Let’s Talk About Money, Honey!
Women must be more conscious of financial investments. Here is how you can start.
Sonam is an ambitious, successful woman. For her, a working mom to a 5-year-old child, life was wonderful until it wasn’t! She lost her husband to COVID. She was shattered emotionally but was stranded because she had no idea about her family’s finances. This senior executive at a multinational company had never paid attention to how her husband was handling their joint finances.
Having suddenly lost her life partner, she was left scrambling to figure out this information. Thankfully, he had maintained a detailed record of their holdings and investments as well as their lawyer’s and accountant’s contact details. However, until she found this record, she was clueless.
Lata is a middle-class lady working in a small private company. She lives with her two young children, husband and in-laws. Every payday, she would hand her salary over to her husband (a tradition in most households even today!). One day, she made a startling discovery – none of the money she had earned remained. Her husband had spent it all. She decided to take charge and keep her salary to invest in her future. But she had no idea what to do with it.
Then there is Preeti, who is going through a bitter divorce, trying to start her life from scratch as she has no money or investments to her name despite having worked hard for 15 years to raise a family.
If you look around, you will find many such strong, independent women, who are reluctant when it comes to handling their money and prefer to leave that responsibility to the men in their lives. That is because traditionally, men have always been in charge of everything outside the home – financial, legal decisions, etc. The women have been in charge of the home – cooking, cleaning and the odd disciplining of the child. As more and more women step out of the home, it’s time for them to assume some non-traditional roles, which include handling their finances, too.
Every woman, irrespective of whether she is earning or not, needs to understand the importance of personal financial management and investments. Taking charge or at least beginning to understand this is crucial for the following reasons:
1. Women need to plan their finances in a way that makes them independent. Doing this early will also help create wealth.
2. We are seeing a rise in divorce cases in urban India. While the emotional trauma is significant, the misery multiplies when there is no financial independence.
3. Having control and access to your finances makes it easier for you to make your own decisions when it comes to your safety. Abusive relationships, and exploitative jobs are all easier to walk away from if you have your own money.
4. Tragic deaths of young individuals and rising divorce rates have also led to an increase in single moms. With proper financial management, children can continue studying and remain largely secure. This is also important for securing your own retirement (in case you are not in a job that gives you a pension).
5. A woman has the right to choose to be single. In such a situation, it is of utmost importance to invest earnings wisely to ensure that your future is taken care of. The pressure to get married may also reduce if you’re financially secure.
6. There is no rule book that says men are better at managing finances. A woman can learn to do this, and if you find that you’re actually better at managing money, there’s no harm in taking charge of the entire family’s investments!
7. Digital revolution in the financial space has made things accessible. You manage your money from the comfort of your home with a mere click thanks to mobile applications, online banking and free information available on the net/newspapers/WhatsApp, as well as customised advice from an advisor. But make sure you don’t trust anybody blindly.
Getting Started
How do you get started then? Financial planning starts with analysing incomes and expenditures as well as assets and liabilities. Based on this, we calculate the monthly investible surplus. We look to invest this to create an emergency corpus – 6-12 months of expenses.
Understand your financial goals (assigning funds needed for buying a house, a wedding, education abroad etc.), and your risk profile (this helps decide which instruments you can invest in – shares are risky, mutual funds lesser risk). Good financial planning also entails buying adequate insurance to secure your family’s future in case something happens to you.
Based on all this, you can identify suitable investments and monitor them regularly. One can do it themselves or engage the services of a SEBI-(Securities & Exchange Board of India) registered investment advisor. Additionally, every woman must understand nomination, the basics of inheritance laws applicable to her and her legal rights in case of a divorce or a separation.
As a rule of thumb, start early, invest a maximum of 30-40% of your monthly salary, control expenses, limit loan EMIs to up to 30% of your net take-home salary and, most importantly, stay updated with the latest information.
Investing is not as complicated as it sounds. If you want to make a dish, you need to find the right recipe, use the perfect ingredients and cook it for the right amount of time. Financial planning is no different. One can start with the basics using Google, YouTube, investor awareness sessions and discussions with peers/friends who are doing it.
Remember to be cautious and not fall for any unrealistic promises. Thereafter, depending on the amount you want to invest, you can decide whether or not you need to hire an advisor. Asking the right people the right questions can bring a lot of clarity and help you take appropriate decisions.
While it is easier said than done, one has to break their own mental barriers and go for it. It might ruffle a few feathers, but it is okay.
The educational and aspirational advancement of a woman means nothing if it does not reflect in her financial independence and overall emotional well-being.
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Trupti Rane
The author is a chartered accountant and financial advisor.