They say that millennials aren't buying houses because we spend all our money on avocado toast. While that's definitely, irrevocably, 100 percent true, it's probably also because we've seen too many movies about Wall Street disasters and have decided Hmm… I don't know that I want to give Leonardo DiCaprio money to buy wolves or whatever (that's what The Wolf of Wall Street was about, right?). Or maybe millennials aren't investing in real estate because we've all been working an insane number of jobs that don't offer benefits or a 401(k); because we live paycheck to paycheck; and because the prospect of investing money for your retirement or for buying a house one day seems crazy when you need to eat lunch today and pay your rent right now.
Then, suddenly, you look at your life, and you're in your 30s and you're like, Shit, I should've started thinking about this a couple of years ago! Which is why, when I brought this up in one of our edit meetings, I was thrilled that Jess knew exactly the person who could help me — and all of you who might be in the same boat — Sallie Krawcheck.
Sallie is a total powerhouse. Currently, she is the CEO and co-founder of Ellevest, a website that helps women invest and plan for their future. Before that, she worked as a CEO and CFO of a variety of investment firms. Most notably, she was ousted as CEO of Citigroup's wealth-management business because she thought Citi should reimburse its clients for money it lost due to bad investment decisions by the company. So, you know, she is legit.
We met in a conference room of the Ellevest offices in Manhattan, which were under a bit of construction. Talking to Sallie really is like talking to a cool friend or cool aunt who is just extremely knowledgeable and no-nonsense. We discussed the basics of investing and navigating Wall Street jargon, and she also walked me through Ellevest (which, real talk, is super-easy to use). By the end of our conversation, I left with a clear to-do list, so it looks like I'll be able to continue eating all the avocados and own a house one day after all.
Laia Garcia: You studied journalism in college. How did you end up working in finance?
Sallie Krawcheck: I had two job offers when I was coming out of college. I had an offer from the Miami Herald, writing obituaries for $12,000 a year — this may not be exactly right, but in my mind it's right. It was 1987 and Wall Street was hot, and I also had a job offer from Salomon Brothers for $32,000. My father forbid me to move to New York, so I'm like, "I am going to New York for my $32,000." The thinking was, I will do this for a couple of years, and then I'll become a business journalist. I just really loved Wall Street. I became a research analyst, which is a lot like a journalist because you write, but you also do the investment models, and that for me was a really good combination.
You can't help the fact you didn't invest before. You just need to invest now.
LG: Were you familiar with the stock market before then, or did you just learn on the job?
SK: Oh, God, I learned on the job. That is sort of the secret: It's hard, but it's not that hard. I took one math class in college and went to Wall Street anyway.
You know, it's funny, because a lot of women talk about having "impostor syndrome," and I came to Wall Street like, Wow, this is supposed to be so hard, and it's not. We just make it sound hard. We just throw on the jargon. Like, if you're the one with all the knowledge and nobody else has it, you're in a pretty good position. Once the knowledge is spread out, all of a sudden, you're not the expert, it's hard to charge as much.
LG: Given this secrecy, how are you supposed to get started? I can't see myself walking into an investment bank and just being like, "Help me!" It's intimidating!
SK: The research I did when I was at Smith Barney showed that neither men nor women understand. It just is what it is. There are so many guys out there who don't really know what a stock is. What is it? I've tried to explain to my kids, it's a portion of ownership in a company. There's cash flows; people will talk about alpha and beta — these are stock-market words. Men will not ask because they don't ask for directions. Women won't ask because they don't want to bother. Neither gets it, but the men still invest, and the women say, "I'll wait till I figure it out, and then I'll invest," and it's costing them hundreds of thousands of dollars over their lives.
Everybody says retirement [is the most important]. OK, but maybe you want to buy a house. That's a great investment. Maybe you want to start your own business; that's a great investment. Obviously you want an IRA or a 401(k) that will get you sort of a double bang for your buck, but not everybody wants to get themselves completely set for retirement before they start their business, buy their house, have their baby, take their trip around the world, etc. So you can make those trade-off choices.
LG: I always thought that only rich people can have investments. If you start a job and you make $35,000, what money do you have to invest?
SK: What I would say to you is, number one, pay down the credit-card debt. Number two, pay down your high-interest-rate student-loan debt. Number three, get some cash and put it aside, at least one month of take-home pay. Number four, I want you to choose an amount that you can invest every month. I don't want you to start with your expenses and then decide how much you can invest, because the answer will be zero. I want you to have a target of maybe 10 percent of your salary. I want you to see if you can adjust your expenses.
I want that 10 percent then to go, most likely, into a 401(k) or IRA. Most likely, that would be a default because those grow; you don't have to pay taxes on those till later, so those can grow more quickly for you. But if you have some goals in life that are going to come before that, that you want to invest for — again, buy a house, have a kid, start your own business, quit your job, travel the world — then you might want to invest in a non-retirement account.
I want you to find a firm that is a fiduciary, who operates in your best interest. I want you to go to that firm, and I want you to ask them to put you in a diversified investment portfolio. I don't want you to buy stocks. That's a loser's game. I want you to be in exchange traded funds. They are like mutual funds, but cheaper.
For your very long-term goals, like retirement, I want you to be much more in equities because that can get you a higher return over time. For your shorter-term goals, I want you to be more in bonds. Lower risk, less risk of loss, lower return over time. I want you to set up a recurring deposit, and I don't want you to look at it again. That's all I want you to do. This is the advice I would give you if I was your friend.
Then you'd say, "Sallie, there are all these articles about investing mistakes people make." I'll be like, "No." "Like we over-trade." I'll be like, "No. These are investment mistakes men make. You just need to do this, and you need to do it this week. If you really can't do it this week, you need to do it next week, because you are losing ground every week." That would be that. What we've tried to build, this is something that turns it into what your goals are. Ellevest tries to do all of this with this, but if I didn't exist, that's what I'd tell you to do.
LG: It's crazy to think about all the money that I've lost by not investing in the last ten or fifteen years.
SK: I know, but you know what? That's OK. In finance, we call that a sunk cost. A sunk cost is a cost that is in the past, and there's nothing that you can do about it. Unfortunately, we make too many decisions in life about a sunk cost. For example, here is this outfit. I paid $300 for this outfit. Now I'm about to go out on a date. I don't like the outfit. Do I wear it anyway? It's a sunk cost. You can't get the 300 bucks back anyway, so forget about the $300. Just make the decision about which dress you want to wear. You can't help the fact you didn't invest before. You just need to invest now.
This interview has been condensed and edited.
Laia Garcia hopes that her collection of '90s magazines will one day be worth thousands of dollars and she can maybe buy a summer house with it.