- Date : 02/06/2021
- Read: 6 mins
Being financially independent does not entail knowing complex finance concepts. Any woman can become independent by following these simple tips.
Whether it is sports, entertainment, or the corporate world, women have proved their mettle and succeeded everywhere. Some of them have reached the pinnacle of their professions and emerged as icons in their fields. At the other end of the spectrum are the millions of ordinary women who slog to make ends meet and support their families.
However, when it comes to managing their personal finance, most women leave it to their spouses or their parents. According to the DSP Winvestor Pulse 2019 survey, only 33% of Indian women are empowered to make financial decisions. Because of this, women are less likely to have control over spending decisions and are thus unable to fulfill their aspirations.
So, it is pertinent for young women earners to not only save money but also educate themselves about the importance of financial planning. This will enable women to embark on a journey to achieve financial independence. Here’s how:
1. Get into the habit of saving
When you are starting your first job, focus on saving as much as possible. Start with the weekly groceries or the monthly utility bills and figure out what is essential and what you can do away with. Or try figuring out how you can reduce the monthly electricity bill by 20%. Claim cashback and discounts wherever possible. Once you get into the groove, you will find it easier to save every month. But do not go overboard and be miserly.
Pro tip: Rather than looking at ‘Income minus Expenses = Savings’, you can consider ‘Income minus Savings = Expenses’.
Related: A millennial woman's guide to saving big on monthly bills
2. Define your goals
Once you begin earning, it is important to define your short-term financial goals, medium-term financial goals, and long-term financial goals. Short-term financial goals (such as an overseas holiday or a premium laptop) can be achieved within 2-4 years. It may take 5-7 years to fulfil medium-term financial goals, such as purchasing a hatchback car or going abroad to study. Long-term financial goals usually require more than 8 years. For example: down payment on a house or funds to start a business, or even a retirement corpus.
Pro tip: Create SIPs in suitable mutual funds for each goal. SIPs aligned with short-term goals can be with funds that are skewed towards debt and stable instruments. SIPs for medium-term goals can be in funds that invest in a mix of equity and debt. SIPs for long-term goals can be in funds that are heavily invested in equity. How women should track their financial goals between 20-60 years?
3. Secure yourself
As soon as you start working, purchase a health insurance policy even if your employer offers mediclaim. Having independent health insurance is important as the mediclaim provided by your employer may not cover you if you are between jobs. Also, its terms and conditions may change overnight. Since the cost of healthcare is exponentially increasing, your finances would be dented due to hospitalisation expenses.
Pro tip: Remember to purchase a health insurance policy that has your preferred hospital in its list of cashless network hospitals.
4. Monitor your savings account
Your parents or spouse may be keen to have a joint savings account with you. In such a case, your earnings may also be accessed by them. Therefore, you should also maintain a savings account that is operated and monitored solely by you. Find out how much money you are saving per month, how much interest you get, and how much you withdraw.
Pro tip: You can transfer funds to your mutual fund SIPs through this account.
Related: 9 Important things to keep in mind before you open a savings bank account
5. Keep an eye on your credit score
Make sure your credit score is always good. In times of emergency, if you need to borrow funds, you won’t have any issues. This is very important for those who are married or women who are single parents. To ensure this, pay your credit card bills or loan EMIs on time without any delay. You can avail of a personal loan of a manageable amount to build your credit score.
Pro tip: To ensure you are always eligible for a loan, make sure you have a CIBIL score upwards of 700. Also, use an identity theft protection service to monitor your credit score changes.
6. Create an emergency fund
Every month, as soon as you get your salary, put a part of it in an emergency fund. This advice is not just for single women. Even if you are blissfully married, trouble can strike without warning. In such situations, having an emergency will keep you afloat. Don’t let your emergency fund sink too low at any point.
Pro tip: Always make sure you have enough money in your emergency fund to see you through at least six months of expenses.
Related: 5 Ways to increase your financial security as an independent woman
7. Diversify your risk
If you are investing in mutual funds or the like, make sure you don’t put all your eggs in one basket. One way you can ensure your funds are spread out over different asset classes is by investing in asset allocation funds or other hybrid funds. The fund investment can be equity-oriented or debt-oriented. It can even include asset classes like gold, metals, and other commodities. So, even if one asset class does not offer great returns or is seeing a slump, another asset class can plug the gap.
Pro tip: Do not go for a generic asset allocation mix. Focus on an asset allocation mix that caters to your needs and priorities.
8. Engage a financial planner
Though there is a lot of advice on the internet, not everything is legitimate or applicable to your specific circumstances. Therefore, it is important to consult a credible financial planner who can scrutinise your portfolio in detail, understand your goals, and offer suitable solutions.
Pro tip: Select an advisor with a lot of experience. Ask a lot of questions before finalising on your portfolio.
Related: 8 Things to know before choosing a financial planner
Financial freedom is the gateway for women who wish to fulfill their dreams, live a life of dignity, and have funds for their personal needs. If you are one of the millions of women who are seeking a better life, start planning your finances today. How married women can attain financial freedom.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.