Irony abounds in an Indian society where the women of the house always hold the keys to the family’s safety locker but are rarely involved in the family’s financial planning and investment decision making. Cut to 2018 and the situation might have changed for the better but there is a long way to go before one can say that Indian women are truly independent in their financial planning. According to a study by a large fund house, only 23% of working Indian women take their own financial decisions.
Financial planning isn’t rocket science or anything out of the grasp of ordinary understanding, and this five-point financial planning guideline is just about what every woman needs to get going with their financial management.
1. Invest towards your financial goals
With traveling and indulging in life experiences becoming commonplace, it is important that every woman should start investing in order to achieve her individual financial goals. Whether you wish to purchase a new car for yourself or you want to take a break each year and explore a new country, it’s going to cost you money and you need to have investments in place to take care of these financial goals. Begin investing keeping your long-term goals in mind and choose investment options that have pay-outs aligned with your goals. Look at options like mutual funds, SIPs, and liquid funds that help you maximize the returns on your investment while providing flexible pay-outs when you need your funds.
2. Have an emergency fund
Irrespective of your age or how much you earn; an emergency fund is something you should always have. As a general rule of thumb, set aside at least two months’ worth of your salary towards your emergency fund and aim to use this only when there is an emergency or you’re taking a break between jobs. A recurring deposit is a great idea to set off with your emergency fund and it also gets you into the habit of regularly saving money.
3. Get insurance
From a woman’s perspective both life insurance and health insurance are highly important. Not only is life insurance a great way to ensure the well-being of your family in the event something happens to you, options like ULIPs also let you invest some amount of your insurance premiums into the market for greater returns.
Health insurance on the other hand is a much-needed investment for women, considering the rising number of female health issues in recent times.
4. Plan for retirement
Retirement planning is the biggest financial irony for women. With an average life expectancy greater than men by at least 3-4 years, higher medical costs, and median salaries around 20% lesser than men, only 18% women plan financially for retirement.
Start investing in pension plans towards your mid-late twenties and keep a healthy balance of investment driven pension plans that have greater returns. Remain invested for at least 25 years so that you have a substantial corpus towards your retirement.
5. Credit management
According to surveys conducted by multiple credit bureaus, women have always been better at credit & debt management than men have, but they do have a wage disadvantage as well. In an economy that is leaning towards credit, it is important to give credit management some serious thought. Stay away from the lure of reward points and don’t opt in for more credit cards than you need. Keep a check on timely payments and restrict your credit utilization to less than 40% of your overall credit limit. Plus, it pays to regularly check your credit scores to assess where you are faltering and what you can build on for a good credit score that helps you get credit when you really need it
