Independence Day Special | 6 money tips for women seeking financial freedom

Avoid common money mistakes to achieve financial independence without hassles

Although women are generally considered to be financially disciplined, their hesitation to take the lead in handling finances often acts as a roadblock in their path to financial freedom.

“Once they become comfortable with basic financial concepts and tasks, they follow their financial plans meticulously, but they need to shed their initial inhibitions about making investment decisions,” says Prableen Bajpai, Founder, FinFix Research.

Even educated, working women tend to delegate money matters to their male relatives. “Women need to understand that personal finance is not rocket science. They can do it on their own,” says Preeti Zende, SEBI-registered investment advisor and founder, ApnaDhan Financial Services.

Here are six nuggets of financial wisdom to help you take charge of your money affairs and achieve financial independence:

Create contingency fund to cover career breaks

This is the first step in any individual’s financial planning process, but all the more important for women since the chances of having to take career breaks cannot be ruled out. The thumb rule is that you should set aside an amount equal to at least 6-12 months' household expenses in a fixed deposit or a liquid fund. “However, many women have to take career breaks due to pregnancy, child care, moving cities to accommodate spouse’s work commitments and so on. So ideally, they should have a buffer fund equal two to three years of their expenses,” says Bajpai.

Also read: Majority of Indians not prepared for job loss, debt repayment is a big worry: Survey

Have adequate life and health insurance covers in place

Besides an emergency kitty, the other tool to insulate yourself against financial crisis is insurance. You need an adequate health insurance policy to take care of your medical treatment should the need arise. Look to have an independent health plan even if you are covered under corporate or family floater policies. “Look to start with an individual cover of at least Rs 25 lakh – base cover of Rs 7.5 lakh-10 lakh and super top-up plan to take care of the balance amount. This combination will ensure lower premium outgo,” says Zende. If you have kids, buy a term insurance cover worth at least 10-15 times your annual income to safeguard their financial future in your absence.

Contribute to household expenses, but also create own assets

Women tend to focus on household expenses, ignoring the need to invest for themselves, say the financial planner. “Usually, women tend to take care of routine household expenses, while the husband’s salary is channelled into investments for the family. However, while women can continue contributing to their household budget, they should make it a point to allocate a part of their income towards creating assets of their own. Those who have no financial knowledge can start with the simplest of instruments such as bank or post office recurring deposits and fixed deposits,” says Zende. Those who are more savvy can start with an index equity mutual fund and hybrid mutual fund to start with.

Even if you are not well-versed with finance, you must make the effort to learn the basics of money management. “Take the time to learn about your money—explore savings accounts, investments, and budgeting tools. The more you know, the more empowered you’ll feel. Understanding your finances can give you a sense of accomplishment and control. And it might take some time, but you must persist,” says Bhuvanaa Shreeram, Founder, House of Alpha, an investment advisory firm.

Be aware of family’s finances, assets

During COVID-19, in particular, many families lost their breadwinners and did not have access to investments or life insurance policy details. It is important to keep yourself abreast of financial investments meant for your family and other assets to avoid such crises.

Women should seek information and be aware of the investments made for securing their families’ future. “Home-makers, in particular, should be aware of the nominations in investments made by their husbands. Women who have created their own assets, too, should ensure that their nominations are updated,” says Zende.

Besides nominations, it is also a good practice to make a Will to ensure your investments are used for the well-being of beneficiaries of your choice.

Also read: Breaking the glass ceiling: How women CAs have become their own bosses

Entrepreneurial aspirations? Plan ahead

The urge to take the entrepreneurial plunge is now not restricted to individuals with risk-taking abilities and resources. Many want to walk down that path now, inspired by the success of many a start-up in India. “Many women have entrepreneurial ambitions as the idea of turning their passions into business ideas and the freedom that comes with being your own boss appeals to them,” says Bajpai. Then, some would want to upskill themselves after a career break or when they seek a change in their work profile. If you, too, have such aspirations, set goals, make a financial plan and work towards creating a corpus.

Do not ignore your retirement goal

Finally, in the pursuit of the family’s well-being and happiness, do not lose sight of your own retirement goal. “The social fabric in the country has changed over the years. It’s not only men who have to plan for their retirement – this is gender-neutral. Women tend to focus more on investing for their children’s education. You must start investing towards this goal right from the beginning, irrespective of your personal circumstances – whether you are married or single,” says Bajpai.

Invest in a structured manner through systematic investment plans (SIP) in index, large-cap or diversified equity funds and be prepared to stay put, market volatility in the interim notwithstanding. While the estimate of ideal retirement corpus depends on several factors, the thumb rule is that it should be at least 30 times your annual expenses at retirement.