Financial Planning Tips for Women

In the modern workspace, women significantly contribute to the country's economic growth. Women make up a big portion of the workforce in India, and they are on their way to reaching financial independence. However, the know-how of sound financial planning is still lacking in women, and they need to buckle up to make prudent decisions to create wealth.

Just like men, financial planning for women is very important. While the entire idea of sound financial planning may come across as a bit challenging, we will try to give you some essential tips. Following these bits of financial advice will help you get started on your financial journey.
 

Take up some easy investment plans, save some money for emergencies, and restrict your expenses to get started with your financial planning. Here are more financial planning tips for women in this blog.

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Financial Advice for Women

The financial needs of women are not similar to the financial needs of their counterparts. Women have different earning potentials and earning patterns. They also live longer than men and have a different approach to life.

So, without further ado, let us take a look at some of the most essential financial planning tips for women. And, since financial planning can be a daunting task, we will keep it very simple and short for you.

 

Create a Budget

The most basic step of any financial planning is to connect with one’s financials first. Make a chart of your earnings and expenses. Categorise your expenses into essentials and not-so-essential. Figure out how much you are spending every month on your bills and how much you are spending on entertainment and other stuff.
 

Having a closer look at your finances will help you understand your financial behaviour and also help you create a financial plan. If you notice you are spending too much on unnecessary things like dining out and buying clothes you do not need, you need to curb your spending.
 

Generally, people spend about 50% of their income on essentials, save or invest 30%, and spend 20% on entertainment. This has been a basic formula for financial planning. You can implement it, too.

 

Create a Financial Goal

Creating a financial goal will give you direction and an objective. You can plan your expenses and investments based on your financial goals. If you want to achieve something short-term, e.g., a foreign vacation, or you want to purchase a flat and save the down payment for it, you have to manage your savings accordingly.

 

Create an Emergency Fund

Many people go overboard with their investments, and they forget to take contingencies into account. So, when that person faces a financial challenge in life, they have to discontinue their investment to gather funds.
 

Therefore, having an emergency fund becomes a necessity. The objective of such a fund is to provide you with liquidity in the hour of need. Emergency funds should not have a lock-in period.
 

But how much do you need to save in your emergency fund? Ideally, it should be enough to cover your essential needs for 6 months. Once you reach that amount, you can divert to investment.

 

Get Insurance Coverage

Insurance coverage is a crucial step in financial planning. When you have accumulated enough funds in your contingency account, buy health and life insurance. A health insurance plan will protect your savings by paying your medical bills. A life insurance plan, on the other hand, will financially protect your family if you face an untimely demise.

 

Manage Your Debts and Taxes*

Remember the first step where you are taking a closer look at your expenses? At this stage, you will be able to observe your debts and taxes. If you find paying a big chunk of your income to debts like credit cards and personal loans, it is time you start curbing them. Since these loans charge a very high interest, it is best that you focus on paying them off as early as possible.
 

Next comes the tax*. Suppose you are paying more income tax than you should. Review your tax with the help of a tax adviser. See if you can take benefits of Income Tax sections allowing tax deductions.
 

Just to mention, buying a life insurance policy can save you ₹1.5 lakhs annually in taxes under section 80C of the Income Tax Act.

 

Focus on Investing

Once you have taken care of the basics — emergency funds, debt management, tax savings, and insurance — you can shift your focus to investment. Survey the market² and do your research for investment plans that can grow your money.
 

There can be two types of investment. One that serves short-term goals and one that serves long-term goals. Your choice of investment will also depend on your risk tolerance. You can choose to invest in equity or mutual funds for better growth opportunities, but it will have a higher risk factor.
 

You may also choose to invest in pension plans that offer good returns at the time of retirement.

Importance of Financial Planning for Women

Having financial awareness helps people mould their lives in the best way possible. They can achieve their dreams, take care of their family, secure their future, and indulge in fun activities. It is similar for women as well. Since they constitute a significant portion of the workforce, they should have sound knowledge of financial planning to reach financial independence.

They can:

• Prepare for emergencies
• Take care of their family
• Spend on higher education for themselves or their children

 

Conclusion

If you think it through, mothers are the best managers. They not only have excellent skills at managing the entire home, but they also manage the household expenses really well. However, they often do not have the adequate knowledge to invest the money.

We hope this blog shows them the right direction, in the most comprehensive way, to start their financial planning. These financial planning tips for women will enable them to become more financially sound and independent.