Women should take charge of financial planning

Women should take charge of financial planning

Women have come a long way; from being just home makers, they now successfully head countries and corporates. Today’s women can handle home and office with equal ease. However, when it comes to financial planning, they still rely on their father or brother (if single) or their husbands (if married). While reliance is ok, they should be pragmatic and independently plan for eventualities as well.

Chart 1 - The need for financial planning for women 

As evident in Chart 1, just like male counterparts, a well thought-out financial plan is important for women (both working as well as non-working) also. Some of the important actions that women should undertake to build a secure future are: 

Goal-based financial planning, estimate costs and investment horizon: 
An investment journey begins with goal identification. Some of the prominent goals are higher education, retirement planning, child birth and child care or taking care of the old parents or in laws. These goals may vary across different stages of life. In addition, every woman should build emergency funds which could help in difficult times such as death of the spouse, divorce, etc. After the listing of goals, they should estimate the cost involved, i.e. what amount is required to attain the goal and the time horizon for each goal. It is important to factor in high inflation while calculating the cost of goals. 

Have a modern approach for investing: 
Fixed deposits or postal savings are traditional favourites among Indians since they guarantee the principal and returns. However, such avenues may not beat inflation. One needs to adopt diversification – investing across asset classes such as equity, debt and gold. Allocation to these asset classes is based on several factors such as risk appetite; for instance, young women have the risk-bearing capacity and should park money in equities, but older ladies should go for more debt. Women can explore investment in mutual funds which, in turn, will offer them exposure to various asset classes (Table 1). Systematic investment plans (SIP) can also help in building a corpus for one’s goals through fixed investment every month. Further, rather than investing in jewellery or physical gold, paper gold via gold ETFs (exchange traded funds) or gold funds is a better option. Tax planning can be done via equity linked saving schemes or ELSS - a diversified equity mutual fund which invests majority of its corpus in equities subject to a lock-in period of three years. First-time investors can also explore investment in Rajiv Gandhi Equity Savings Scheme or RGESS.

Table 1: Investment options offered by mutual funds 

Besides mutual funds, the financial plan needs to make a provision for contingent goals and provide adequate cash flow to manage contingencies. Adequate insurance also needs to be built in.

Track and realign your investments on a regular basis: 
The behaviour of the financial markets is dynamic and, hence, it is necessary to make adjustments in asset classes to reap the maximum benefits. The portfolio should be regularly monitored which will help in redeeming/removing the underperformers and include products which have the potential to generate superior returns.

Summing up:
A woman leaves no stone unturned when it comes to taking care of the family and kids. If she can put similar efforts in the financial planning process, she can build a bright future for herself and her family. Women can become wealth creators if they invest early and regularly. For the technically challenged, there are professional financial planners.

 Happy Investing