Women today earn an income that is equal, if not more, than their male counterparts. But that isn’t the real achievement. The real achievement is when women don’t just make money; they also manage it efficiently.
Here is a simple financial check list for you that will help you kick-start and manage your finances effectively.
1. Your spending plan: Chart out a spending plan every month. When you do that, don’t write down your expenses first. Instead, start your plan by listing out how much you would save and invest during that particular month. The wisest way to use your money is in the following order – Earn, save, and then, spend. Once you decide how much you will save, then list out all your expenses for the month. This will help you identify any unwanted expenses, and then, you can divert it to your savings budget. Remember, at least 20% of your income must be invested every month.
2. A contingency plan: Set aside a minimum of 6 months’ expenses money as a contingency fund. You can use this at the time of any emergency like say a sudden loss of job, hospitalisation, etc. You can maintain this money in a liquid fund.
3. A plan for your liabilities: Taking a loan is inevitable these days. But you must remember this: your liability can make life difficult for you IF you do not know to control it. Make sure your Easy Monthly Instalments (EMI) outgo does not exceed 50% of your income. The interest on your credit card may range from 36% to 42%. Hence, it is ideal to pay your credit card bills before the billing cycle begins so that it does not disturb your monthly budget.
4. A plan for your children: The cost of education keeps increasing every year. That’s why, you need to have a sound investment plan in place to meet your children’s education needs. For example, if you have an 8-year-old child today, and your child will be graduating from school in about 10 years, his college fees, which may cost you Rs. 10 lakh now, will cost you approximately Rs. 25 lakh in the future. It might be difficult to arrange the money at the last minute. But if you invest wisely with just Rs. 10,000 every month for the next 10 years, you will easily get to your goal of saving for your child’s education.
5. A retirement plan: Science has shown that wives outlive their husbands. Hence, you have to plan your retirement, and you have to plan for it wisely. Start investing for your retirement kitty. If you are 35 years old now, let’s assume that you would like to retire when you are 60 years. If you would require Rs. 100 lakh at the time of your retirement (after adjusting inflation), then you will be able to accumulate this corpus only if you start saving at least Rs. 5,000 every month (at 12% interest p.a.) from now.
6. An asset allocation plan: As you grow old, your appetite for risk comes down. That’s why asset allocation plays a crucial role in all your investment decisions. The general thumb rule to calculate the percentage of equities in your portfolio is this: 100 – your age. For example, if you are 30 years old, then you should have 70% of your assets in equity, and 30% in debt. However, remember: this can also vary depending on your individual needs. For instance, if you are a young woman who has just started your career, and if you are planning for your own marriage, or to buy a car in about 5 years, then it is ideal to have about 60% of your savings in debt investments, and about 40% in equity. This is because the time frame of your investments is just 5 years. On the other hand, if you are planning to accumulate wealth for your retirement, and if you have time on your side, then it is ideal to have about 80% of your savings in equity and about 20% in debt.
7. Have adequate medical/life insurance cover – There are special medical insurance policies designed to cater to the needs of women. It is more prudent to have a special critical illness medical insurance policy to take care of any critical illnesses.
8. Regular review – Last but not the least, once you create all the above plans and start executing them, it is advisable to review your financial situation and investments at least once a year. This will help you take stock of what you had done last year, and what you should do during the year to come.
So, ladies! This Women’s Day, get your plans in place, and get going with your investing; because an empowered woman is a happy woman.