More and more women are going into the workforce and becoming earners every year. Once you start earning, you should make it a priority to create a financial plan. This will help you be better prepared for emergencies and achieve your financial goals faster.
A survey by Tata AIA Life Insurance, called Financial Awareness Among Women, found that 59% of women do not independently take decisions on their finances. Also, a Nationwide Retirement Institute survey found that 62% of women are either expecting to retire later than originally planned or don’t believe they will ever be able to retire due to inflation, compared to 47% of men.
On one hand, women are not taking independent financial decisions and on the other, things like inflation are delaying them from achieving their financial goals. This makes it more important for women to start their financial planning as soon as possible.
In this article, we will be diving deeper into nine financial planning tips for women, which will help them step up their money management game.
1. Create A Budget
Draw up a personalized budget based on your goals, spending, and saving habits. Before you start a new month, sit down and analyze your spending habits and see if you have any overspending problems. This will help you weed out bad habits from the get-go. Then, allocate a certain portion of your money towards various categories, such as rent, bills, EMIs, and groceries, among others. Also, allocate some portion of your money toward savings and investments.
2. Set Your Financial Goals
Your financial goals are what will motivate you toward saving and investing every month without fail. These goals can be buying a house, taking a vacation, buying a gadget, paying for your child’s education and marriage, etc. It is important to have short-term and long-term goals. Only when you figure out why want to save and invest, you can be able to stay invested.
3. Prepare For Emergencies
A survey by Finology Ventures found that at least 75% of Indians do not have an emergency fund and could default on their EMIs in case of a sudden lay-off or any other event of income loss. This is a concerning number. However, this should also tell you how important it is to have an emergency fund. An emergency fund can help you during medical emergencies, job loss, career change, and more. One should have at least 6 to 12 months of expenses in their emergency fund. Once you start earning, make it a point to save a little bit every month and never touch this money unless it’s an actual emergency.
4. Save & Invest
The importance of saving money is taught to us from our childhood. Nevertheless, some people delay their savings journey to spend as much money as they can in their 20s. Having fun is a must to have a happy life but that shouldn’t stop you from saving money. If you don’t save from your first salary, you might find it difficult to build a saving habit later in your life. So, even if you can save only a few thousand rupees, it is ideal to start today.
Once you start saving and have enough money in your emergency fund, you should start investing a little portion of your salary. Mutual funds are a great investment option for newbies. You can choose a mutual fund based on your risk tolerance and financial goals, and earn higher returns than your bank savings account. Once you get enough experience in investing, you can explore other investment instruments, like stocks, ETFs, REITs, and more. The most important thing to know here is that you should invest to earn inflation-beating returns. So, educate yourself and invest wisely.
5. Use Technology
Earlier, people used to budget with pen and paper, visit the bank to know their account balance, and hire an advisor to help with investing in stocks or mutual funds. Thanks to the advancement in technology, we can now do everything from the comfort of our homes.
There are several mobile apps, dedicated to organizing your personal finance. One such app is Koshex, where you can track your net worth, save in smart savings options, invest in personalized recommendations, plan for your taxes, keep track of the performance of your investments, and so much more. Using technology to simplify your financial life can help save so much time and money.
6. Plan For Your Taxes
Most people plan for their taxes at the last minute. It is a good idea to plan for your taxes at the beginning of the financial year so that you can make tax-saving investments throughout the year. ELSS Funds, Public Provident Funds, National Pension System, and Medical Insurance are some of the tax-saving instruments chosen by people every year. Understand your tax slabs, see how much tax you may need to pay, and invest in the appropriate tax-saving instruments.
7. Build A Good Credit History
If you have never seen your credit report, the time is now to download it and check your credit score. If your score is less than 750, make a plan to improve your score. Try paying your credit card bills on time, utilize 30% or less of your available credit, limit requests for new loans or credit cards, keep your old cards open, and consider consolidating your debt.
8. Learn The Basics Of Finance
Ignorance is never bliss. Try to understand at least the basics of finance, like how income tax is calculated, how to do budgeting, how you can diversify your investments, how certain investment instruments work, and so on. Read finance books and blogs written by experienced professionals to learn about tips and trick on how you can navigate the world of finance. You can take informed investment decisions only if you know how the investment instruments worked and how they can help better your financial life.
9. Be Confident In Your Abilities
If you want to take control of your financial life, it is important for you to build your confidence. Women invest less in riskier assets than men. The major reason for this could be because they are not confident enough to manage their finances on their own. However, with education and a better understanding, you can overcome this problem. You do not need to be an expert to become financially independent. All you need is a clear idea of your finances and a structured financial strategy on how to put them to good use.
In The End…
Financial planning is extremely important for women because they live longer, get paid less than men, and face more hurdles in the workplace. Most times, women are expected to quit their jobs after getting married or having children. This affect their chances of being promoted quickly or getting a raise. These breaks from the workforce also leave them without a salary, putting a pause in their saving and investing habits.
So, it makes it important for women to start their financial planning as soon as possible. We hope this article helped you understand how you can navigate your finances smoothly and take control of your financial life. If you wish to learn about other personal finance topics, investment instruments, tax-planning options, check out our other blogs.
You can create a free account with Koshex to track your net worth, budget efficiently, save smartly, invest in personalized recommendations, and more. All you need is one app to get on top of all your financial needs.