Here is a comprehensive guide on how women can manage their finances effectively in the year 2021. A women’s best protection is a little money of her own. Women in India have been taking huge strides in breaking through the glass ceiling in many industries. It’s a major shift, from managing households to managing businesses. However, the one area that’s still seen as a male domain concerns finances in general and investments, in particular.
Women, on their part, have to juggle between their work and household duties. Even with all the equal partnership, it is still women who are responsible for child-rearing, taking them for classes, ensuring all the meals are prepared on time and to the liking of all the family members, managing house help to ensure the house is cleaned properly and taking care of family’s health and exercise. In all this, women find it easier to hand over one responsibly to their spouse to manage and that is money management.
1. Set Financial Goals and Budget
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. 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.
2. Believe in yourself
As an advisor with over two decades of experience, I can tell you men don’t know better and are as bad or as good as you in managing money. So start by believing that you can do it, as you can do everything else in life. If your money is currently being managed by your spouse or parent, you should have a chat with them about wanting to learn managing finances, for your own good and seek their moral support in the same.
3. Become Part of Family’s Financial Decisions
It is not just important but imperative that women get involved in all financial decisions made in the family. Women shy away from finance because of legacy issues. While they are comfortable meeting household budgets and making the rupee stretch, they are reluctant to engage in investment decisions.
Actively participating in family’s financial decisions, irrespective of your marital status, is a sure shot way to take control of finances. The simple reason being that you learn more and more about the most crucial aspects of personal finance budgeting, goal-setting, investing for them and insuring against casualties, among other things.
While women must take the initiative, the man in the family father, husband, or brother should also make the effort of involving the women. Nearly 42 percent of my clients still do not involve their women in financial decisions, in spite of us encouraging them.
4. Investments before Marriage
Being married is one of the most beautiful phases in our lives. However, matrimony comes with its own set of responsibilities. Thus, unmarried women – preferably in their 20s – must utilize their freedom to experiment or take risks with investments to build wealth. In fact, if you have a mix of short and long-term goals, it will keep you motivated. But there are certain golden rules to follow; never borrow more than necessary, especially, if you are buying assets that have life-long financial implications such as a house. Another key point is about choosing from among the different asset classes; equities have historically proven to be the biggest wealth creators hence, appropriate investments in equity mutual funds through a Systematic Investment Plan (SIP) – where a fixed amount is invested at regular intervals – can help you build a substantial corpus overtime to reach your goals. In addition, for working ladies, investments in Equity Linked Savings Scheme (ELSS) mutual funds can help you save tax u/s 80C of the Income Tax Act.
5. 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.
6. Make some Investments on your own
Knowledge is of no value unless you put it in practice. Start with an SIP in a balanced mutual fund and check out the experience before deciding further investments. Most women find it difficult to do this because of the fear of losing money. Unless you do it yourself, you will never gain the experience. We all make mistakes in other aspects of our life and learn to do better from these mistakes. Hence, you shouldn’t feel bad about making some errors in your financial life.
7. Make Retirement Planning a Priority
It is natural for women to compromise on their needs and goals in order to secure that of their children’s. But, this habit can prove to be costly in the long run, especially during retirement.
Women in doing so jeopardise their financial safety and might make themselves dependent on their children later in life. Children may resent the dependence, which will eventually cause disharmony between the parent and child. More so because women have a longer life expectancy and hence, need a much bigger corpus to survive retirement.
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