As we celebrate 71 years of freedom as a nation, this is a good time for women to reflect on their Financial Independence. Women today have come a long way in empowerment in terms of excelling in areas like the arts, sports, governance and in terms of being able to pursue the professions of their choice. Yet when it comes to handling their finances, a lot of women still leave it entirely to the men in their lives.
This tendency stems from the lack of confidence in their own ability to manage finances well. However, nothing is farther from the truth; women are equally good if not better at making sensible money decisions.
Here are 5 things women must do to achieve greater financial independence:
1. Have a financial plan for your life. Every woman either needs to create one for herself or be part of one. If you are single, either by choice or by circumstance, then you need to create a masterplan that provides a sense of direction of how to steer your finances. Married women too need to actively participate in any financial plan of the family, whether they are contributors or not, as they stand to be affected as beneficiaries. Moreover, women bring in an element of discipline and focus when they are involved in the family’s financial plan. So, seek active involvement in putting together a financial plan.
2. Switch to a savings budget from your spending budget. The traditional way of budgeting involves keeping track of where you are spending money. The idea is to help you monitor whether expenses are overshooting in a particular month and to hopefully curb them in the following months. However, such a budget doesn’t help to track your savings. So, what you need is a savings budget. Decide how much you wish to save from your family income month. Ideally you should push yourself to save 25-30% of the household income. Those in careers where you don’t get a monthly pay cheque can fix a percentage of saving from the yearly pay.
3. Organize your finances and have a good grip on where you stand individually or as a family if married. Even if you don’t have an income of your own and don’t have much say in the money decisions, you must know what your family’s income and sources are (salary/business, income from investments, rent). Know how much life and health insurance the family has. Know how much loan you have. Know where to look for the documents and contacts in the event you need them. Additionally, as a good practice, have access to the family’s savings and investments through joint accounts.
4. Make financial security a priority. Often in the commitment and zeal to be a good mother, daughter or sister, women let their own security be neglected. Basically, here’s what you need to do to ensure your financial security:
a) Build an emergency fund to see you through the rainy days when there’s a temporary loss of income or periods of extraordinary expenses, without having to depend on others especially if you are single.
b) Invest for your retirement. This can be a common fund with the spouse for married women.
5. Hire a good financial planner who can answer all your money questions and guide you on making a comprehensive financial plan.
Women generally are more open than men to seek and get help. This is a good trait, but some may try to take advantage of it. So, select your advisor well. Beware of free advice from your bank RM, friends or insurance agent who call themselves your financial advisors and guarantee you ridiculous returns. A good planner will focus on your goals and risk behaviour to make a goal-based financial plan, and help you stay focused to achieve those goals on time.
Financial freedom can mean different things to different people, but one thing is certain, you cannot be financially free as long as you are bound to someone for all money decisions. So, follow these 5 steps, be the master of your finances or partner with your spouse in building your family’s finances. And remember what Clare Booth Luce said about women and money – “A woman’s best protection is a little money of her own.”
(By Amar Pandit, Founder and Chief Happiness Officer at HappynessFactory.in)