Be it single women, married or divorced, there are ways to overcome hurdles and become financially independent. Some of the challenges may be it in dealing with the struggle of saving and investing, tackling financial illiteracy, balancing the needs and wants of parents and children, or overcoming resistance in marriage. Hope you will find a way to make your financial dreams come true this Women’s Day.
Strategies to Raise Savings
An important factor in how much a woman saves depends on how she invests.
1. Speed up Saving
Since the woman will end up saving less due to the gender pay gap and fewer years she puts in at work, one way of overcoming this hurdle is by increasing her monthly savings. So if a 25-year-old woman is building a corpus for retirement at 60, she will have to save nearly 17% of her income compared with 10% that men would have to in order to build the same corpus. If she finds it hard to do so, she can automate her investments or increase her EPF and VPF contribution with her employer, so that the money is saved before she can spend it.
2. Optimize Investments
Though there is no difference in the way a woman or man invests, the best way to make up for lost time and money is to invest smarter. For all the long-term goals, be it retirement or her children’s education and wedding, which are more than 12-13 years away, she should harness the growth of equity, which gives one of the highest returns in all asset classes. A small portion, however, needs to be kept in debt for safety. She should also factor in the eroding effect of inflation and taxation while making calculations as these eat into the corpus.
3. Protect Investments
To ensure that her life and investments are free of risk, it is crucial to keep an emergency corpus and purchase the right insurance. If she is single, she should stock up at least eight months of household expenses as contingency. To protect her children, buying term life insurance, which is 7-10 times her annual income, is important. To avoid medical costs eating into her retirement corpus, she should also buy health insurance for herself and her children.
4. Work Longer
Another way to enhance earning power and compensating for lost money is that the woman skill herself in a way that she continues to work even after retirement.
5. Negotiate Better
There is nothing wrong in asking for rewards and equal pay if your performance is at par with your male co-workers. So women need to be vocal and confident if they want to close the pay gap.
If own residential accommodation is felt required in the place of work, better plan acquiring own house/flat for stay of value within the possible means plus housing loans. As money value depreciates over years by the inflation, paying future money for acquiring present non depreciating assets is advisable. Going by past value strength, investing in pure gold (but preferably not jewellery gold) also is a good investment. Guarding against inflation on savings also should receive attention .
Secure yourself first
1. Save for Retirement
From the day you start earning, invest for your retirement by putting your money in a mix of equity funds and debt instruments. If you are in your 30s, put at least 70% of your savings in equity and 30% in debt. The former can be in the form of equity funds and the latter can comprise EPF, VPF, PPF and NPS. Remember that kids can take loans and parents will have assets that can be monetised, but you will have no source of funding your retirement.
2. Emergency Corpus
With dependants, you cannot afford to run into a financial crisis, say, job loss or medical problem. So even before you start investing, build a contingency corpus equal to 4-6 months of household expenses.
3. Buy Insurance
Another tool to secure your family is to buy term life insurance that is 7-10 times your annual income, keeping in mind the number of dependants and loans. For health, pick a Rs 5-10 lakh family floater plan for your spouse and kids, but buy a separate plan for your parents. Also, take a Rs 25-30 lakh critical illness plan for yourself and your spouse.