Prudent financial plan can help continue investments even if there is some break in income generation.
Financial planning, in simple parlance, is the process of achieving your goals by effectively managing your finances. It involves defining financial goals; evaluating current financial position; calculating money required to meet these goals; assessing risk profile; and finally, investing in various instruments which can help you meet your goals.
Though the number of women employed in full-time jobs have risen exponentially over the past few years, most continue depending on their fathers/ husbands to plan their finances.
Need for good financial planning
Jay Patil, who worked as a senior manager in an IT company, died of a heart attack at the young age of 41. He was survived by his wife Pooja and their two kids, aged 11 and 9. Pooja, although a full-time employee in the same industry, took little interest in financial planning as she thought finances were not her cup of tea. Not only did she not know if Jay had more than one bank account, but she also wasn’t aware if he had named her as a nominee of the bank account, property, locker and whether he’d taken cover for home loan. To make matters worse, Pooja had let Jay make all her financial decisions as she believed he was better at it than her. Losing a loved one is one of the toughest phases of life one can go through, but the situation worsens if financial stress is added to it.
Control your finances
Define your goals and classify it based on tenure. Every individual’s financial goals fall under either of these categories: need and desire. Need-based goals are buying a first house; medical and term insurance for life protection; child/children’s education, etc. Desire-based investments are buying the latest expensive gadgets and car; an annual international vacation; a second house for investment, etc.
After categorising your goals, you should classify them further based on tenure: short-, medium- and long-term goals. This will further help prioritise your goals and the investments associated with it.
Discuss your goals with your partner
Discussing goals with your spouse can help you both to jointly work towards the common goals. An example for this could be having a retirement corpus. If both of you start allocating funds towards your collective retirement fund, it will avoid duplication of investment for the same goal and both partners will be aware of each other’s investments, thereby avoiding the precarious situation that Pooja faced.
A working, single woman, too, should prepare a contingent and retirement fund, and protect herself by taking life insurance cover to protect her family in adverse situations.
Look beyond gold and FDs
A plethora of options are available in the Indian market and it is time you started exploring investment options beyond fixed deposits (FDs) and gold, such as Public Provident Fund (PPF); National Pension Scheme (NPS); mutual funds; gold ETFs instead of physical gold; stock market; corporate fixed deposits; non-convertible debentures (NCDs); unit-linked insurance policy; and bonds to name a few.
How planning can help
As the number of working women has risen significantly in India, so has their disposable income. Financial planning, if started at an early stage of your career, can help you achieve your long-term goals.
Additionally, it is known that average life expectancy of women is 70 years, three years more than that of men (67 years), as per World Bank’s data in 2015. If one takes into consideration the age gap between most married Indian couples and no unnatural cause of death, it’s clear that a lady might have to manage 6-8 years on her own, post the death of her husband.
Women also inherit properties, cash and gold from their ancestral family, and the lack of financial planning can lead to a large corpus being splurged on indulgences than on the important, need-based goals.
Unfortunate as it may be, divorce rate has been increasing in India. Financial planning will come handy to cover monthly expenses, children’s education, and the burden of managing finance-related decisions all by yourself.
Furthermore, women also take career breaks for raising children and taking care of the family, which may impact the discipline of SIP investing and compounding gains. A prudent financial plan can help continue investments even if there is some break in income generation.
Hence, it is recommended that you take out a significant amount of time from your busy schedule to make a comprehensive financial plan. After all, it is your money. Its only logical that you put it to use yourself. Happy investing!
