For many people, money is an emotionally charged subject. It can represent power or control, even in relationships. Our beliefs about money can influence how we spend, save, and handle our finances. Women in India have been making huge strides in leading top companies and starting new businesses. However, to gain financial independence, women need to get confident about taking decisions regarding investing and savings. This will help them feel at ease with financial security to fall back on.
Benefits Of Financial Independence
Whether single or married, at any age, women can choose to become financially independent. Here are a few reasons why.
1. To Handle Emergencies
As a family one needs to be prepared for contingencies. With jobs no longer completely secure, if the entire family is dependent on only a single earner, it can put immense stress on the person. Also, in case a family has multiple EMIs, having a double income makes sense.
2. To Manage Increasing Cost Of Living
With inflation on the rise, and healthcare and education are becoming expensive. Financially independent women can not only contribute to household expenses but can also help in meeting the financial goals of the family in the long-term.
3. To Feel Confident
Many women depend on their parents or partners to help fulfil their dreams and aspirations. As an independent woman, she becomes self-sufficient and does not have to depend on anybody. Whether splurging on shopping or on a trip with friends, she can make her own financial decisions.
4. To Be A Role Model
A strong, independent woman is a crucial role model for her children and helps challenge the gender bias prevalent in the country. The children learn about the value of money from an early age and are better able to handle their finances as an adult.
Top 10 Things To Do To Be Financially Independent
Here are a few pointers to begin your journey towards financial independence. Most of these tips are easy to implement and can go a long way in making an impact on your financial goals.
1. Track Expenses
Instead of impulse spending, start tracking all the household expenses. This will help you understand average expenditure, areas that can be cut down in case of emergencies, and segments where there are possibilities of savings.
2. Maintain An Emergency Fund
Save a portion of your income monthly in an emergency fund to help during a layoff or a sudden large medical expense. A good rule of thumb is saving 10-20% of your income.
3. Actively Involved In Financial Decisions At Home
Be aware of the day to day decisions made at home that can have an effect financially. Have a regular discussion with your partner to understand long term goals and current financial strengths.
4. Hire A Financial Consultant
An independent financial consultant can help you guide you through all financial matters big or small. They will help you with budgeting, investing for both short-term and long-term goals, how to structure debt, insurance, and tax strategies to help you save money and grow it at the same time.
5. Retirement Planning
It’s important to start planning for life after retirement at an early age. Whether you’re in your 20s or 30s, it’s never too early to invest in retirement schemes. With an advisor, you can figure out an approximate monthly requirement and start saving towards those goals.
6. Diversify Your Basket
A common mistake amateur investors make is that they put all their eggs in one basket. To reduce overall risk, all make sure your investment portfolio has a mix of stocks, bonds, real estate, commodities, etc. Your risk appetite will help you understand the right balance of each of these financial instruments. All read the documents and assess both the upsides and downsides before investing
7. Be Prepared
Do your research before undertaking any new debt or investment. Plenty of information is available on the internet and read them voraciously. This will also make you better prepared for your discussions with the financial planner as you will be able to clearly state your goals and decide on the process to achieve them together.
8. Avoid Credit Card Debt
While credit cards make it easier to buy new things constantly, it is prudent to always pay your bills on time. Without noticing, the interest on these can start mounting up and you will lose valuable money over small expenses. Also, choose credit cards that offer a plethora of rewards and charge lower late fees. Recently, many new fintech companies have started offering extra rewards for making certain payments.
9. Cut Expenses
Find ways to cut down your daily expenses and increase your savings. You can find good deals by shopping for household needs in bulk, removing unnecessary expenses, and avoiding impulse buy on a regular basis. All these small amounts eventually add up and give a huge boost to your savings.
10. Ask For That Raise
As women, we are sometimes shy about having a clear discussion with our managers at work regarding pay and benefits. If you have been consistently a high performer, schedule a discussion with your manager and HR regarding promotions, increase in salary, and bonus amounts. Get clarity regarding your performance indicators that will lead to a higher salary.
Financial independence can mean different things for different women at distinct stages of life. Here are a few ways, investing will be different based on your phase of life.
1. Young And Single
In your 20s, you have more freedom to take risks that can help you achieve long term goals like buying a house or a vehicle. For long term goals, you can choose to invest in equity mutual funds or SIPs which will provide you with a higher rate of return over decades of investment. For short term goals, choose traditional instruments like fixed deposits or post office savings schemes that have short maturity periods. Be risk-aggressive in this period to gain more returns, as you don’t have major financial bills.
2. Married And Working
With a double income available, it’s time to invest for children’s education, marriage, and retirement. Purchase suitable insurance plans and invest in gold funds and ETFs. After 40, it is prudent to invest in tax-saving schemes for retirement.
As a homemaker with no income, you’ll already be trying to save as much as possible. If possible, invest in RDs and SIP with an attractive rate of return. Your savings will be very useful in case of emergencies.
As your income increases over the years, focus on securing both your future and the family’s. Invest in a diversified portfolio and review your portfolio on a monthly basis. The earlier one starts, the better the outcomes that can be expected.