Women have different milestones in life. With most women becoming financially independent, it is important that they also take control of their finances. To mark Women’s Day, Mint asked advisers to provide women a guide to manage their finances better.
Director & co-founder, PeakAlpha Investments
Money management is a daunting task for most of us. For women, it often appears to be a mountain too high to climb. I suggest women take hold of their income and divide it into three boxes—freedom, splurge and essential.
Start by putting away money for financial freedom first, which is saving for your retirement goals. You should allocate at least 20% of your disposable income towards this end. Next, set aside money for yourself. At least 10% towards spending on whatever makes you happy. Last is the essentials box, which typically amounts for the bulk of the monthly outflow. If you can create an efficient budget and save on some heads here, you should allocate the surplus towards financial freedom.
Keep the proportion allocated towards these boxes as your income increases. This way, you are contributing increasing amounts towards your future without compromising your current needs. The best thing is that you have a discretionary spending budget, so you can stop feeling guilty about the Jimmy Choo hiding in your closet. Go flaunt it!
CEO & principal adviser, Finzscholarz Wealth Managers
Women face unique financial risks owing to inheritance laws, family responsibilities, career breaks for childbirth or elderly care and living longer than men. Leaving money management to men is not the answer. All these risks can be easily managed if women learn to manage their investments. Here are five steps to get started.
1. The biggest impediment to a woman’s financial emancipation is her own beliefs. Get rid of your biases if you have any and take charge of your money today.
2. Get educated! You need not become an expert in finance for this. All you need is to get enough information and knowledge to understand how the market dynamics work.
3. Understand what you want from money, objectively and emotionally! Learn to differentiate between needs and wants. Take care of current needs and save for future needs and wants. Don’t borrow for anything other than a home unless it is a life and death situation.
4. Invest for your future needs and wants! Decide upon a strategy and invest accordingly. Do not get carried away with market movements and rumours.
5. Find a fiduciary adviser who understands your unique requirements and works along with you.
CEO & founder, Investography
Women need to get involved with investment decisions the way they are involved with spending and saving ones. It is important to have money conversations with your family to ensure common goals, setting lifestyle expectations and ensuring the protection of the family. I believe in the mantra “If you teach a woman, you teach a family.” So, you have this responsibility too. We think we avoid risk by investing in fixed deposits and gold. But there are different risks to these investments, invisible risks, the risk of inflation and we won’t be able to meet our goals. So, buckle up and start learning. Be it the power of compounding or understanding risks that come with equity, we have to ensure that we trade off the right risks. Let’s take decisions that may seem a little unpopular at the moment for long-term gain.
Co-founder, Plan Ahead Wealth Advisors
Women are instinctively nurturers. So, often, they tend to be a bit conservative in money management. This works well for the household budget and for being well-prepared for exigencies. But, when it comes to investing, women need to invest some time to understand various investment products and also take the help of a Sebi-registered investment adviser, if needed.
Women should keep aside a contingency fund equivalent to three to six months of household expenses. Earning women with dependents should buy life insurance to keep the family lifestyle intact in your absence; a term cover is a prudent option. You should ensure adequate health insurance to avoid a health issue affecting your finances.
Understand short-, medium- and long-term needs and then make investments matching these time frames. Define your goals to arrive at an appropriate quantum of corpus needed for these goals.
Ensure that you write a will so that your hard-earned wealth can smoothly be accessed by your children or grandchildren.