Gone are the days where the man was expected to be the breadwinner of the family and the woman was expected to stay at home and look after the household. Today, men and women are economically and socially equal.
But when we talk about the investment or personal finance planning spectrum, most women still rely on their husbands/father to go about their investments or financial plans.
Today, we will change that school of thought. Today, we’re going to talk about 8 simple, yet easy personal finance hacks which every woman should follow!
Financial Planning Guide for Women
The following are few key pointers that everyone can keep in mind in order to better manage your expenses in the year 2019 and beyond.
1.Plan Your Investments
Making investments is important. But you already know that.
Now, what is more important is making planned and regular investments.
Planned and regular investments can create the difference between you fulfilling your goals and you earning returns but not adequate returns that can fulfill your goals.
Planned investments entails estimating what is the objective of the investment, what is the sum of money required for the objective, what is the investment that can be made and what is the time horizon for the investment.
Moreover, it is very critical to choose the correct investment tool.
Today, investing in a Systematic Investment Plan (SIP) is a brilliant option. Not only does it serve the purpose of regular investments, but also inculcates savings.
You can simply opt for a suitable SIP according to your goals. Thereafter, the amount can be automatically deducted from your account at a specified date each month.
This way you can easily plan your expenses from the remaining amount and invest regularly.
Looks like a good New Year Resolution to opt for, right?
2. Set Your Financial Goals (And set them high!)
Identifying and setting of a financial goal goes a long way in accumulating money required for various essential milestones and activities in life.
As in the case of the above-mentioned example, setting financial goals such as children’s education, children’s marriage or a foreign trip with family; brings about a lot of clarity.
In fact, even if you want to let’s say, buy a new bag, you can have a financial goal.
For example, if the bag is 5000, you can strategize to save/invest 5000, in 5 months to reach your goal.
3. Save! Save! And Save a Little More!
Saving is setting aside a sum of money from our income, for future use, mostly for unforeseen contingencies.
Let us recall the time when our mom gave us a piggy bank. Little did we know that in the form of a play exercise, our mother taught us one of the most important financial lessons of our life- the habit of saving.
Not only did she tell us this, but she also led by example. Think of the time when our mother used to have a small money jar or loose notes hidden secretly among the kitchen utensils.
If you do not save already, let 2019 be the year of reckoning.
Let’s resolve to develop the habit of saving regularly. You never know when this could come in handy!
3. Idle Savings Is a Workshop to Financial Disaster
As an extension of the above point, you should also take care to not keep your savings idle. It is extremely important to invest your savings.
You can invest your savings in a myriad of asset classes such as equity, mutual funds, gold, real estate and so on. Today, people are moving on from the traditional methods of investing to more dynamic avenues and you should too!
However, make sure to invest according to your risk appetite and return expectations.
4.Manage Your Debt
In the age of credit cards, many of us end up over-spending.
According to reports, most millennials have at least one form of long-term debt. Some common types of loans could be a home loan, an auto loan, a personal loan or an education loan.
The convenience of easy availability of debt has led to the problem of excessive debt.
Suppose, you come across a beautiful dress at a mall. Upon looking at the price tag of the dress, you see that the dress is expensive and beyond your planned budget for the month.
As you were trying to solve the dilemma of whether to purchase the dress or not, the salesman says that the dress would look very pretty on you.
Countering your natural instincts of not buying the dress, you convince yourself to do so. You say to yourself that you can always use the credit card to indulge in the purchase.
You swipe your credit card and happily purchase the dress.
Whereas, this is exactly what a credit card is meant for; a regular habit of doing so could be harmful.
5.Life Insurance (Be insured, be certain!)
You must have heard the saying, ‘Jaan hai to jahaan hai’.
It simply means nothing is greater than one’s life itself.
A life insurance policy provides a financial safety net for your loved ones, helps in tax saving, provides a sense of financial security and obviously, peace of mind.
Irrespective of your salary or your network, you don’t know what is in store for you tomorrow.
Therefore, life insurance is probably one of the most important investments that each and every individual must necessarily make. For new earners, this should be one of the first investments as well.
Remember, life doesn’t come with a guarantee card and thus as a responsible family person you should make investments by taking into consideration the needs of your family members.
Term insurance is very famous and also recommended. However, there are various types of life insurance plans and one must choose the plan carefully.
Opting for life insurance is as much a responsibility of the female gender as it of the male gender.
As a woman of the 21st century, you must ensure that not only you but each and every member of your family must have a life and health insurance.
6.Tax Savings Is Important
If you are a working woman, this point is extremely important for you.
What if I told you that you could save about ₹50,000 – ₹ 100,000 in taxes, by the way of investments.
It would be amazing, right?
Don’t worry, even if you are not a working woman, this may be extremely useful to manage the taxes of other family members.
In this regard, it is important to understand how we can invest not only to earn returns, but also save taxes at the same time.
Are you surprised? Yes, this is not only possible but absolutely legal as well.
You should know that all individuals and salaried professionals are eligible for a deduction of ₹150,000 from their taxable income under section 80C of the Income Tax Act.
Best Tax Saving Instruments for You
Equity-linked Saving Scheme (ELSS) is a category of mutual fund that intends to encourage long-term investment in the equity asset class.
Investment in ELSS is tax deductible up to ₹150,000. However, this investment tool is unique, in the sense that, it has a lock-in period of 3 years.
This means that any investment made in an ELSS scheme cannot be taken out before a minimum period of 3 years.
PPF stands for Public Provident Fund – a fixed interest scheme in which the Government decides the interest rates. PPF is considered to be one of the safest investment plans in India, as it is backed by the Government.
3.National Pension Scheme
National Pension Scheme, also known as NPS, is a contribution based pension scheme launched by the Government of India.
Simply put, it is a system which encourages continual savings during work years to create a sizeable corpus post-retirement and acts as a saving-investment tool.
Though it provides greater tax incentives amounting to ₹2,00,000, it also comes with a huge lock-in period (also one of the longest). This makes the investment illiquid.
Moreover, the entire amount is not available at retirement. 40% of the NPS corpus (or 80% of the corpus in case of partial withdrawal from NPS) has to necessarily be invested in an annuity.
8.Create an Emergency Fund
As the word itself states, an emergency can occur at any time. It is essential for you to save up a small portion of your income/saving in an emergency fund.
On the other hand, the lack of an emergency fund may cause major stress during an unfortunate event which immediately requires a large amount of money. An emergency fund comes in really handy in such situations.
It is advisable to set aside 3-6 months of the expenses in the bank account towards setting up an emergency fund.
Why Should You Plan Your Financial Future
Financial planning is not just restricted to what your husband decides to do for your family, or for you. And contrary to popular belief, women are amazing when it comes to personal financial planning.
Haven’t you seen your mother planning your household expenses? Meticulous and articulate, her calculative spirit can save you through a famine!
Whether you want to send your child to an Ivy League College, or even buy that designer jewelry you’ve been eyeing, following these 8 simple steps can bring so much closer to your financial goal.
Disclaimer: the views expressed here are of the author and do not reflect those of Groww.