Expert advice

May 08, 2014,17.21 IST

Financial planning and its importance for women

Jasleen Kohli
Bajaj Allianz Life Insurance

Have you ever wondered how a simple housewife, from any strata of society, can manage her household in whatever budget she has? Why do banks and microfinance institutions lend money to the woman in the household? Simple, women have inherently been better money managers on a small scale. Yet, many women, including working women, seem comfortable leaving their long-term finances and retirement planning to their fathers or husbands. On the occasion of Women’s Day, it will be worthwhile to take a look at simple measures that women could take to plan their finances for a secure future.

The first and most important step is to understand her financial needs and develop a suitable plan. For this, a good start would be to calculate the inflows and expenditure and the level of savings possible. As many personal finance managers recommend, she must keep emergency funds in the form of ready cash to the tune of 3-4 times her monthly salary/ allowance. When this level is achieved, she can then take the next step towards financial planning.

The second step is to identify financial goals for her family. Goals, typically, include retirement savings, higher education of children, provision for her daughter’s/ son’s wedding, old-age care for her parents and in-laws etc. While these are worthy goals, it is extremely important to correctly estimate the sum needed for their fulfillment with the time frame in mind. Also, any likely liabilities should be identified and accounted for, as this affects the quantum of investment substantially. For eg: repayment of a housing loan.

The next step is to evaluate possible investment options so as to meet liabilities and financial goals. It is imperative that a woman educate herself about money management and investing. Various investment options such as mutual funds, bank fixed deposits, national savings certificates, pension plans, real estate etc. could be considered. Women usually do not consider insurance, both life and health, as priority. However, with rising medical costs and growing incidence of lifestyle related illnesses, it just makes sense to invest in an insurance plan that covers such contingencies, apart from the usual projected living costs, education expenses and retirement benefits.

Retirement planning has become important in the last two decades. The joint family structure has disintegrated, nuclear families have become a norm and parents cannot realistically expect their children to bear their financial liability during their retirement years anymore.  Hence, it’s critical for every woman to plan for retirement, the earlier the better. She wouldn’t want to spend her golden years worrying about meeting even her basic needs, right?

Of course, at different life stages, it is advisable that a woman reviews her goals, her investments and the adequacy of her insurance cover and jiggles her investments accordingly. It is extremely necessary that her contact details, nomination details etc. be totally updated, at all times. Utmost care should be taken to ensure that all documents should be clear in every respect, especially real estate ownership deeds, so that there is no ambiguity at the stage of realization of the investments.

In case financial planning seems too overwhelming, it is recommended that she find an experienced financial planner who can help her visualize and plan for her long-term financial goals.
In the long run, a woman should not let the fear of losing money or the fear of failure stop her from investing. After all, the financial wellbeing of her entire family rests in her hands and she is the best money manager in the household.

The author of the article is Head - Operations at Bajaj Allianz Life Insurance

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