- Date : 24/04/2023
- Read: 4 mins
The article provides tips for Indian women to achieve financial independence, citing the LXME’s Women and Money Power Report 2022, highlighting low investment rates among women.
Women have an innate sense of handling financial matters. They oversee the household expenses and manage to save, even on a shoestring budget. However, when it comes to managing their finances and investments, they leave the decision to their family’s male members.
According to LXME’s Women and Money Power Report 2022, 49% of Indian women were either not investing or unaware of their investments.
It is surprising to see these numbers. While Indian women earn and save, when it comes to investments, they have preconceived notions like:
- Men have a better understanding of money-related matters.
- Investments are too risky for their tolerance.
- Investments are complicated and hard to understand.
Also Read: Latest FIS study shows that 48% of women want to try dating in the metaverse
However, when women get over these notions and get serious about investments, they can attain remarkable results. Here are some tips for women to help them achieve financial independence:
-
Goal identification and prioritisation
The first step in financial planning is identifying and prioritising your financial goals. This gives your investments a purpose.
Find out why you need to save and invest. Whether you want to save up a down payment for your dream home, pay for your children’s higher education, or take an international holiday, list down your goals.
Once you have listed down your goals, prioritise them. Prioritising goals means putting your goals in ascending order. Start from the one which has the shortest horizon and then proceed to note down the long-term goals. This would help you identify how much you need to save first.
-
Budgeting
Budgeting means identifying your income and expenses and then figuring out how much you can save. It can help eliminate unnecessary expenses so that you can increase your savings.
List your income and deduct expenses from the total income. The resulting figure would be your disposable income, i.e., income that you can save.
-
Emergency fund
Emergencies are unannounced, and when they strike, you might need financial assistance. Rather than using your planned savings for an emergency, it is better to have an emergency fund.
An emergency fund is an essential saving to prepare for unforeseen circumstances. It's advisable to set aside 3-6 months of income and invest in liquid options like savings accounts or liquid funds. This ensures easy accessibility in times of need.
-
Risk assessment
After building your emergency fund, it's important to assess your risk appetite. Determine if you are comfortable with high risks or if you prefer to avoid them so that you can select the appropriate investment options.
-
Asset allocation and portfolio diversification
Asset allocation means investing your savings across different types of assets. This depends on your risk appetite. If you have a high risk-taking appetite, you can choose equity-oriented investment avenues like equity shares, equity mutual funds, etc. On the other hand, if you want to avoid risks, you can choose debt-oriented instruments like fixed deposits, debt mutual funds, etc.
Pick different types of assets to create a diversified portfolio. Portfolio diversification means having different types of investments for a well-balanced portfolio. Too much equity or debt is bad. Instead, you should have a good combination of equity and debt instruments. This would give you the benefit of maximum returns while minimising risks.
-
Disciplined investment
A disciplined approach to investment is important. This allows regular savings and cuts down on the temptation to draw upon your savings. Moreover, compounding returns can work wonders if you save regularly and give your investment time.
-
Portfolio review
Lastly, review your portfolio regularly to identify possible deviations and make changes accordingly.
Also Read - Here are the best ways to improve financial security for women
The bottom line
To achieve financial independence, women should prioritise their goals, budget their income, create an emergency fund, assess their risk appetite, and diversify their portfolios. With a little financial literacy and a disciplined approach to investments, Indian women can break free from traditional gender roles and pave the way towards a financially secure future.
Related - How to build a robust financial plan
Women have an innate sense of handling financial matters. They oversee the household expenses and manage to save, even on a shoestring budget. However, when it comes to managing their finances and investments, they leave the decision to their family’s male members.
According to LXME’s Women and Money Power Report 2022, 49% of Indian women were either not investing or unaware of their investments.
It is surprising to see these numbers. While Indian women earn and save, when it comes to investments, they have preconceived notions like:
- Men have a better understanding of money-related matters.
- Investments are too risky for their tolerance.
- Investments are complicated and hard to understand.
Also Read: Latest FIS study shows that 48% of women want to try dating in the metaverse
However, when women get over these notions and get serious about investments, they can attain remarkable results. Here are some tips for women to help them achieve financial independence:
-
Goal identification and prioritisation
The first step in financial planning is identifying and prioritising your financial goals. This gives your investments a purpose.
Find out why you need to save and invest. Whether you want to save up a down payment for your dream home, pay for your children’s higher education, or take an international holiday, list down your goals.
Once you have listed down your goals, prioritise them. Prioritising goals means putting your goals in ascending order. Start from the one which has the shortest horizon and then proceed to note down the long-term goals. This would help you identify how much you need to save first.
-
Budgeting
Budgeting means identifying your income and expenses and then figuring out how much you can save. It can help eliminate unnecessary expenses so that you can increase your savings.
List your income and deduct expenses from the total income. The resulting figure would be your disposable income, i.e., income that you can save.
-
Emergency fund
Emergencies are unannounced, and when they strike, you might need financial assistance. Rather than using your planned savings for an emergency, it is better to have an emergency fund.
An emergency fund is an essential saving to prepare for unforeseen circumstances. It's advisable to set aside 3-6 months of income and invest in liquid options like savings accounts or liquid funds. This ensures easy accessibility in times of need.
-
Risk assessment
After building your emergency fund, it's important to assess your risk appetite. Determine if you are comfortable with high risks or if you prefer to avoid them so that you can select the appropriate investment options.
-
Asset allocation and portfolio diversification
Asset allocation means investing your savings across different types of assets. This depends on your risk appetite. If you have a high risk-taking appetite, you can choose equity-oriented investment avenues like equity shares, equity mutual funds, etc. On the other hand, if you want to avoid risks, you can choose debt-oriented instruments like fixed deposits, debt mutual funds, etc.
Pick different types of assets to create a diversified portfolio. Portfolio diversification means having different types of investments for a well-balanced portfolio. Too much equity or debt is bad. Instead, you should have a good combination of equity and debt instruments. This would give you the benefit of maximum returns while minimising risks.
-
Disciplined investment
A disciplined approach to investment is important. This allows regular savings and cuts down on the temptation to draw upon your savings. Moreover, compounding returns can work wonders if you save regularly and give your investment time.
-
Portfolio review
Lastly, review your portfolio regularly to identify possible deviations and make changes accordingly.
Also Read - Here are the best ways to improve financial security for women
The bottom line
To achieve financial independence, women should prioritise their goals, budget their income, create an emergency fund, assess their risk appetite, and diversify their portfolios. With a little financial literacy and a disciplined approach to investments, Indian women can break free from traditional gender roles and pave the way towards a financially secure future.
Related - How to build a robust financial plan
