The gender gap in workplaces has reduced over time. The pay gap has narrowed. Day-to-day responsibilities in most urban households are being shared by both men and women. In fact, women are breadwinners in many cases. These are all welcome signs of women’s financial independence. However, financial independence is not just limited to having a steady income source and sharing expenses with the men of the household. Securing one’s future and building wealth to attain aspirations are important too. When it comes to financial planning, a lot of women still rely on their male counterparts to do it on their behalf. Irrespective of your marital status, whether single or married, widowed or divorced, you need to take finances in your control in every sense.
Let’s look at a few essential steps women must take to up their financial wellbeing.
Set goals and save accordingly
If you are just hoarding money or blindly setting aside a fund in your savings account without mapping it to any goal, you may not be able to earn effective return in the optimum time frame. Set some goals and have a time frame in mind to ascertain your investment tenure and risk appetite. Choose investment instruments that are best for each goal. Say you want to buy a house in 10 years or are planning retirement in 20 years. These are long-term goals achieved over several years. Therefore, with the greater time span, you can have a moderate to high risk appetite, which increases the possibility of earning above average or even high returns via such options as equity mutual funds or ELSS. On the other hand, for a short-term requirement such as going on a vacation, you can put your money in low-risk and liquid instruments such as ultra-short debt funds or a recurring deposit. Remember all your aspirations can be attained with investment in the right financial assets and sufficient time.
Invest in mutual fund SIPs
Mutual fund SIPs allow you to invest in a disciplined manner just like in recurring deposits and fetch lucrative return in the long-run. Mutual funds do not need to be timed like the stock market and the risk associated due to investment in market-linked products is mitigated over time through rupee-cost averaging in SIPs. So with an investment of Rs 5,000 every month, you would be able to build a corpus of Rs 50 lakh in 20 years if you earn an average annual return of 12 per cent. And SIPs allow you to start with an amount as small as Rs 500. You can choose your fund based on your investment tenure and risk appetite. You can also combine tax savings under 80C as well as wealth creation by investing in an ELSS.
Insure your health
If you have been relying on your spouse’s health cover or your corporate cover, it’s time you bought a separate insurance to ensure sufficient coverage. Your corporate cover will only support you while you are on the job. At the time of transition from one to job to another or if you decide to take a break in your career, you will be left without any insurance. Adequate health insurance is a must to protect you financially against any health emergency or a prolonged disease for that matter. Insurance takes care of most of your pre-and post-hospitalisation expenses. The premiums you pay towards health insurance are eligible for tax benefits to the tune of Rs 25,000 under Section 80 (D).
Create an emergency fund
The purpose of creating this fund is to safeguard you against any financial emergencies such as job loss, health hazard, accident etc. Invest in a liquid fund which doesn’t have any exit load to build a corpus worth six to 12 months of your income. It would come handy to pay your bills and rent, cover your day-to-day expense and take care of your premiums and EMIs, if you were to face any unforeseen circumstances and were without an income temporarily.
The author is CEO, BankBazaar.