In the 21st century, women are at par with men. From just being a stay-at-home spouse, women have come a long way, facing the patriarchal society, getting their rights, and then securing the top position of the companies and countries.
Women are great in their work, a lot of times, even better than men. Still, it has been found that women often get lower pay than men. They often spend more and tend to save less. And as a result, many women are not regularly active in financial Planning.
Women must understand that being educated and independent is just going halfway down the road. To cover the other half of the road, women have to be smart about spending their money and make a prudent decision concerning their hard-earned money. Just earning money is not good; you also must spend and save it wisely.
So, let's discuss financial planning for women.
Importance of Financial Goals
Financial Planning is important for everyone. Money matters a lot, and so merely earning a good amount of money will not make you better off, unless you are not able to manage that money well. And for that, you must know investing, saving and spending.
Financial Planning is thus important for the following reasons:
- Financial freedom - By doing proper financial planning, women can divide their earnings into savings and expenses. Financial Planning will give them financial freedom, and they will not have to be dependent on their male counterparts for their financial needs.
- Emergencies and unplanned expenses - Life is full of uncertainties. Emergencies and unplanned incidents can knock on your door anytime. So, it's better to keep a good amount of savings to tackle emergencies and unplanned expenses.
- Pregnancy and motherhood - Pregnancy and motherhood is an important life phase for many women. At that time, healthy financial planning can also help the woman ensure her financial independence, and so would enable her to manage all such things on her own, whenever needed.
- Career Breaks - Maybe at some point in your life, you will think of taking a career break. You might want to change your career or take a break from the professional world. During this time, you will not have a regular income flow, and here, your savings would come in handy.
- Increasing your skills - In your career, there will come a time, where you will desire to learn new skills and upgrade yourself. Additional money in the form of savings can help you back this.
Suggestions for financial Planning
Allocate a budget
Primarily, you can personalize your budget as per your financial needs and goals. You can plan this keeping in mind the period within which you want to carry out your goals. You can start with the following 60:20:20 ratio.
Upon receiving your salary, you can distribute 60 % for your provisional expenses, 20% for investment and savings, and spend 20% for leisure. By distributing the budget as per your needs, you can keep up with your financial goals.
Speed up savings
It is a harsh truth that quite often, women get less remuneration as compared to their male counterparts. This can result in fewer savings for women. To overcome this hurdle, she will need to increase her monthly savings.
For instance, if you're in your 20s, you can save more by saving nearly 20% per month to meet your financial goals at the age of retirement (say 60). If a woman is unable to save on her own, she can increase her PF contribution or can give standing orders for money transfer in investment schemes, so that the money is saved before it is spent.
Save for retirement
From the very day, you start earning, investing, and saving for your retirement. You can do investments and savings in the stock market, provident funds, fixed deposits, debt instruments, etc.
In your 20s, put 75% of your savings in a highly risky investment like equity and 25% in a safe investment like NPS, PPF, and fixed deposits. Gradually, shift to less riskier investments. This way, you can save for retirement, to meet your expenses and have a healthy standard of living.
Life is full of uncertainties, and so, emergencies and unplanned incidents can knock on your doors anytime. It is hence advisable to keep a corpus in a savings account (other than investment) to take care of important expenses for at least five to six months.
In India, people invest to earn money, rather than for protection against an unexpected event. But it is always advisable to buy insurance against unexpected events, especially life insurance and medical insurance.
You know that you don't want to become someone's liability during illness. At the same time, you take life insurance because you want to leave a sufficient amount for your loved ones after you're no more. So, insurance should be an important aspect of your Financial Planning.
Restrict variable expenses
All humans, whether it is men or women, desire to spend money on variable expenses like travel, phone, luxury shopping, night out etc. Now you don't need to put a stop on everything and miss all the fun, but there is a limit for variable expenses which you must maintain in order to be able to fulfill your long-term financial goals.
It is recommended to be more prudent and judicious while spending money.
Use modern technology
With technological advancements, financial handling has also modernized. There are many apps and websites for handling different kinds of investments, savings and your budget. These apps and websites can help you cut down your expenses and suggest the right investment option for you.
So, make the best use of technology to meet your financial goals.
Tax planning is an important aspect of Financial Planning. Every human wants to lower their tax liabilities, and so, there are CAs and financial planners that can help you with your taxes. But it's always better to understand things on your own and plan what's best for you.
You can get tax deductions of up to 1.5 lakhs in Income Tax by investing tax saving schemes. There are many tax saving options like National Pension Scheme, PPF, ELSS and others, through which you can get deductions in your income tax.
If you own a business, you can save the bills of meals, travel bills, etc. and get a reduction in your business tax liability.
Financial Planning is extremely important for every individual, irrespective of whether they are a man or a woman. However, it is a bit more important for women to know their way around money and learn how to save, invest and spend it cautiously. They shouldn't solely depend on suggestions from their friends and family.
Women must take charge of their personal financial wellbeing and excel in money management, just how they're doing in other fields!