TomorrowMakers

Wouldn’t you want to be in a position where you can confidently steer your financial path on your own? Read on to find out how.

Why and when you should take your own financial decisions?

Guess how many working women in India take investment decisions independently? If we are to go by the findings of a survey by DSP Mutual Fund released earlier this year, it is only a measly 30%. In other words, an overwhelming chunk of Indian women don't feel they are competent enough to take personal finance decisions, even when they are qualified enough to hold a salaried job.

Another survey, conducted by Nielsen, offers additional pointers to substantiate this hypothesis. According to it, out of the women who did take their own investment decisions, 33% did so after being persuaded by their husbands, while 24% said that their parents encouraged them.

This goes to show that even women who seem to be financially confident have had to be cajoled into taking financial decisions that concern them. 

Interestingly, an Allianz Life survey earlier this year revealed that this trend is seen in the developed US society too. According to the findings, almost 60% of US women surveyed said they wished they were more confident with their financial decisions. They would prefer not to have their husbands, partners, or other family members take such decisions for them.

So, if you are a gainfully employed woman but don’t feel financially confident, how do you go about tackling this? Let us look at some ways you can manage things on your own, without giving your partner or parents the chance to ‘advise’ you to be financially independent.


1. Financial goals

The first step towards gaining financial confidence is to become financially secure. When you know you have money, you will automatically feel confident about life. But merely having a steady job does not guarantee financial security. You will be compromising your financial peace of mind if you spend more than you should. 

Simultaneously, financial stress can be avoided if you are working towards a specific goal. So it’s important to set up financial goals – short-term, mid-term, and long-term. Working towards meeting these goals will ensure that you rein in your expenses. This, in turn, will ensure financial stability. Read this to understand how to set SMART financial goals and easily track progress

Guess what else you will achieve? You will attain the ability to take financial decisions and go ahead with them – independently. 

Related: How married women can attain financial freedom 

2. Budget balancing

This brings us to the next point in our to-do list: budgetary allocations. This refers to the way in which you manage your income, especially now that you have set goals such as buying a house, saving up for a business idea, marriage, car etc.

When allocating funds, don’t forget to include student loans, EMIs, rent, household expenditure, commuting costs etc. in your expenses. Keep a check on social expenses such as movies or eating out). Balance your budget and save for your goals, so that you can take charge of your finances. This is a sign of a financially confident woman. Use this monthly budget calculator to evaluate your financial standing based on your rent, age, income, city and your lifestyle based expenses. 

3. Emergency funds

Emergencies often strike without warning. So it is vital that you and your family are taken care of, especially during your retirement years. Even the best of companies downsize from time to time to stay relevant in a competitive world; given this reality, the daunting possibility of anyone needing hospitalisation when it is least expected cannot be overlooked. 

So, when saving towards your goals, set aside something on a regular basis to build an emergency fund for impending hard times, such as a loss of a job or urgent medical treatment. By creating such a contingency fund, you will have ensured financial stability for a possible downturn in your fortunes. You will have designed the complete plan to face the future with confidence.

4. Spend-save ratio

One way you can to ensure adequate savings for hard times (or life after retirement) is to maintain a spending-saving ratio: how much you should save from every rupee earned before you spend the rest. You can start with a simple rule of the thumb: allocate no more than 50% of your take-home pay for essential expenses, save 15% of pre-tax income for retirement savings, and keep 5% of the take-home component for short-term savings. 

If your company does not deduct income for PF contributions, go for a Public Provident Fund (PPF) scheme; this is a long-term saving instrument that also provides tax relief. It also goes a long way in creating a retirement fund. As an Indian woman, it is important to be as self-sufficient as possible, given our weak social security system.

5. Debt clearance

EMIs often drain your income, so always look at them as debts that need to be paid off as quickly as possible. Paying off such debts also means you put a stop to extra expenses in the form of interest payouts. 

Note that missing an EMI deadline can have negative consequences. Your credit score will take a hit, and getting a loan in future can be a more expensive deal thanks to higher interest rates. Worse, if this becomes a habit, you may even be denied a loan when you most need it.

So, whenever possible, put your extra money toward your squaring off debts. A debt-free life is also a financially more secure life. Needless to say, the more financially secure you are, the more financially confident you become.

Related: How financial literacy can empower women to develop a financial identity

6. Insurance coverage

One financial decision you can take early in your career is to get health and life insurance for yourself. Not only does this provide much-needed security, it is also cheaper to buy insurance early in life as compared to buying it later. Life insurance provides security for your dependents, such as your ageing parents or your children. Ideally, the life insurance amount should be 10 times your annual income. Calculate how much life cover you would need to secure your family's financial future.

A health cover provides financial support if you are to fall ill suddenly and need hospitalisation. Given the high medical costs today, a cover like this prevents a total drain on your savings. But remember to increase the cover over time to cover all your dependents, or ensure bigger death benefits.

This is one financial decision you will never regret taking. What’s more, women tend to get insurance at cheaper rates compared to men because they typically live longer and carry less health risk than men. Thus, it is not uncommon for the premium quoted for a 34-year-old woman to be about equal to that for a 31-year-old man. 

7. Government schemes

Typically, most government schemes have special benefits for women. For instance, special rates are offered for women borrowers of home loans.

If you have a daughter, you can plan ahead with the Sukanya Samriddhi Yojana. Launched specifically for the girl child, this can secure your daughter’s financial future. However, you must avail of it before she turns 10.

Under the scheme, you can deposit a maximum of Rs 1.5 lakh annually, and earn a fixed return of 8.6% with triple tax exemption benefits under Section 80C (which provides tax exemptions on the amount invested, the amount earned as interest, and the amount withdrawn).

8. Various investments

‘Investment’ is a word that scares many women, but it need not be so. Investment does not always mean putting your hard-earned money in the capital market, although that too is an option if you want to add to your earnings and meet your goals faster. 

Even without taking the market route, you can start investing in recurring deposits, PPF, or increase your PF contributions – that is, take a safe investment option depending on your risk appetite and time horizon for a specific goal. 

On the other hand, if you are the type who does not mind taking risks, or if you don’t have anyone depending on your income, such as elderly parents, you may consider parking some of your investible money in mutual funds. Opt for balanced funds (which invest in debt and equity), and large-cap schemes (which invest in large, well-known companies).

If you are game for bold moves and higher returns, you can invest in equity funds. For this, set aside an amount that you will not need for the next few years. This ensures that the amount stays invested and fetches you above-average returns. As a newbie, take the advice of a trusted financial advisor when investing. 

Also read up on finance and financial terms in order to familiarise yourself with the markets. It can be truly empowering!

Why and when you should take your own financial decisions?

Last words

Although specifics and ranges differ, most people share the same financial concerns: financing their current lifestyles, financing long-term future lifestyles that they desire, and balancing these needs against each other while taking non-financial goals and considerations into account. 

Goals can range from putting food on the table to starting a business. Whatever your goal, you’ll need money to finance it. This is where financial confidence comes in. Wouldn’t you want to be in a position to manage financial decisions on your own? Reading this article about financial tips that can help women earners can go a long way in achieving financial confidence.

Disclaimer: This article is intended for general information purposes only and should not be construed as insurance or investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

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