Aspirations and goals of working women are no different from those of their male counterparts
Modern working women claim and deserve gender equality. Working women do not appreciate the differentiated treatment given to them when it comes to taking financial or any other decisions.
Aspirations and goals of working women are no different from those of their male counterparts. Hence, the fundamental principles of financial planning do not differentiate between men and women. Future financial goals – funding the higher education and marriage of children, buying a house and a car, going for overseas vacations, and planning for retirement – are common for both genders.
Maintaining a certain standard of living becomes important.
Let us now examine some of the key decisions which all working women must take to ensure that they enjoy financial well-being.
First of all, if there are family members dependent on them, they must ensure that they have adequate coverage in terms of disability as well as life insurance. It is essential to protect the family members just in case the earning female member becomes incapacitated or disabled due to any disease or accident etc. The thumb rule here is that she must have a life insurance plan and total disability plan coverage equivalent to ten times her annual income.
For Example: If a woman is earning Rs 10 lakh per annum, then she must have a life and disability insurance cover of Rs 1 crore to ensure that family members feel financially protected in case of any unfortunate eventuality.
Apart from giving protection to family members, working women have to plan for their retirement needs well in advance. Please remember, it is not common for all working women to retire at the age of 60. Retirement will depend upon their profession. Sportswomen, Air Hostesses and Celebrities do not have a very long working span. Hence, they need to do special planning for early retirement and ensure that they can live comfortably for the rest of their lives by accumulating a corpus and by investing in different asset classes: equity, debt, and real-estate, etc.
Women have a special liking for Gold. The thumb rule for investing in gold is that it should account for more than 10 per cent of their total financial portfolio, either in the form of physical gold (ornaments etc.) or paper Gold (Gold mutual funds or Gold ETFs & Sovereign Gold bonds, etc.).
All working women must have some exposure to equity mutual funds through Systematic Investment Plans (SIPs) for creating long-term wealth. This is also needed for achieving financial goals such as education/marriage of their children or retirement, etc. The thumb rule of asset allocation is that 100 minus the age should be the percentage allocation to equity mutual funds; 10 per cent should be in the Gold and the balance should be in debt instruments such as PPF, EPF, Bank FD, and Bonds.
To sum up, all working women's financial portfolios must include 3-4 mutual fund SIPs equal to 20 per cent of their monthly income, regular contributions to the Public Provident Fund, and NPS account for ensuring retirement planning. Regular pension for life, besides having adequate health insurance and Life/disability insurance is also important.
Documenting the Financial Plan
It is also important to mention here that all working women must get a financial plan made as a document and they must implement it and keep rebalancing their portfolio by reviewing it at half yearly interval.
Making the Will
They must ensure that a proper 'Will' is made by them and their total investments are distributed in the proportion desired by them. It should be done much early in their life and must be shared with close family members for easily claiming investments in the eventuality of sad demise.
Working women must ensure that they learn to limit their expenses within their income levels and not resort to debts, loans or excessive credit card spends at any point of time. Stretching your expenses beyond your limit can lead to financial stress and compromise your future comforts.
Hence, it becomes imperative for working women to be in control of their finances, to be fiscally disciplined, and to remain well-planned.(The writer is Group Director - Financial Well-being, Bajaj Capital)