and plan for contingencies or financial uncertainties.
Your personal finances also require risk management. Whether it's having insurance coverage or building an emergency fund, at the end of the day, it's about proactive risk management - i.e. calculated risks and smart decisions.
Take time to assess your risk exposure. Ask yourself: Do I have insurance? Is it enough? Do I have an emergency fund? (Remember, credit cards and loans are not emergency funds. They're debts that must be repaid.)
Money Tip: Protect your financial future by building an emergency fund and having adequate insurance coverage.
By proactively managing risks, you ensure that unexpected challenges don't derail your financial journey.
CFO Strategy #6: Continuous Learning
CFOs are committed to continuous learning.
Staying informed is crucial as the financial landscape constantly evolves. Whether it's reading books, listening to podcasts, or attending workshops, CFOs make learning a part of their financial routine.
Research indicates that women who actively engage in financial education experience have increased confidence in their money management skills. (Remember the little note about Financial Literacy included above? Yep, that's what we're talking about.)
Money Tip: Seek out resources that resonate with you such as online platforms that offer tailored content for women and address our unique financial challenges like The Woman CFO blo (Shameless plug. I couldn't help myself.)
Remember, continuous learning is your secret weapon for staying ahead in your financial journey.
And there we have it.
Running your finances like a CFO isn't solely reserved for corporate boardrooms. Nor is it about having a finance degree. It's about adopting a strategic mindset to manage your money effectively. Empower yourself with financial knowledge, understand your financial landscape, set goals, budget strategically, invest wisely, mitigate risks, and commit to continuous learning. YOU have the power to be the CFO of your financial destiny.
Remember, every step you take towards financial empowerment is a step towards a brighter, more secure future.
Ready to embrace your inner CFO? Share your financial goals, budgeting tips, and success stories in the comments.
