Effective Money Management Habits for Women
Happyness Factory is a Goal Based Planning platform. We aim to spread financial literacy and help people make sound financial decisions.
01 Mar, 2018
We live in an era where gender parity is a reality. Yet, there is a need for disparity in the way
women approach financial planning. Why this distinction, you ask? Well, as much as equality is appreciated, women do lead different lives than that of men. The circumstances they experience vary from that of men. Thus, situations like gaps in income due to marriage or maternity leave and the higher life expectancy of women must be accounted for when planning finances.
Another important thing to remember is, it doesn’t matter whether you’re single or married with children; financial planning is a good habit for all to practice. Women generally fail to look at their own finances as being separate entities from that of their families. Hence, the onus of financial planning falls on the male members of the family. A by-product of this behaviour pattern is a negligible understanding of financial products by women. This can have detrimental effects and thus, women should take an active role in planning their finances.
Even within a woman’s lifespan, financial planning must change due to different requirements and needs experienced at different periods of time. Hence, it is imperative that each stage be evaluated individually.
Most of us believe that financial planning is simply about monitoring the cashflow. But there’s so much more to it. A good starting point would be ascertaining what financial goals you wish to pursue; both, short and long term, because it gives a clarity to the process of planning. Make an effort to get acquainted with financial processes and products to make the most of your investments.
Understand that it’s never to early to begin. Every rupee adds up to a substantial corpus over a period of time. Thinking that you might not have enough to invest and will do so later is a foolhardy approach to planning your finances.
Set up a contingency fund, wherein you save 3-6 months of expenses, to deal with unexpected circumstances. Even if you have no dependents, this is good practice to observe.
When planning to start a family
For those who are married and looking to start a family, a different approach needs to be adopted while charting out a financial plan.
Starting your own family involves not just contributing to the household expenses, but also contributing to future goals like a child's upbringing and future. If we assume that a woman has worked for five years prior to her marriage, there ideally should be some amount of savings. Investing those in Debt and Equity Mutual Funds is a good idea, because the compounding effect will result in a larger corpus than the one she started with.
Investing towards a child’s education is a goal of utmost importance for most parents. As such, buying term insurance is a good way to begin saving towards this goal. This especially favors single mothers, since in the event of their untimely demise, their child’s education and future remains secure. Additionally, these days, there is a constant need for liquid cash to deal with the monetary demands that come with a school or college education. To cope with this need, rather than choosing a branded insurance company, a better idea would be to invest in high-quality diversified equity mutual funds, that also provide liquidity.
Saving for retirement is a major concern for most people, regardless of their marital status. But, understanding that the earlier you start, the more corpus you will have at your disposal in the future is a good first step.
Most of us are unaware of how to best plan for our future. In such an event, consulting a financial advisor is your best bet. A good financial planner will not only help you invest in the funds that suit your needs, they will also monitor your portfolio, suggesting switches as and when necessary. Moreover, they will also keep a lookout on factors such as inflation, which have the capacity to make drastic changes to your estimated corpus.
In today’s world, financial planning has become a necessity. Take a long-term approach to managing your finances and most importantly, understand that it’s never too late to begin investing towards your goals.
To know more about what to avoid during the process of financial planning, read ’10 Common Mistakes Women Make About Money’.