Dear Women, it is Time to Ensure Your Financial Freedom

Mar 08, 2021

Women are the embodiment of a nurturer, caregiver, mother, sister, wife, and doting daughter. Over the years, slowly and steadily through education, women have become capable enough to earn her livelihood and lead an independent life.

Women today are stepping out of the stereotypical roles with many of them making a living and shouldering family responsibilities as much as men. Today, women are making their mark in every field - sports, law, medicine, business, politics, and so on.

But has this independence transitioned into financial freedom?

Well, apparently there is a lot to be achieved in this area...

Recently I came across a social experiment conducted by one of the leading Fintech companies in India involving a group of men and women of different ages. The participants were asked a bunch of questions; if the answer is 'Yes' they take a step forward and if the answer is 'No' they take a step back. Initially, the questions were general in nature -- 'Did you learn to ride a bicycle as a kid?', 'Do you play any sports?', 'Can you make tea or breakfast?' and so on, generating mixed responses from the participants.

Slowly, the questions started to be centred around managing finance...

Do you make household bill payment yourself?

Have you ever purchased an insurance policy unassisted?

Do you know the difference between mutual fund and SIP?

Do you know the breakup of your salary?

Do you know the details of the financial documents that you sign?

Do you manage your own finances and earnings unassisted?

Do you make investments for family members or spouse?

Do you file Income Tax Returns on your own?

Shockingly as these questions unfolded the divide between men and women when it comes to managing finances became evidently clear.

There is still a sizeable populace of women in India, who are deprived of a role in the financial planning of the household even in the 21st century. The momentous decisions are taken by men in the household such as the father, husband, and brother.

You must know that financial independence is not just about earning, or what and how much you own. It is also about actively and constructively participating in making wise money-related decisions at the household level in the interest of the family's financial future.

Usually, financial independence is considered as financial freedom. But the two cannot always be equalized. Financial independence gives you the liberty on things you need today, whereas, financial freedom is more futuristic.

To attain financial freedom, you need to embrace financial planning keeping in mind your current expenses and the contingent ones, because life is known to throw curveballs at us. You certainly do not want to be caught on the back foot if for any reason the task of managing finances suddenly falls on your shoulders. Therefore, it is high time that women ensure their financial freedom

[Read: Important Lessons the Year 2020 Has Taught Us]

Image source: Image by drobotdean - www.freepik.com
 

As far as one can see women are known to be better money managers than men. Here is what sets them apart:

  • - Setting aside a certain sum from household income for saving

  • - Being able to manage monthly household expenses even with a limited budget

  • - Disciplined approach when accumulating funds for future goals/contingencies

  • - Not taking unnecessary risk

  • - Making purchases during sale season to ensure savings

These are exactly the kind of qualities needed to ensure the financial freedom of yourself and your family. You would be happy to know that a growing number of fund managers are making their mark in the mutual fund industry. Evidently, there is no reason that should hold you back from taking charge of your financial freedom.

So, here's a five-step approach to get you started on your journey to financial freedom:

  1. Define the financial goals - The goals set need to be S.M.A.R.T (Specific, Measurable, Adjustable, Realistic and Time-bound). Plus, they need to classified as short-term, medium-term, and long-term. Without this exercise, it would like sailing without a mariner's compass; without a sense of direction, and the envisioned goals may just remain dreams.

  2. Determine the amount needed to invest regularly to accomplish the envisioned financial goals - Remember, the old adage: Rome was not built in a day. Likewise, depending on the corpus required to achieve the envisioned goal, calculate the regular investment needed to achieve the envisioned goal by taking inflation into account is necessary (as it erodes the purchasing power of money). Investing in an ad hoc manner, or copying what friends, colleagues, and next-door does with his/her investment, will not help.

  3. Invest prudently in productive avenues - While there are a variety of investments avenues available, mutual funds are a potent avenue for wealth creation if the category, sub-category of a mutual fund, and the scheme is wisely selected as per individual risk profile, investment objectives, the financial goal being addressed and the time to achieve the goal.

    Systematic Investment Plan (SIP) is a worthwhile mode of investing regularly, in a disciplined and systematic manner to achieve many of the life goals. It enables rupee-cost average and helps compound hard-earned money, potentially proving to be a rewarding experience. When you invest remember to diversify investments across various asset classes, categories, sub-categories, and investment style.

  4. Don't ignore insurance - Insurance is integral to financial planning. The objective of insurance is indemnifying risk to life and health. Hence, holding an optimal insurance cover, both for life and health insurance needs is essential. A sub-optimal insurance cover could endanger the financial wellbeing of dependents.

  5. Review the financial plan - To remain on course, it is important to review the financial plan at least annually. This will enable incorporating any economic or personal changes in the financial plan to achieve the envisioned financial goals as intended.

In course of the above exercise, also make it a point to maintain an emergency fund; as Martin Luther said, "Nothing in the world causes so much misery as uncertainty." Life at times throws unpleasant surprises at us. So, around 6 to 12 months of regular monthly unavoidable expenses, including EMIs, should be maintained as an emergency fund (also known as contingency fund) in a savings account and/or a pure liquid fund.

A lot of times, the lack of awareness about personal finance creates financial insecurity. The financial pinch is felt when women find themselves stranded if they are divorced or widowed, or are cheated out of their rightful legacies, or/and are rabidly mis-sold financial instruments.

But conquer that negative feeling by learning more, knowing more. Do not get swayed by emotions. Pay heed to golden words of Benjamin Franklin: "An investment in knowledge pays the best interest." Doing this will elevate self-morale and confidence.

In case of help needed, do not hesitate to seek professional guidance from a competent financial advisor, who can guide in an independent, ethical and unbiased manner.

And last but not the least, to all the mothers out there -- be a role model to children. When children see that their mothers are financially independent, they will also understand the value of money and be inspired to be self-sufficient in life when they grow up. Moreover, pass on the right value systems, education, to children; as they will potentially help the world to be a better place.

Embark your journey towards financial freedom and wellbeing today!

Wishing all the ladies out there a Very Happy Women's Day! And cheers to your financial wellbeing!

Editor's Note: We, at PersonalFN, encourage you to enhance your financial knowledge and become a 'Financial Guardian', who understands the financial planning elements to guide your family through and become more disciplined with your finances so you can have a better financial future.

PersonalFN's "Certified Family Guardian" e-course is a special initiative that can help you with all the relevant tools and learning modules needed to get better at money management and achieve your financial goals.

Enrol for "Certified Family Guardian" course today!

Warm Regards,
Divya Grover
Research Analyst

 

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