It is such an anomaly when financially-independent women have to fall back on their male counterparts to manage their finances. It is high time they become conversant of the fundamental principles of financial planning and make informed financial decisions. The basic money-managing steps are –
- Create a budget for your finances
- Define your financial responsibilities
- Study the financial market to understand the investment options
- Pick the investments that best meet your financial requirements
Guide To Managing Money For Women
For the women of our country, gaining financial independence comes with several obstructions. Yet, they are deciphering ways to productively manage their hard-earned money and take control of their finances. This article is a guide to managing money for women, which will empower them with the knowledge and resources to plan their finances.
Financial planning essentially involves knowing how much money you have, how you want to use it, why you want to invest, and how much risk you are willing to take. Here are some simple steps to wisely plan your finances and manage your money.
Make a budget
Creating a home budget is a skill that most women master. Capitalise on this skill to make a defined budget of your income. The prudent strategy is to adopt the 50-30-20 rule, i.e., spend 50% of your money on necessities, 30% on leisure and recreation, and 20% on investments. However, you can re-define this ratio based on your needs and situations.
Set financial goals
Set short-term, mid-term, and long-term financial goals based on your family responsibilities, current lifestyle and future aspirations. Be realistic and ensure you cover all your important life goals, such as your marriage, children’s education and marriage, property purchase, life and health insurance for the family, and a financially stable retired life. Do not discount your plans to go on a dream holiday, buy beautiful jewellery, a luxurious car you desire or set up your own business in the future. The key is to prioritise your financial goals and plan investments that help realise these goals.
Evaluate investment options
Gain knowledge on different investment options available in the financial market such as fixed deposits, mutual funds, equities or stocks, bonds, post-office schemes, public provident funds, etc. Do market research on the life and health insurance plans by different companies. Analyse each of them on critical parameters – the rate of return, risk involved, and liquidity. Use online tools and resources to understand the estimated return on investments (ROI) and probable risk factors of investment options and calculate their profitability index (net of the taxes). Select the ones that align with your financial goals and risk-bearing capacity.
Make investment portfolio
Make a portfolio of investments that gives you maximum returns at the lowest risk. Diversify your risks by investing in different types of financial products with different tenure. Put money in both short-term and long-term investments for continuous inflow of returns. Most importantly, track the performance of your investments periodically. Several online tools are available to calculate the period-to-date profit or ROI and yield of investment instruments. Rebalance your portfolio by investing more in profitable products and liquidating those generating losses.
Thus, managing money is an ongoing process of planning your investments, executing the plan and tracking it regularly.
We now provide you with a few more tips to help you better manage your money –
- Control your monthly bills such as telephone, water, electricity, subscriptions and other fixed expenses. Restrict or eliminate the unnecessary expenditure to generate surplus for the essential overheads.
- Do not keep loans and debts for too long. Pay them off as early as possible to reduce the compounding interest expenses.
- Save a part of your income for the rainy day. Create an emergency fund (other than the bank deposits) to cover expenses for the period you may not be working or earning adequately (taking a sabbatical or working part-time or for any other emergency). Likewise, create a retirement fund so that you retire as a queen! Use an auto-debit facility in your savings account to regularly transfer a part of your income to both these funds.
- Use your credit cards sensibly. It will help in two ways – control unwanted spending and reduce outstanding bill payments (credit card debts). Be cautious of the credit card limit and spend accordingly.
- Invest in yourself to enhance your earning potential. Enrol in relevant educational and professional courses in your field to upgrade your skills. It will increase your prospects of landing a high-paying job and grow your wealth.
- Find additional income sources. Start a side hustle, such as freelancing jobs, to increase your aggregate income.
- Hire expert services. They will design an investment portfolio that best meets your requirements.
To conclude, managing money for women is an integrated process that educates them on the basics of earnings, savings, spending, and investing. The elementary money-management knowledge in this guide will help them make prudent decisions for financial freedom.
Fintech – A Digital Revolution in Finance Sector,
The advancement in digital technology has provided innovative solutions to the finance sector, transforming it into a fintech (financial technology) industry. These new-age digital solutions help women manage their money efficiently. These tools help women make informed investment decisions and achieve their financial goals.
We at ShePays endeavour to make the women of our country financially tech-savvy. We are launching a digital-first Neo bank to provide a financial learning platform to you. It offers digital solutions to perform financial transactions, such as online money transfers, bill payments, investments, insurance, gold purchases, and many more. Our specialised products (prepaid cards, savings accounts and business banking) are available through our website and mobile app. The new bank comes with in-built financial calculators and formula-driven services to compute the ROI on investments. Our financial experts offer financial advisory services to help you make prudent investment decisions and grow your wealth.
What factors should I consider before choosing an investment product?
Ask yourself the following questions about the investment product –
- Does it align with my short-term and long-term financial goals?
- Will it generate sufficient ROI to meet my future needs?
- Am I ready to take the associated risks?
- Am I prepared to lock in my funds for the stipulated investment period?
- Can the product be converted into cash in case of emergency (liquidity factor)?
- Will I get tax exemption on the principal investment amount or capital gains?
What is the difference between short-term and long-term investments?
|Short-term investments||Long-term investments|
|Investment held for up to three years||Investment held for more than three years (mostly five years or more)|
|Examples – fixed deposits, post-office schemes||Examples – stocks or equities, bonds, real estate, mutual funds, public provident fund|
|Lesser risk, lesser returns||Higher risk, higher returns|
|Liquid assets, easily convertible into cash||Illiquid assets, not so easily convertible into cash|
How to create a diversified investment portfolio?
# Choose investments with different rates of return and tenure.
# Even out your portfolio by investing in both short-term (low risk) and long-term (high risk) investments.
# If investing in equities, do not invest in stocks of the same categories or sectors.
# Invest in asset classes that have negative correlations with each other. So, if the profitability or price of one investment goes down, the other counterbalances as it goes up.
# Rebalance your portfolio regularly to make changes as per market fluctuations.
What are the investments recommended for women with low risk-bearing capacity?
- Bank Fixed deposits
- Recurring Deposits
- Public Provident Fund
- Post-office schemes (Kisan Vikas Patra, National Savings Certificate, and Time Deposit and Monthly Income Schemes)
What are the moderate-risk investments with high returns?
- Unit Linked Insurance Plans (ULIPs)
- Capital Guarantee Plan
- Mutual Funds with Systematic Investment Plan (SIP)
- Equity Linked Saving Schemes (ELSS)
How can I leverage digital technology for managing my money?
- Opt for digital or online services of your bank for all your banking transactions.
- Bring your bank in your pocket! Download the mobile apps of your bank on your smartphone and do banking on the go.
- Use online tools and resources to calculate the ROI of your investments.
- Create an online trading account to buy and sell stocks.
- Use Artificial Intelligence-based interfaces, such as chatbots, to get online assistance from your investment companies.