A woman who has not taken charge of finances early in life will ultimately need to take charge of her finances at a later date.
Indian mythology once had two dominant gods of wealth - Lord Kubera and Goddess Laxmi. Kubera predates Laxmi by almost a thousand years but Kubera is not worshipped as much now as he was once in ancient India. On the other hand, Goddess Laxmi has become the symbol of wealth and prosperity. In this shift from the masculine to the feminine lie some deep rooted beliefs that Indians have about financial planning and money management.
Most women leave financial planning and money management to either their husband or father. Though this trend is changing now and lot of professional women are taking charge of their own finances, however the abdication of this responsibility is a cardinal mistake any woman can do. Does gender play an important role and would it lead to a different financial plan if the underlying financial goals are the same is a question that gatekeepers of money have debated. Most studies have shown that not only do the financial goals change but the risk appetite, temperament, attitude and emotional quotient of handling and executing of a financial plan also changes considerably when women take charge of finances.
The key difference is the way the male mind and the female mind thinks is the approach towards financial planning. The alpha male is focussed on – well – alpha, short term wins and maximising the returns in a very competitive manner. It’s almost a game that he wants to win to satiate his pride. On the other hand, the female mind is focussed on the long term goals not being compromised, collaborative approach and looking at the bigger picture. In a study done by Fidelity, this was aptly demonstrated by the fact that women tend to fund their retirement account more than men, no matter what their salary.
Underlying the same factor of long term security and contrary to the long term approach, women generally demonstrate lower tolerance to financial risk. Many women lean toward more-conservative investing since greater risk might lead to failure. This leads to a higher than needed allocation to risk-free assets like bank accounts and thus a lower than optimal way of managing risk.
Life span is also an important factor to take into consideration. Mortality charts demonstrate that women tend to live longer than men by five to ten years especially in industrialised and knowledge economies. This effectively means that a woman who has not taken charge of finances early in life will ultimately need to take charge of her finances at a later date. The golden rule in which remains common across men and women in managing finances is “Start Early, Stay disciplined”
Coming back to our story of Kubera and Laxmi. The story goes that once Lord Kubera became so proud of his money that he felt that money could never be depleted and started boasting on how money could do anything. It was in this phase that Kubera lost all his money. Goddesss Laxmi on the other hand is a representation of serenity, wisdom and following knowledge (“Saraswati”) in terms of distributing wealth across assets.
The writer is CEO, Outlook Asia Capital, a Consulting & Wealth Mgmt firm