When it comes to money, women really have come a long way. But on average, women’s financial experiences are still different from men’s. Change won’t happen overnight, but in the meantime women can still support and learn from each other
1. Educate Yourself
Before diving into strategies to build a solid financial foundation, carve out some time to learn about money management and investing. According to a 2018 survey, women, on average, are less comfortable making retirement investment decisions, and they exhibit lower levels of financial literacy compared to men. Just 32% of women with a bachelor’s degree are comfortable managing their own investments.
If you’re among those who don’t, you can begin to overcome some of your discomfort by educating yourself. Read books and articles, and contact your financial institution or local nonprofits to ask about free educational resources that may be available to you. You may also want to search on social media for relevant groups to join or people to follow to up your knowledge about personal finance.
If you get overwhelmed or confused while studying, you may want to ask a professional for help. It could be the difference between improving your financial health and continuing to struggle with building an emergency fund, managing your debts, saving for retirement, or reaching goals you have.
2. Prepare a monthly Budget
Every good financial plan starts with a budget. Work backwards and calculate how much you need for bills, groceries, school fees, rent, and other expenses. Add a small miscellaneous amount to this. Create a monthly expense sheet and set it in stone. Allocate the rest of your money for an emergency fund, travel fund, savings, etc. depending on your needs.
Plan your expenses for a given period and monitor if you have spent more than you originally planned. At the end of the month, make the necessary adjustments to optimize it; daily follow-up can help you save up to 15%.
3. Manage your own Money
It may seem slightly tedious, but learn to manage your own money. It may seem natural to pass on money decisions to one’s father or brother or husband, especially in Indian society. Do not do this. There are resources online where you can learn the basics of money management. Do not give up power to anyone else. You can definitely consult family members, but make your own decisions and maintain a separate bank account.
4. Set Financial Goals
When you set goals for every area of your finances, you give yourself concrete targets to work toward. This exercise also provides you with a starting point, and you can flesh out the necessary steps to make your goals a reality. When setting financial goals, think about what excites you, and then set realistic targets that will motivate you to keep going if the road gets a bit rocky.
It’s essential to have both short-term and long-term goals. Short-term goals are objectives you can achieve within one year and that give you those small wins that propel you to move forward, like a new piece of furniture or a weekend getaway. Long-term goals, like saving for retirement or building your child’s college fund, require more effort, and could take several years to achieve. Be mindful that goals sometimes change over time. So, be sure to revisit your list of goals at least once per quarter and make adjustments based on where you are in your life with your finances.
5. Build an Emergency Fund
Now that you have a financial plan, it’s a good idea to build an emergency fund to cover any unexpected expenses. Experts often recommend having at least 3 months’ of living costs tucked away in a saving accounts. If you don’t have anything saved, now could be a great time to start. If you can’t afford to save large lump sums, that’s fine. Putting small amounts every month could help you build a decent pot of cash. And if you think you may forget and miss a payment, just automate the process by setting up a standing order or Direct Debit. This will help you build your emergency fund without you realising it.
6. Make a plan to repay Debt
This is crucial if you want to be debt-free. Whether it is a home loan, car loan, or business loan, figure out how you can repay it at the earliest. You can set aside an amount every month in addition to the EMIs you pay. For example, if your house EMI is Rs 50,000, try to put aside another Rs 10,000 a month. In a year you would have saved Rs 1, 20,000, plus some interest if you invested the same. You can use this amount to prepay the house loan, shaving almost three months off your repayment plan.
7. Consider Investing your Money
Saving money is a sensible thing to do, but it may not always be the most suitable option when it comes to building wealth over the long-term as the value of your savings could be affected by inflation. We talk about inflation when the cost of goods and services rise over time. Things get more expensive and if your income doesn’t grow as fast as inflation, you’ll be losing some purchasing power.
8. Savings for Family Vs Needs
Always keep emergency funds so that you do not need to dig into long term investments for emergencies as the opportunity cost for early term withdrawal is very high. Saving is something which is a value to be inculcated in all youngsters even before they start earning as this is what teaches them the concept of ‘Value of money’, so that the millennials also start thinking about saving.
9. Make a Retirement Plan
Invest in a plan that will take care of all your needs. Do not rely on anyone – no, not even your children. It’s great if they help, but build a safety net if they don’t. Do not give away your home or precious belongings to your kids just yet; you can always leave it to them in your will. Invest in a monthly income plan and build a corpus for your retirement phase. This will ensure you have an income every month, say 40 years from now, and will be financially independent.