Predominantly, most women have left financial decisions and investments to the men in their lives. So, single women allow their father's to plan for their investments and file their returns while married women depend either on husband or father in law to handle finance matters. As they grow older many depend on their sons to take care of their finances.
Statistics show that most women over the age of 65 years outlive their husbands. Many will not have their husbands around to take care of their financial requirements. Today the number of divorces is increasing. Women who are financially not stable will have to depend heavily on alimony and relatives and may even lose custody of their children.
While the art of managing household finances and saving pre-dominantly is better handled by the fairer sex, they are either not confident enough or not ready to take up responsibility that goes with it. They have an aptitude to think before taking impulsive decisions and are known to be more careful in their approach towards life in general.
These qualities can well be groomed into making strong financial decisions for themselves and their loved ones. The only prerequisite is a keen interest in their finances, understanding the tax implications on their income and evaluating the various avenues for investments that are available. Hence, financial planning is gaining importance for women also.
The number of women working in the urban cities with an attractive salary package is increasing at a phenomenal pace. They are getting more competitive in their jobs and are considering career before family in many cases. Many women are daring to start their own business ventures to pursue their ambition.
They have more money in their pockets than ever before. The need of the hour is to be able to take control of their finances and investments. They could take assistance from reputed financial services firms to help them chalk out an action plan to achieve their financial and personal goals. Hence, financial planning is gaining importance for women also.
Educating themselves on various aspects of investing is critical to be able to take an informed decision. They can sharpen their financial IQ by reading business newspapers and magazines, watching business channels and surfing finance related websites.
This will help them get acquainted with the financial markets; understand basic investment products, related international and local market conditions that can affect performance of their investments.
The key is to start with the basics and then move forward with the support of a trusted financial advisor. Women can take the following steps to move towards financial freedom:
~ Start handling money and investment decisions: They can begin by getting involved in managing the family's finances. Understand the strategy used by their fathers or husbands while taking investment decisions. They need to understand the investment process, filing up the forms, reading investment statements and handling the bank accounts.
~ Seek professional advice: Women should seek professional advice while investing rather than acting on tips of broker or family members and friends. It is always better to have a financial plan prepared which understands her life goals and risk attitude before moving to the investment selection. All investment decisions should be taken on well researched options and not on sudden whims and fancies or hot tips.
~ Investments should be held singly or jointly: It is always better to manage a portion of their investments in single name. In case of sudden death of the husband or a divorce, it is increasingly difficult to have access to the money immediately. Or else investments should also be made jointly with their husbands/ parents or at least a nomination should be in place for all investments.
There are various investment avenues that women can look at for investing their money. Predominantly women have been known to be risk averse. Although they believe in saving for a rainy day, they might not be smart in taking investment decisions. In the past, women have been more comfortable with savings in bank accounts, storing money in lockers, or buying gold or buying bonds.
Now more women are open to the idea of investing in broader investment avenues. They are considering investment in direct equity and mutual funds in a big way. Buying property is another attractive investment option for women today. They are getting more comfortable with the internet, hence online trading and net banking accounts is an easy facilitator to plan their investments in this fast paced world.
The tax structure also favors women to a larger extent. Net Income of women up to Rs 1,80,000 for the financial year 2008-09 will not be taxed. This is over and above the other deductions available. They can look at optimizing their income by investing up to Rs 1,00,000 under Section 80 C in Life insurance schemes, NSC certificates, equity linked saving schemes or by repaying principal of their home loan.
Women can also look at taking joint loans with their husbands. This will give them tax benefits of interest deduction up to Rs 1,50,000 per annum along with the option of buying a bigger house in a convenient location. Mediclaim can also be taken as a deduction of up to Rs 15,000 per year for premium paid for family members.
Women should be careful while planning their finances. They should be in full control of the situation at any given time. There are certain financial mistakes that they need to be aware of:
~ Investing randomly without a plan: Women sometimes are keen to invest without considering the broad picture. It is best to consider any investment decision in light of the current investments, risk appetite and time horizon available.
~ Assuming the current situation to be same through out: Women should plan for the worst case scenario like losing their job, a medical crisis, sudden death of a loved one, divorce, etc. Ideally they should keep aside 6-9 months of living expenses in the event on a sudden contingency.
Expenses on credit card should always be incurred based on current earning. Loans should be kept at a reasonable level. Adequate insurance cover should be in place to protect their family members in case of sudden demise.
~ Waiting to save money: Women should concentrate on saving on a regular basis. Even small surplus from income should be invested prudently. They can invest through Systematic Investment Plans (SIPs) in mutual funds. This will help them build up a disciplined approach towards investing. They can also benefit from the power of compounding and rupee cost averaging. Any large windfalls like inheritance or huge bonuses should be invested for the long term to build up their retirement assets and for wealth creation.
~ Plan for all stages in life: Over a period of time, even career oriented women may get married and have children. They need to plan for periods of voluntary unemployment to bring up their children. Sudden loss of income could lead to a low self esteem if the women were previously financially independent. Retirement planning should also be well thought over and nest eggs should be built to provide for their golden years.
Once these issues are kept in mind, it is easier to sail through life. Money today is an important key to happiness; hence women should plan their finances and investments well. It is important to also regularly review all investment decisions from time to time to ensure that they are in line with the overall financial objectives, time horizon and risk appetite. So ladies, it's time to wake up and smell the coffee. Take control of your finances and have a great life ahead!
The author is a certified financial planner (CFP). She is also head, training & business development, Ask Wealth Advisors Pvt Ltd.
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