- Date : 08/09/2021
- Read: 4 mins
Even with modest means, homemakers can begin their journey towards wealth creation.
It is important for women across all walks of life to attain financial independence. While working women have a predictable and steady source of income, things may not be the same for homemakers. They may have to squirrel away money left over after household expenses, or perhaps depend on an allowance from their spouse.
Most women are excellent at saving for a rainy day. If you are one of them, that’s indeed commendable. However, you would be doing a disservice to the effort by keeping the money locked up. With inflation and the rising cost of living, you would actually be losing out on the purchasing power of your savings.
The financial planning process
To beat inflation, it is important to leverage different investment tools that can help you generate more returns by compounding your savings into a bigger corpus over time. But before evaluating different investment choices, you will need to put a financial plan in place. Here’s how:
- Determine your saving potential: The first step is to identify how much money you can save consistently. Even though your actual savings may differ one from one month to another, based on past trends you should be able to arrive at a figure.
- Identify your financial goals: The next step is to identify different financial goals, and then quantify and prioritise them. These could range from saving to buy jewellery, go on a vacation, or plan for a stress-free retirement. Having a list of tangible goals will help you chart your course better.
- Decide on investment avenues: Each goal will require a different investment approach and hence the investment tools will have to be selected carefully after accounting for the timelines, expected returns, and risk parameters. Having a specific portfolio for specific goals also ensures that other milestones are not derailed if an issue crops up with one.
- Implement an action plan: Thanks to digitalisation, most contemporary investments are very easy to understand and execute. However, you may need the assistance of an expert (financial advisor, insurance agent, property consultant, or stock broker) to conduct specific transactions or understand investments better.
- Review and re-evaluate your plan: Financial planning is a dynamic process and needs periodical monitoring and re-evaluation. When faced with different challenges – whether driven by personal, social or economic factors – you can quickly make adjustments that can help bring your financial goals in line with the changing situation.
Investments to consider
Now that you have an idea of the financial planning process, let us look at some investment options that you can consider.
- Mutual Fund SIPs: Mutual funds offer a great avenue to build a diversified portfolio with the option to choose from wide range of funds. A Systematic Investment Plan (SIP) allows you to grow wealth via exposure to equity investments that are handled by qualified fund managers. Additionally, the threshold for investments is as low as Rs 500 for most funds, making it a great pocket-friendly option for wealth generation.
- Recurring Deposits: This is a relatively risk-free investment tool that allows you to accumulate funds for a predetermined tenure ranging from 6 months to 10 years. You can select both the tenure and the amount you wish to invest on a monthly basis. The interest rate of recurring deposits is very similar to that offered by fixed deposits. Some banks even allow you to get a loan against your long-term deposit.
- Stocks: Direct investments in equity come with high risks and high rewards. Therefore, you need to carefully analyse the performance of a stock before investing in it. As with mutual funds, you could use a systematic approach to investing in stocks by picking up a few units every month, thereby averaging out your cost of acquisition.
- Exchange Traded Funds: These funds invest in an index or a group of related funds or assets. ETFs provide a great avenue to gain exposure to alternative asset classes like gold and real estate without a high entry barrier. You can accumulate gold in value for future use or receive rental income without having to buy a property.
As a homemaker, don’t worry about starting small. The important thing is to start early and stick with it. As your knowledge and understanding improves, so will your confidence. Take the first step towards a confident and independent you!