Today, the progress women have shown in various spheres of life has been nothing short of phenomenal. From heading top MNCs globally to representing the country in Olympics, women are leaving no stone unturned to make their mark in the world. However, when it comes to managing finances, women continue to remain largely dependent on their spouse or father. They need to break away from this age-old practice and start taking control of their finances.
Sharing with you some of the decisions that women must take in order to be more financially independent:
Be financially confident
One of the reasons why we continue to be dependent on others for managing finances is because of our unwillingness to familiarize ourselves with financial terms and decision-making process. What we do not realize is, financial independence is not just about saving or earning money, it also empowers us to utilize it wisely.
Start reading about financial planning and then have an open conversation with your parent, partner, or even a financial advisor about how you wish to kick-start your investment and savings journey. I would recommend you to make smaller investment first and gradually increase it once you become more comfortable with managing it on your own. Slowly take charge of your money.
Maintain emergency fund
An emergency fund assists in tackling financial emergencies such as sudden job loss, accident or severe illness, wherein your regular income inflow stops temporarily. You may choose to maintain a separate emergency fund, or consider having one with your spouse. In case of latter, ensure both of you contribute to this fund every month. Ideally, your emergency corpus should be at least 3-6 times your monthly expenses.
You can consider parking your emergency fund in high yielding savings accounts offering interest rates up to 7.25%, since these provide highest form of liquidity along with minimal risk.
Invest instead of merely saving
Understand the difference between saving and investing, and how important the latter is to achieve various financial goals. Instead of merely keeping your hard earned money idle in your bank account, consider investing this in various investment instruments. Avoid restricting your investment to safer investment options and instead, go ahead and explore other investment avenues such as mutual funds.
Prioritize financial goals
Identify and prioritize specific financial goals, in order to make investments according to your investment horizon and risk appetite. Make sure each of your investment has a specific financial goal.
Women are usually inclined towards safer investment options such as Fixed Deposits, PPFs or NSCs etc. On the contrary, I would recommend you to consider investing in equity-linked mutual funds as well. ELSS not only helps save tax, they outscore other investment options when it comes to returns, lock-in period and taxability of gains. Also, consider making separate investment for each goal. Debt fund is good option for short term goals (less than 3yrs). Opt for balanced fund for goals that are 3-5years away and invest in equities only for long-term goals that are at least 5years away.
Save enough for your retirement
Do not deprioritize retirement just because you have a support system as this may prove to be grave financial mistake later on. Start planning for your retirement as soon as you have a steady job as this would give you more time to grow your money through the power of compounding. Remember that delaying retirement investment for later time may cost you more.
Purchase adequate term and health insurance
A vital step towards protecting your family from the uncertainty of future is to purchase adequate term as well health insurance. Term insurance protects your family financially in case of your untimely demise, by providing an assured sum to them, at lower cost. Opt for term insurance amounting to at least 10-15 times your current annual income.
Given the rising cost of healthcare in India, relying on your savings or employer’s health policy would be a big mistake. Hence, it is important for you to have a health insurance policy in place. You can either choose one that is specially designed for women or buy a regular health cover with maternal and child care benefits. Choose for a family floater plan if you have dependent family members.