Indian women have started earning decent money and thus are becoming financially independent. However, financial decisions are still being taken mostly by their fathers or husbands. There are many reasons for the same, including the historical reasons of the Indian society being patriarchal. This needs to change looking at the changing environment around us.
Responsibilities may suddenly feel like a burden. However, financial planning is the only way one can plan for their present as well as future expenses.
1. Set Financial Goals
Setting short-term, mid-term and long-term financial goals is an important step toward becoming financially secure. If you aren’t working toward anything specific, you’re likely to spend more than you should. You’ll then come up short when you need money for unexpected bills, not to mention when you want to retire. You might get stuck in a vicious cycle of credit card debt and feel like you never have enough cash to get properly insured, leaving you more vulnerable than you need to be to handle some of life’s major risks.
2.Build and balance Budget
It’s time to re-think your budgetary allocations. Budgets that are followed in late twenties needs to be altered keeping in mind future expenses such as buying a house or accumulating capital for a business idea that you always wished to start, or marriage. Rethinking spending on the latest gadgets or home decor products is a good idea for now. Instead, channelise spare money to fulfil your financial goals.
Thinking ahead of hard times such as loss of job or immediate medical treatments and creating a contingency fund is one way of ensuring financial stability. You need to keep aside at least six months’ expenses. You need to choose an instrument that would offer a good amount of flexibility. Instruments which allow you to withdraw cash immediately (ATMs) would work well for you. For instance, Cash Management Funds, which allow you to invest and withdraw by just sending an SMS, would work well. The money can be collected at the nearest ATM. This enables you to pull out money at any given point of time. But, if you are not comfortable, at least have six months’ expenses in a savings account should be enough.
How and where you invest would depend on your risk-appetite and time horizon for a goal. If you are averse to market volatility, you can start investing in recurring deposits, public provident fund or increase your voluntary PF contribution (VPF).
But if you can take risks, especially if parents aren’t dependent on your income, you can consider mutual funds. Starters can go for balanced funds (which invest in debt and equity) and large-cap schemes (that invest in large, well-known companies).While investing in equity funds, set aside sums that you would not need for the next three to five years at least. This is to ensure that the amounts stay invested and earn above-average returns.
5.Insure your Risks
After you receive your salary for the first few months, don’t rush to invest massive amounts or spend everything. This will create liquidity problems for you at the end of the month.
Draw a budget of your expenses. Include student loan EMI, if any, rent, household expenditure, amount sent to parents and transportation costs. To the extent possible, keep a check on the number of times you eat out, expensive excursions with colleagues or costly movie tickets during weekends. For the first few months, observe how your monthly expenditure pans out before taking concrete financial decisions.
6.Guarantying or Guaranteeing Debt
There is a lot of responsibility involved in being guarantors hence don’t be a guarantor for anybody except your immediate relation like a spouse. If the borrower is unable to afford the repayments down the track, you will be responsible for paying off the remaining amount of the loan or having to sell the property you used as security to repay the debt. Signing up to be a guarantor may seem like a great idea at the time, but it could cause problems with your relationship with the borrower if you have to end up repaying the loan.
Given the highly-stressed lifestyle of a woman today irrespective of whether she is a home-maker or working a health insurance cover is mandatory. This is more so, with instances of hypertension and heart disease rising even among women. So, take some time out of your daily chores and buy yourself a cover this Women’s Day.
Insurance provides much needed financial security for your dependents, who could be your ageing parents or your children. With time one should increase their insurance cover so as to cover all their dependents. Also buying insurance early in life would be cheaper as compared to buying it later in life. Ideally the insurance cover should be 10 times your annual income. Additionally, women also get insurance at cheaper rates as compared to men because women have higher life expectancy rates. For instance, premium for a 31-year-old male and a 34-year-old female would almost be equal.
8.Teach Financial Values to your Kids
Financial Planning is a concept most of us are not new to this but it’s still essential for us to teach children essential money lessons early in life which will hold them in good stead in the future. A better way to go about it is to introduce young kids to the concept of saving. Show them the wisdom in putting aside a little bit of money every month to save for something they want. When they eventually learn to manage their pocket money, learning to strike that good balance between spending and saving wisely, they would have gained the skills to manage monthly budgets when they grow up.
9.Maintain a Spending-Saving Ratio
One way of ensuring that you have enough savings during lean periods or post retirement, is to ensure that you are regularly saving. If you are a single individual, with no financial obligations towards a family, chances are you will be at times tempted to spend lavishly.
A number of companies automatically deduct income for a provident fund contribution, and even if you are not covered under the scheme through an employer, you can sign up for a Public Provident Fund (PPF) scheme on your own. Major Banks like SBI and ICICI actually allow you the ease of signing up for a PPF scheme online. This long term saving instrument also provides tax relief.
10.Plan for Retirement
As an Indian woman, it is important to be as self-sufficient as possible. This means planning not just for any emergencies or other major expenses but also for your post-retirement life. Keep this long term perspective in mind while handling your savings. Create a financial plan for your entire life-span, starting from what would be an acceptable monthly income for you, post retirement. For instance, if you have a PPF account, try not to encash it when you change jobs, since that can be more convenient. Also, you can make investments in other long term instruments like 10 year bonds to ensure that savings do not dwindle away regularly on maturity. Most importantly be disciplined about maintaining your savings overtime.
11.Pay Off Debt
Pay off debts that drain away your income in the form of monthly EMIs. Paying off such debts would also result in lesser interest being paid and prevent the huge hole in your purse.Pay off debts that drain away your income in the form of monthly EMIs. Paying off such debts would also result in lesser interest being paid and prevent the huge hole in your purse. Throw all of your extra money toward your debt,” they’ll say. “You’ll have to make sacrifices in the meantime, but it will be worth it. Some people can sprint to the debt payoff finish line, but most people benefit from taking a slightly easier route. It’s due every month and you face negative consequences for not paying it on time. And if you want to pay extra toward your debt, it helps to have that money accounted for in your budget.
12.Avail benefit from Government Schemes for Women
You can also plan ahead for your daughter Sukanya Samridhi Yojna was launched specifically for the welfare of the girl child. You can deposit a maximum of Rs 1,50,000 per year while earning a fixed return of 8.60 percent with triple tax exemption benefits under section 80C i.e. there will be no tax on the amount invested, the amount earned as interest, and amount is withdrawn.