Women, you have demonstrated your acumen in every prominent meadow, whether be it science, space, art, entertainment, finance, or any other. Yet, some statistics related to financial arena divulge that more than 40% of women take a back seat and prefer silence when it comes to manage finance for self or for family. Some of the interesting reasons highlighted by you are: “I am not good at numbers”, “I own the billing department and let my husband own the investing department”, etc. Firstly, you need to understand that you have to manage finance at some or the other stage of your life. There are innumerable reasons why you should start understanding more about finance and taking control of your pennies. You are the solid building block of your family. You play multiple vital roles simultaneously; mother, caregiver, working professional, employer, etc. It is imperative that you must take care of yourself as you also might have to take care of others circling you. Life can pour you many uninvited troubles, such as divorce, illness, losing life-partner, losing job, or anything else. You would not like to put yourself in a regret zone thinking “what-if I had more control of my finances”. Rather than living your life in what-ifs, start taking action right now. Another convincing reason for taking charge of your finance is to plan for your advancing years. The modern lifestyle has contributed to increase the life expectancy of women, which is higher than those of their male counterparts. In other words, you might have to spend a significant amount of evenings of your life alone. Consistently growing inflation rate, no source of income, and no pension scheme demand your attention to be discreet for your old age.
So, buckle up yourself, now is the right time to be awake and cognizant for planning and organizing your finance.
Gather data about your status quo
- What is your total income
- What is left after paying your regular expenses and liabilities
Decide your financial goals
List down your short-term goals, i.e. goals that you wish to fulfill within 0-3 years of period.
Plan for short-term goals
- List down what are your short-term goals, i.e. goals that you wish to fulfill within 0-3 years of period.
- For each of that goal, what is the deadline and how much money you would require
- Plan how much you can contribute currently, from your monthly savings, towards that goal
- Setup accounts dedicated to those goals. Figure out the investment options available for short-term goals.
- List down your long-term goals, i.e. goals which need to be fulfilled after 5+ years.
Plan for long-term goals
- List down what are your long-term goals, i.e. goals which need to be fulfilled after 5+ years.
- Figure out the investment options available for long-term goals. Take help of professionals and financial advisors
- Fidelity, America’s one of the largest financial solution company, suggests to save at least 8X your ending annual income for retirement and keep increasing your retirement savings (target for 10 – 15% of your salary)
- How can you save more by cutting back on spending
- Allocate % of your money to your defined goals, e.g. you can create your own graph
- Essential expenses: 50%
- Retirement Savings: 15%
- Short-Term Savings: 5%
- Miscellaneous: 30%
- Plan how to invest your left overs to reduce your debt. Prioritize your debts which should be paid first with your left over money. e.g. firstly pay all your debts which charge high-interests such as credit cards, private student loans. Secondly, put money aside mandatorily for retirement. You can also save for your short-term goals such as short-term educational course, travel trip, etc.
- Plan how to allocate your money strategically among your asset classes
- Allocate your money strategically among different asset classes in order to
- Reduce portfolio risk and volatility
- Align your strategy to you goals, time-horizon, risk-tolerance, and financial situation
- Aim for higher and consistent returns
- Fill the gaps of pitfalls of market timings
- Make sure to check your account periodically and ensure that your portfolio is helping you to near to your goal
Understand the dynamics of investment as per your age
It is emphasized that earlier you start saving, the more you prepare yourself for future. Following are some guideline to decide your investing dynamics depending on your age:
- 20s: This is the age when you are on the rainbow stage of your life. You must be dreaming of your marriage, higher education, new job, etc. You have plenty of reasons to save for your short-term goals. The earlier you start saving and investing, the more you enjoy the compounding of your money. Your young age provides you the privilege to opt for some moderate to high risk investment options. Start devising your investment plan. Look for options such as equities, mutual funds, or any other. Get your medical insurance and set emergency funds aside.
- 30s: By this age, you must have already entered into family life, have finished higher-education, or got a job. Now you are loaded with some added responsibilities for your children and family. So, now, you can think about investing in term-insurance, children’s education plan, real-estate, gold, tax planning and many more.
- 40s: By this age, your focus shifts towards children’s higher education and their marriage. At the same time, you must make you a priority and you’re your retirement planning on top of your list. Increase saving for your retirement. Investment in real-estate properties would be an ideal choice at this age.
- 50s: You are approaching the retirement and hence you are advised to move towards lesser risky zone in investing. If you have invested in equities, then start transferring it to debts.
- 60s: At this age, you should start investing is instruments which are completely risk-free and can also provide some return. There are plenty of investment options for retiree. One of the most suited options at this age could be SCSS (Senior Citizen Savings Scheme).
Some examples of investment options are:
- Low-risk or conservative investment options / Lower returns: Fixed Deposits, Bonds, PPF (Public Provident Fund), NSC (National Savings Certificate), SCSS (Senior Citizen Savings Scheme), SIP (Systematic Investment Plans), Money Market Funds, Banks Fixed Deposits. Some other famous options are Sukanya Samriddhi Yojana dedicated for securing girl child’s future.
- Aggressive investment options / Higher returns: Tax saving mutual funds, Diversified mutual funds, Direct Equity / Stock, Real Estate Investment, Gold / commodity investments, Corporate / Commercial Deposits, ELSS mutual funds (Equity Linked Savings Scheme).
Be prudent and believe in yourself
- Do not be obsessed with high-returns or extremely high risks. Investigate the inherent factors such as terms, locks, and risks.
- Do not try to time to market or avoid the market.
- Do not haste for investing. Do your homework.
- Do not use your emotions in buying or selling. Stay on course during stormy days.
- Do not forget your portfolio after setting up. Keep monitoring and rebalancing.
- Do not delay. The earlier you start saving and investing, the more you enjoy the compounding of your money.
- Do not ignore age-factor. Age is inversely proportional to risk-tolerance. Assess the risk and your current financial situation and then decide whether you ae able to tolerate that amount of risk.
- Do not forget to build the legacy. For any estate planning or wherever possible, set details of your wills, trustees, nominees, and their shares.
Keep investing, keep monitoring, and keep growing. Do it yourself or with help of a pro, just do it.
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