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Mistakes to avoid when you start earning money

One year into my first job out of school, working as a strategy consultant for McKinsey, I had an epiphany. I was on a project with a retail banking client, and all the guys on my team were discussing their stock investments and other personal finance issues. Suddenly, the EM (project manager) turned around and asked

[quote style="boxed"]Anke, how do you invest your money?[/quote]

It was an embarrassing situation.

[quote style="boxed"]Well, I don’t have any money![/quote]

You can’t blame McKinsey consultants for beating around the bush, so my EM exclaimed:

[quote style="boxed"]How is it possible, Anke? You have been working at McKinsey for a year! How can you not have any money?[/quote]

It was a very valid question. I stuttered something about money I owed to friends and family upon graduation and about how I had had to buy work clothes when I started and how my boyfriend was living in London and I spent a lot of money on weekend trips, but they remained sceptical. Surely, I could have saved up SOME money to invest?

As much as I often complain about my time at McKinsey, I am thankful for learning this valuable lesson one year into my career, not five years on or never, as some of my friends and colleagues. If you are earning a salary for the first time, write this on your forehead: DON’T SPEND YOUR WHOLE SALARY!!

I know it’s hard. All your student years you have no money, getting just enough from your parents to pay for student housing and food, and maybe textbooks, but beyond that, you have nothing. If all of a sudden the balance on your bank account jumps from $0 to $3,000, of course you feel like a millionaire. Maybe you’ve been told that the job you’ve landed is extremely desirable, so you think, surely now I am rich?

Here’s how I spent my first salary:

  • I bought a beautiful gold and silver Maurice Lacroix watch for myself. My old fossil watch had broken down a year earlier, but I had decided I wouldn’t buy a new one until I could buy a nice one, so as soon as I got the salary I went out and bought this one
  • I went to Karen Millen and bought a very nice evening dress and a fancy pullover that I probably wore only five times before throwing it out a couple of years later
  • I spent a couple of weekends with my boyfriend in London. Since he was housed in a student residence sharing his tiny room with another postgraduate student, I booked a five star hotel for both weekends  (which is what I was used to after one month with McKinsey!)

Once I had also paid the rent for my apartment, you can imagine how much of my salary was left. I don’t really regret the money I spent in the first month. It was fun. I still love my Maurice Lacroix watch and don’t think I need to buy another one for the next ten years. I needed to buy some shoes and work clothes. Working hard during the week, I needed to enjoy my weekends with my boyfriend.

The problem starts once you get into a habit of thinking you are rich just because you have a high income, because then you can get used to spending everything you earn, and years of hard work later, you realise you actually have nothing. Make sure you don’t just work a lot, spend a lot and are left with nothing at the end. Make sure you start building up some money to invest as soon as possible so you can start moving into the direction of personal and financial independence. You don’t want to be in a situation where your spending habits are such that you have to stay in a job you don’t enjoy just to finance the expensive lifestyle you have gotten used to.

Here’s is my personal finance battle plan that should provide a compromise between enjoying your income and building up a financial buffer:

the first three months, just have fun! Buy some chique work clothes, take a couple of nice weekend trips, invite your friends for drinks, pay off money you owe to your parents, buy something lasting that will remind you of that first salary (a nice watch or a beautiful piece of jewellery)

after three months, the honeymoon is over! You should have a good wardrobe by now, so it is time to control your spending. Check how much money you have left after paying for rent, phone bills etc. and aim to save half of it. I can’t give you a number because it depends on how much you earn, but if you start your career with a consultancy or bank, you should at least be able to save $200-$300 per month. If you earn somewhat less, still aim to save $100 per month. If we’re talking first job out of the MBA, just double or triple all numbers mentioned here.

after one year: time to invest! You should now have built up between $2,000 – $4,000 and it will be a good time to start moving from savings to investments. It will be a good learning experience to start investing money in stocks. The aim here is not even to have huge returns, but to build up experience in investing money for when you have more money. I really liked the idea explained in the book Rich Dad, Poor Dad that explains how the problem of not having money to invest is not even the lack of returns, but the lack of investment experience people have over many years. If you start investing in your early twenties, you might have ten years of experience investing money in your early 30’s, this will give you a big advantage in the long run!

If you have been working long hours for two or three years and you have no money in the bank, think about what the whole point was? Hopefully you have picked up useful skills and experience, but when will you monetise them? If you don’t have any money left, could you have picked up the same skills or more simply by starting your own business? Trust me, I know a lot of people who work 60-90 hours per week, think they are rich because they are bankers or consultants and if you dig a little deeper they actually have nothing. They will be penniless as soon as they quit their jobs. That’s not what financial independence is about.

I hope after reading this you will be smarter than I was when I started my first job. I am incredibly grateful to my McKinsey colleagues for exposing my stupidity so publicly early on. Over time, it saved me a lot of money. If you have any experience to share related to handling your income during the first years out of school, please leave a comment below. Thanks!

In almost every article on women in business or other minorities in business, you will have seen disheartening statistics. Only 2.5% of Fortune 500 CEOs are women. Only 9% of billionaires are women. Only 30% of UK business owners are women. Women earn 20% less than men. African Americans make up just under 1% of Fortune 500 CEOs. Asian Americans only make up 6% of board members in the Silicon Valley’s top 25 companies, despite making up a third of all software engineers. It’s all rather depressing, isn’t it?

When I attended the Women in Business Club event at the London Business School last week, one feedback I consistently heard was that the students loved seeing examples of women traders, women bankers and women entrepreneurs. They found it inspiring and motivating. Suddenly, it didn’t matter that only 5% of women are entrepreneurs or traders. What mattered was that there were alumni from their school, with the same degree, just a few years ahead, who had done it, so it must be possible! If you’re a women who wants to be a trader, what would you rather know: only 10% of traders in New York and London are women, or: three women who studied the same degree as you at your business school are now successful traders in London and New York? If you want to set up your own business, would you rather hear that only 30% of entrepreneurs are women, and among those, less than 3% had more than $200k in revenues? Or would you like to hear stories about ten young women who have set up their own businesses successfully and find out how they did it?

The problem with statistics is that they don’t capture what is possible, and instead tell you that whatever you dream of is improbable. People easily forget that just because a low percentage of women have done something, it doesn’t mean they can’t, it doesn’t even mean that it is difficult. A low percentage can conceal a very high number, if you’re talking about a big pool of people. For example, the statistic that only 30% of entrepreneurs in Britain are women sounds very different from the statistic that there are ONE HUNDRED AND FIFTY THOUSAND businesses run by women on this small island in the Atlantic. In the US, we have NINE MILLION women running their own business. The statistic that only 2% of Fortune 500 CEOs are women sounds different from there are 10 Fortune 500 CEOs in the US, and by way, the CEO of Pepsi is a woman, and the CEO Kraft Foods, and the CEO of HP is a woman. Similarly, what’s more inspiring for young ambitious African Americans to hear: less than 1% of Fortune 500 CEOs are African Americans, or the fact that the President of the United States of America is of African American origin? One of the highest profile media stars and most incredible self-made billionaires is an African American woman, Oprah Winfrey.

Once I started looking for role models to profile in this blog, even I was incredulous how many fantastic and inspiring women entrepreneurs, scientists and business women there are. Now that I have open eyes and ears, I see them everywhere. Karen Finerman, who manages her own $400m USD hedge fund. Sheryl Sandberg, one of the top executives at Facebook. Shama Kabani, 25 year old founder of the Marketing ZEN Group, one of the leading social media marketing experts. Sky News reporter Alex Crawford, who was embedded with the Libyan rebels in Tripoli when they ousted Gaddafi, while journalists from all other networks where nowhere to be seen. I don’t even need to introduce CNN’s Christiane Amanpour to you. If you follow TED Talks as avidly as I do, you might have heard of Amy Smith, MIT engineering professor who teaches her students to develop useful appliances made from locally available materials in underdeveloped communities. Or of Nadia Al-Sakkaf, editor of the Yemeni Times who fired half the male staff when she took over the newspaper from her father! I could go on and on. If you want to see hundreds examples more, I encourage you to check women 2.0 which profiles womentech entrepreneurs and TED Talks for amazing women and men of all from all over the world in all fields.

You sometimes hear the complaint that there aren’t enough role models for ambitious young women, but the truth is, once I started looking for them, I found far more than I can even profile here. They are EVERYWHERE! 10 or 20% may not sound like a lot, and it may mean you won’t have an immediate role model in your department or even your company. But it still means there are millions of role models out there, as soon as you open your mind and look in other countries, companies or industries. I am not trying to be unrealistic or deny there are obstacles along the way. But what I do know is if anything is going to change, it will only come because we try to inspire, motivate and educate the next generation, not because we tell them the odds are stacked against them before they even try.

Are you finding it hard to find female role models? If yes, let me know what you dream of and what area you want to find a role model for, and I am sure together we can find her!


Women in Business club launch at the London Business School

Last night I went back on campus for the launch event of the Women in Business Club at the London Business School. It was great to be back and meet all the great women from the MBA class of 2013. I went there along with two other female alumnae to talk about careers in sales and trading, and after us two impressive entrepreneurs from the MBA class of 2011 talked about their newly launched fashion start-up, The Fold London. They design and sell fashionable work clothes for high flying women, I loved it (they also have a facebook page)!

After our presentations, we went over to the dining hall for champagne and canapes, and most imporantly, networking. I met a lot of impressive women who were happy to meet a female trader and see it can be done. They loved hearing success stories from women who have done it, be it making it in investment banking or launching your own business, and their enthusiasm about our stories showed me why there is such a need for this blog. I think I am not the only woman in business who is thrilled by the opportunities out there and impressed by all the great women entrepreneurs and business women out there nowadays.

One highlight was to meet a former McKinsey analyst trying to escape from the consulting world. I definitely recommended her to consider a career change as she seemed to be unhappy with her life at McKinsey for all the reasons that I left. At least for me, there hasn’t been a day that I regretted leaving management consulting. In fact, for much of the first two years after leaving, I thanked God almost every day that I left. I met some other ex-consultants from other firms and it definitely seemed like a lot of them were looking for alternatives.

Another highlight was to meet a Chinese girl who used to be an avid reader of my old MBA blog and she was very surprised and happy to get to talk to me in person finally. It’s amazing how those posts I wrote while I worked at McKinsey and did my MBA at London Business School are still read by hundreds of MBA students around the world 5-6 years on. It definitely shows that it was worth documenting my experiences at the time, although to be honest I enjoyed writing them so I would have done it anyway, even without readers. But if it was helpful for those applying to business school or looking for jobs in consulting or banking, I am very happy to have helped.

I also got to have two glasses of champagne, which is very rare for me these days as I don’t go out much since I had a baby, and was able to catch up with the other bankers who presented on what’s going on inside the banks these days, lots of volatility and uncertainty obviously. I am wishing the MBA class of 2013 lots of success in their summer job search, and hopefully by the time they graduate the worst of the debt crisis is over.

Networking advice from Britain’s six best connected women

The DIRECTOR magazine has just published its list of BRITAIN’S BEST CONNECTED WOMEN, sharing their networking advice. One key theme is that they generally shy away from the term networking and try to focus on establishing real meaningful relationships and providing value without immediately expecting something in return. I have often found that this is the key to true success in networking, rather than the old-fashioned collecting business cards and connecting only with those who can do something for you – I experienced this first hand as a McKinsey analyst at business school, when those aspiring to join McKinsey were suddenly my very best friends, only to ignore me as soon as they got rejected or got the job with McKinsey – that is not smart relationship building for the long term!

If you understand networking as making a true connection, building relationships and creating value for your friends, you may find that you are much better at networking than you thought you were. Here’s a summary of their best networking advice:

  1. “My advice is to talk to people – it is the personal connection that matters. The old-fashioned basis of creating a relationship doesn’t change – once you’ve got that groundswell of following, then you can start to leverage it using technology“.
    Polly Gowers, founder of everyclick.com
  2. “Never abuse your connections or friendships – I don’t ask favours of any of them. It’s about creating a healthy business relationship on merit”.
    Lynne Franks, founder of the SEED network
  3. Don’t be selfish: always try to be prepared to help your network/connections without necessarily expecting anything in return. The greater the contribution you make, the more people will value you and will respond in kind“.
    Bindi Karia, VC/Emerging Business Lead, Microsoft BizSpark
  4. It is not just about the number of people you know or the mountain of business cards you collect, but rather about the depth and authenticity of the relationships you build and sustain, the depth and maturity of the connection you have with one another, and about nurturing and valuing the free flow of ideas“.
    Lucy Marcus, founder of Marcus Venture Consulting
  5. “I’m a firm believer in building long term-relationships, not simply “networking”. I have been helped by some of the most unlikely of connections and we can learn from everyone”.
    Shaa Wasmund, founder of  Smarta.com
  6. “Nothing compares with face to face – so often I have found a real meeting invaluable – but my trusty mobile is constantly at my side. Networking for me is not an add-on – it’s an essential“.
    Carole Stone, chairman of  YouGovStone

Invaluable advice from Sheryl Sandberg, COO of Facebook

If you haven’t yet watched Sheryl Sandberg’s commencement speech at Barnard College, please take the time to do it. There are so many gems in this speech that it is worth listening to it several times. I agree with so many of her comments and share so many experiences that it sounds like she could have written the highflyingladies’ manifesto.

My favourite quotes and takeaways from her speech, if you don’t have time to view the video are:

  • I’m old enough to know that most of our lives are filled with days we will not remember” – very true, and very sad at the same time!
  • The promise of equality is not the same as equality. Men run the world
  • “Women became 50% of college graduatesin 1981 – 30 years ago – but when the decisions that affect the world today are made, women do not have an equal voice at the table”
  • “Studies have shown that success and likeability are positively correlated for men and negatively correlated for women. So as women get more powerful, everyone likes them less”
  • “It may sound counterintuitive but the most important career decision is whether you have a partner and who that partner is” (is your partner going to do his share of work at home?
  • “I can’t wait for the day that work life balance is not something just discussed at women’s conferences
  • At Facebook, they put two quotes on everybody’s wall: “Fortune favors the bold” and “what would you do if you weren’t afraid?”
  • Start out by aiming high”

But please listen to her speech if you can find the time. I am back to school myself tonight for the launch of the Women in Business club at the London Business School. I can’t wait to meet MBA class of 2013 and see what their dreams and aspirations are. I will report back tomorrow.