Today women are moving forward in every field and are breaking stereotypes every day. From managing households to businesses, women are changing all traditionally held perceptions. Hence, the subject of financial planning and managing money is equally important for women. This article on financial planning for women and money management tips will help women receive the best financial planning tips and ideas, no matter which stage of life they are in.
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Significance of Financial Planning for Women
Financial planning for women is an essential part of everyday life. Honestly speaking, most women stay clear of all financial planning. However, here are some significant reasons why women should get involved in money management.
Achieving Financial Independence
The most important reason to enter into financial planning is to achieve financial freedom. Financial independence gives you the freedom to live life on your terms. If a woman is financially secure she does not have to depend on others for her livelihood. Therefore, it also increases her self-esteem and self-respect.
Taking Career Breaks
The need/wish to take a career break may arise anytime. However, if she does so, there will be no regular income. Hence, in order not to be dependent on someone she will need to plan for this period. Moreover, a career break may also involve additional expenses like educational expenses for higher education or improvement of skills. She may also want to switch careers and will need the requisite education for it. Hence, to plan for these eventualities, sound financial planning is necessary.
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Preparing for Emergencies
Life is full of emergencies. From health to loss of life to accidents, there is no shortage of negative experiences. Hence, not only women, everyone must have a contingency fund to cope with these unexpected situations. Also you need to save for the rainy day.
Marriage and Parenthood Bills
The two most important turning points in every woman’s life are marriage and motherhood. Women now participate financially in the upbringing of their children in two-income households and are no longer dependent on their parents to pay for their weddings.
Thus, it is obvious why women’s issues and financial planning should no longer be separate topics. In order to better plan their finances, below is a guide of the components that go into financial planning.
Major Components of a Financial Plan
Some of the major components of financial planning for women are:
Setting Financial Goals
Your financial goals will help you decide what you want to do with your money. Financial objectives may be short-, medium-, or long-term. A house purchase, an international trip, etc. are examples of such objectives. The first part of a financial plan is having a target in terms of money.
Choosing Your Baseline
Identifying your current situation is the second step in beginning your financial strategy. Calculating your starting point or net worth will help you achieve this. You can get a sense of where to start by subtracting your assets from your liabilities. Assets include things like bank accounts, stocks, real estate, and jewels. Liabilities include debts from credit cards, loans, mortgages, etc.
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Planning Your Cash Flow
Analyzing your current financial activities is the third element. How do you finance your lifestyle, for instance, and where do you spend your money? Making a budget for yourself is also beneficial. You can expand this figure once you’ve created it. You can determine how much cash flow you’ll need over the next 10 to 15 years by accounting for inflation.
As mentioned earlier, emergencies can strike at any time. Ideally, when you create an emergency fund you must prepare to cover for around 6 months of income-less existence. Try to save this money in liquid instruments so that you do not have trouble accessing it when the need arises.
When it comes to financial planning, women are unaware that they live longer than men. In order to cope with a life without a salary, they will therefore generally need more money. Hence a financial plan must include retirement planning.
With the above components, you can easily set about creating a financial plan. Hence, financial management for women is simplified to a great extent.
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Money Management Tips For Women
It takes time and effort to achieve financial goals, and it is advisable to take the advice of an expert at the planning stage to avoid mistakes. Here are a few financial planning tips for women which are very significant in the current context to achieve financial freedom and live a financially sound life:
Make A Budget From The Beginning
When you’re single, all you think about is spending the money you have. If you start making a budget from the beginning, then you will not have any problem. Prepare a budget from the time of your first job. Divide your expenses into two parts and thus plan for the whole month.
Allocate A Budget
Based on your monthly/annual income, draw up a personalized budget based on your goals and the time frames within which you want to achieve them. A good way to start is by following the 50-30-20 rule. On receiving your salary every month, allocate 50% to sustenance expenses, 30% to savings and investments, and the final 20% to your lifestyle expenses.
Set Financial Goals
It is essential to set goals in advance to achieve anything in life, whether financial, career-related, or family goals. Goals must be high and realistic! Financial goals can be lined up for the short term as well as the long term.
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Keep Track Of Your Expenses
Along with saving or investing, it is also very important that you keep track of your expenses as well. Keeping track of expenses will make it easier for you to gauge your savings, and you will be able to save more quickly.
Save More For A Stable Future
“What we save saves us.” If we cannot save money, we have to limit our expenses. Experts have suggested that we must have enough money saved to cover at least 3-6 months of our expenses. Many of us face problems in saving as we cannot differentiate between needs and wants. Read our article on how to save money for the future.
Avoid Idle Savings
Keeping money in savings accounts in banks gives a meager 2-3% return per annum, whereas fixed and recurring deposits yield around 4-6% return per annum. Those who save money only under these two options miss out on many opportunities for earning good returns in the market.
To avoid idle savings, we can start investing initially with a very small amount as low as Rs. 200 per month. Yes, it’s true, chit funds are such an option where you can start investing with a very small amount. Chit fund is an excellent saving as well as investment alternative. An investment scheme that provides high returns and allows you to withdraw money whenever you need would be considered a good investment. Chit fund is one such scheme that allows you to invest and earn interest on your deposits. It is a unique way to save money because the tenure or maturity period is short and the monthly contribution is small and hence easily affordable.
You earn an average 10%-15% on your investment. No risk whatsoever with a registered online chit fund platform like The Money Club. The Money Club is India’s best AI–driven digital chit fund platform founded by ex IIT, INSEAD and UCLA alums. Through The Money Club mobile app you can join a club with other verified peers and pool up money regularly. The Money Club runs clubs on a daily, 3-days, and weekly basis to help you earn returns in a short time or borrow when you have a need.
Management of debt is another important area of financial planning for women. We should always prioritize our debt repayment. Overspending has become very convenient due to the convenience of credit cards. Many of us tend to overly depend on debt. In addition, there can be car loans, home loans, education loans, etc. We must plan to dispose of such debts as soon as possible. Piling up debt will ultimately lead to higher interest which in turn negatively affects our credit scores. Once the credit score lowers, getting a loan becomes more challenging too. Use debt consolidation if you have fallen into a debt trap.
Put Technology To Use
There is certainly an app for everything these days. There are money saving apps, financial apps, budgeting apps to keep you on track, apps to help you reduce debt, apps to organise all your investments, even applications to invest the extra change from your shopping trips.
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Buy Insurance, Be Secured
Insurance is what protects us against unforeseen circumstances. Whether it is the death of a breadwinner, illness, or loss, insurance will provide us with adequate funds to see through the circumstance. It is essential for all women to buy a health insurance policy that provides essential health benefits and expense coverage in case of medical emergencies. Premiums will be less if you invest early. As age increases, the amount of premium keeps increasing.
Analyze Your Budget At The End Of The Month
If you have made a budget at the beginning of the month, then it is also necessary to analyze it at the end. Set the budget ahead by looking at all these things like how much was spent, extra or anything left. In this way, you will have already prepared an idea for good savings and expenses at the end of the year.