Even with women excelling in all fields of life and becoming increasingly independent, their financial planning still takes a backseat and is primarily handled by the men of the family.
We recently did a study on women and their money power, which revealed that overall, 51% of women in the country are either not investing at all or are unaware of their investments.
Yes, the number resounds like an echo. One that we are striving to change in the upcoming years.
Women have differentiated financial needs — differentiated earning potential, career peaks, career breaks, longer life expectancy, and a different approach & mindset toward financial planning.
It is thus imperative for women to take charge of their money through smart planning and investing best suited for their needs. It can seem like an intimidating step to take, to quote Chinese philosopher Lao Tzu, “A journey of a thousand miles begins with a single step.”
Here are some of the key points that women can follow to take charge of their personal finance:
1. Be Aware Of Your Earnings And Expenditure:
The first step in the journey of becoming financially fit and independent is to understand your financial patterns. This means that not only is it essential to be aware of your earnings but also be aware of your significant expenditure.
Use a journal or an online spreadsheet to write it down and understand your financial behaviour. Make sure you jot down all details as they will further help you make decisions accordingly.
2. Have SMART financial goals for your future:
Set financial goals from the very beginning. Without the presence of an end goal in mind, any activity seems pointless. Whatever your necessities and aspirations are, write them down and then work on creating a path to achieve them.
It is very important for these goals to be SMART goals- Specific, Measurable, Achievable, Realistic, and Time-bound.
Keep aside at least 20% of your monthly income to fulfil these goals. Once you have identified the goals with timelines, plan your short-term and long-term investments.
3. Build an Emergency Fund:
An emergency fund can help one stay afloat in a financial crisis such as the current one.This fund should be at least six months of your expenses and be quickly and easily available when required.
The money should be liquid since you’ll need it when an emergency strikes. This fund can be created with a savings account or with liquid and arbitrage funds that target better returns.
4. Prioritize Life and Health Insurance:
Always ensure you and your family are protected with adequate insurance. Uncertainties don’t knock at the door, they are sudden and rather disruptive- emotionally and financially!
Our study stated that 58% of women have no health or life insurance in their name. So, cover yourself and your loved ones with health and life insurance to ensure the financial stability of your family!
5. Plan for your retirement fund:
Retirement at some point is almost inevitable! Your expenses will continue, but income will stop, so you’ll need a good financial cushion to sustain you through your dream retirement!
We found that only 2% of women are investing for their retirement. It is important that you start early, start small and start investing in assets that leverage the power of compounding, like Equity Mutual Funds.
6. Never ignore your taxes:
Plan your taxes at the beginning of the year, so you don’t end up making unfruitful decisions at the last minute.
Apart from this, you can make use of the various tax deductions available and save your taxes. This will aid in better planning for your financial goals.
7. Stay Informed and Updated:
Success can’t be achieved overnight, and the same goes for financial freedom. Staying up to date with the trends and terms can help expand your knowledge and avenues.
Despite resources that equip us women to bridge the gap between women and finance, we observed that 93% of women don’t access any financial investment-related website.
Therefore, constantly upgrading your knowledge will help you feel more confident and adapt to the financial world and where you invest your money.
Take small steps, chart out a financial plan with all your money goals and when you want to achieve them.
Read, learn, and ask other women about their financial planning journeys. Start small but start with a SIP (systematic investment plan)! Remember, financial independence is an essential life skill every woman should be well equipped with in order to be truly independent.
(The writer is the founder of LXME – India’s first financial platform for women)
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)