Our last article, “Determining Financial Goals for Women and Steps to Planning Their Finances” covered the 3 important goals that every woman should focus on and the vital steps to plan their finances. Today we touch on why it is important for women go about planning their investment and insurance needs.
 

• Women are stepping out of the stereotypical roles that traditional society had yoked them with. In the corporate world, women still earn less than men; not because they are less competent, but because a patriarchal system runs it. For women, this automatically transpires into less money in the bank and in government or company sponsored retirement funds.
• Women live longer than men. Living longer means that women need to save more for a longer retirement and consider the impact of long-term health care costs.
• Women are expected to take a break from their careers to start a family, care for the young and the elderly. This can translate to lower total career earnings and decreased contributions to retirement plans.
• Women are prone to health related conditions than men. Diseases like Ovarian Cancer, Breast Cancer, Uterine Cancer, Ectopic Pregnancy and Endometriosis etc. are health related issues faced by women. With rising health care costs, it would be wise to purchase a health insurance cover at an early stage in life.

Now that we have looked at the reasons, let’s see how we can go about planning.

For starters, invest at least 20% to 30% of your income every month. This would be a good starting point to achieve your financial goals.

A prudent practice to live within your means and become a wise investor is to trim your expenses, based on the amount you are left with after investing a portion of your income towards investments. Avoid getting into debt wherever possible and stay out of credit card debt always!

Follow the guru-mantra:

“Don’t save what is left after spending, but spend what is left after savings”—Warren Buffett

Income – Investments = Expenses

The amount so saved can be invested based on the following matrix for your long term financial goals (7 to 8 years horizon)

 

Asset Allocation Strategy (in percentage terms)
Risk Profile	Aggressive			Moderate			Conservative
Age	Equity	Debt	Gold	Equity	Debt	Gold	Equity	Debt	Gold
20 to 30	75	15	10	65	25	10	40	55	5
31 to 40	75	15	10	60	30	10	40	55	5
41 to 50	60	35	5	50	45	5	35	60	5
51 to 60	40	55	5	30	65	5	25	70	5
"Note: The above table is for illustration purpose only (Source: PersonalFN Research)"

 

This is a simple matrix for you to optimize your returns and acts as a good yardstick to evaluate your current portfolio.

If your investments are more inclined towards debt or you haven’t considered gold as part of your portfolio, it’s time to call your financial planner to check if your current asset allocation strategy is in sync with your financial goals.

As you pay attention to your investment needs, make sure you don’t ignore your insurance needs either. Using the Human Life Value (HLV) Calculator, you will be able to calculate the amount of life insurance you need based on your requirements. Term insurance policies offered by HDFC Life (Click 2 Protect) or ICICI Prudential Life Insurance (iProtect Smart Term Plan) are some of the good options under the term insurance domain.

Similarly, opt for a mediclaim policy now, if you haven’t got one already. Apart from a Family Floater policy, consider purchasing maternity health insurance coverage offered by Bajaj Allianz, Religare Health Insurance, and Star Health Insurance, etc.

Always bear in mind to keep your investment and insurance needs separate. Insurance is a tool to cover life’s uncertainties. Most people fall for the sweet talk of a Relationship Manager trying to sell a traditional insurance policy. A traditional insurance policy offers low returns vis-à-vis other investment products and poor insurance coverage vis-à-vis term insurance policies too. Stay away from them.

Dear reader, we hope this article provides the impetus and way for you to take charge of your finances—investments and insurance. Share your views, experience related to financial planning here with us. We will be happy to read, and guide you. Here’s to your financial freedom!

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