Whether you are a working mother, a homemaker, or a single career woman, you need to ensure that you stay on course when it comes to money matters. “The first step in the journey to becoming financially fit and independent is to understand your financial patterns,” says Priti Rathi Gupta, founder of LXME, a financial planning platform for women “This means that it is essential to not only be aware of your earnings but also of your significant expenditures.” She suggests using a journal or an online spreadsheet to note down your financial behaviour.
Kritika Jha, a 25-year-old from Bengaluru, who started working in IT a year ago, uses a mobile app to track her expenses. “When I did not keep track, I used to end up having the bare minimum left at the end of the month, just before the next salary got credited. Once I started keeping track, I realised I was spending unnecessarily on things that I didn’t really need.”
Invest And Grow
Incidentally, Rathi Gupta believes that women are born money managers. “When they are risk-aware, disciplined, and are able to make informed decisions and stay calm under stress, women can easily go from managing home budgets to being smart investors,” she avers. “When women begin to invest and grow their money, they have the potential to bring about societal change, because they begin by investing back into their community and children.”
In India, there are multiple options available to women to invest or create savings depending on their sources of income. “Investment options such as mutual funds or stocks are good for creating a long-term investment corpus,” Rathi Gupta advises. “One can choose from fixed deposits (FD) in banks or more traditional investment avenues such as provident funds.” To generate income in the case of homemakers, the same investment options can be used to earn interest on the principal amount. Homemaker Naina Mutha, 35, from Chandigarh, notes, “While I haven’t worked for a salary, I have ensured that I keep the money in my name in FDs. The interest that I get from them gives me financial independence.”
There are some investments that carry higher risk but have the potential to generate higher inflation-adjusted returns than other asset classes in the long term, while some investments come with low-risk and, therefore, lower returns, according to Rathi Gupta. These are some options she suggests women invest in:
Direct Equity: Over long periods, equity has been able to deliver higher than inflation-adjusted returns compared to all other asset classes, but be aware that it is a volatile asset class, and there is no guarantee of returns. You need to pick the right stock and the timing of your entry and exit is also crucial.
Equity Mutual Funds: Equity mutual fund schemes predominantly invest in equity stocks. An equity fund can be actively or passively managed.
Debt Mutual Funds: Debt mutual fund schemes are suitable for investors who want steady returns. They are less volatile and, hence, considered less risky compared to equity funds. However, these mutual funds are not risk-free.
National Pension System (NPS): The NPS is a long-term, retirement-focused investment product managed by the Pension Fund Regulatory and Development Authority (PFRDA).
Public Provident Fund (PPF): Since PPF has a long tenure of 15 years, the impact of the compounding of tax-free interest is huge, especially in the later years. Further, since the interest earned and the principal invested is backed by a sovereign guarantee, this is a safe investment.
Senior Citizens’ Saving Scheme (SCSS): Probably the first choice of most retirees, it is a must-have in their investment portfolios. As the name suggests, only senior citizens or early retirees can invest in this scheme. SCSS can be availed from a post office or a bank by anyone above 60.
Gold: Many banks sell gold coins these days. An alternative way of owning gold is paper gold. Investment in paper gold is more cost-effective and can be done through gold Exchange-Traded Funds (ETFs).
Real Estate: The house that you live in is for self-consumption and should never be considered as an investment. If you do not intend to live in it, the second property you buy can be your investment.
Bank Fixed Deposits (FDs): A bank fixed deposit is considered a comparatively safer (than equity or mutual funds) choice for investing in India. Under the Deposit Insurance and Credit Guarantee Corporation (DICGC) rules, each depositor in a bank is insured up to a maximum of `5 lakh with effect from February 4, 2020, for both the principal and interest amount.
Ensure Your Own Financial Safety
Savings are important for financial safety. Having an emergency fund also helps during hard times. Rathi Gupta advises that you keep a fund that will meet six months’ expenses. The money should be easily available when required, so it needs to be liquid. “This fund can be created with a savings account or with liquid and arbitrage funds that target better returns,” she suggests.
Insurance is another way to prepare for hardship. It is important to have an insurance policy for life as well as one for health. Research suggests that women tend to live longer than men, but also have more diseases compared to men. The annual Insurance Regulatory and Development Authority of India (IRDAI) research report reveals that only 27 per cent of policies sold by private investors are to women as opposed to 73 per cent to men. Gupta Rathi opines, “Single, married, or retired, there is no good argument as to why a woman should not opt for her own health insurance policy.”
Go with the spirit of the Queen song I Want To Break Free when it comes to your financial freedom and stability. The mantra to follow is to ‘earn, invest, save’.
Starting Out? These Tips Are For You
“Building financial acumen and wealth creation are joyous experiences and, if we break the barriers between finance and women, trailblazing financial feminists will be leading the way in no time,” Rathi Gupta notes. She shares these tips for young women starting their careers:
Be Aware Of Your Earnings And Expenditure: Keep in mind how much money you earn, and what your regular expenses are. The key lies in maintaining a balance between the two.
Set Yourself Achievable Goals: Set your financial goals from the very beginning. Set aside at least 20 per cent of your monthly income to fulfil these goals. Once you have identified the goals with timelines, plan your short-term and long-term investments.
Make Use of Financial Investment Tools: Time-based investment tools such as Systematic Investment Plans (SIPs) and incremental investment through lump sums help in building a healthy portfolio. The strategy is to make, save, and invest as much money as you can. Try to increase the automated savings amount once every few months.
Keep Yourself Knowledgeable And Updated: Freedom of any kind cannot be achieved overnight, and the same goes for financial freedom. Staying up to date with the trends can help expand your knowledge and avenues.
Turn To Professionals When The Need Arises: Reach out to professionals such as registered financial advisors, who can help you decide the best financial tools and investment avenues available in the market to achieve your financial goals. This will help you to be accountable, and learn techniques to better manage your money.
Also Read: How Women Can Get Over The Fear Of Managing Money?