International Women’s Day: Why a customised financial plan, not a cookie-cutter approach, is key to financial freedom

You need to stay the course to see the result and that is possible when your financial plan is customized to your individual circumstance.

When charting a path to financial security, many women look for a simple template to achieve key goals. However, there are several unique factors that women need to consider while planning for their finances.

While there can be many pointers that are gender neutral, a cookie-cutter method of planning cannot be effective. Each woman’s financial situation, level of empowerment, relationship dynamics, support system and emotional baggage are different from the other. Therefore, what works for me will not work for my friend who is the same age and has a similar income profile.

Customisation is essential

A few years back a freshly retired woman came to us and wanted help with investing her retirement corpus.  She was very well read, confident and her husband knew of her interest in finances and was fine with her taking the lead and planning for the family.

She had a very conservative portfolio consisting of traditional investments like fixed deposits, PPF and bonds. When we explained that she would be spending close to one-third of her life in retirement and that shying away completely from equity would be a mistake, she was receptive. We showed her how volatile equity investments were historically and how her ability to stay put was an absolute necessity to start her foray into equity investing.

She had many questions and finally decided to move a part of her investments to equity mutual funds. We did not want her to make sudden changes and moved her along the path very slowly, starting with debt, moving to hybrid and eventually equity. The result has been that she has a large corpus now which will last for her lifetime.

She recommended one of her daughter’s friends to us. This lady was in her 40s and doing well professionally but she did not have many assets in her name. She was married but was unhappy in her marriage and wanted to move away from her marital home. She wanted to ascertain if her lifestyle could be maintained solely from her earnings. When we interacted with her, we realised that while she spent a large portion of her income on day-to-day expenses of the family, her spouse had saved a large portion of his income and had good assets in the form of house, mutual funds, PMS, etc, and she was not a joint holder of any of those assets.

She had to start from scratch and build an emergency corpus, provide some funds for her children and then save for her retirement.  As many of her goals were short term, a large part of her investments was in safer debt funds. She has only been able to set aside a tiny portion towards her long-term goals. Initially, she could not understand why we did not replicate the investment strategy of the person who referred her and invested solely to build wealth. Once she understood she was at peace knowing her financial situation and secure in the knowledge that she had taken a concrete step to set things right.

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Take life-stage and unique needs into account

Another young woman in her 30s who was referred to us had a toddler and was in a happy and secure marriage. She wanted to spend more time with her child and wanted to understand how her family’s finances would change if she decided to take a backseat in her career. She had a financially rewarding job, but it needed a lot of her time. Her husband was supportive of her decision when she took a break of 18 months.  During this period, she had to stop all her ongoing investments and restructure her current investments into some liquid funds to take care of her needs without being dependent on her spouse during her sabbatical.

She spent some part of her break to draw up a financial roadmap for the family and is happy that she is helping achieve their goals while being able to take care of the child.  She wanted clarity and steady progress towards her goals. This required different investments, asset allocation and monitoring than the other two women mentioned above.

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No one-size-fits-all

As you can see if any of them had decided to follow the others' example, they would have had disastrous consequences. It is therefore extremely important to take time to understand what you are trying to achieve with your finances and be conscious of the reasons for your choices. Chalk out your investment strategy, instead of following a template which takes your gender and age and tells you what to do with your money.  After all, money is a means to an end. Moreover, you need to stay the course to see the result and that is possible when your plan is customised to your individual circumstance.

Last but not least, it is important to keep in mind that the challenge a woman who is trying to traverse the path to financial well-being faces is very different from that of a man. Traditionally it is viewed as the responsibility of a man to ensure that the personal finances are sorted to give security and growth.  We have seen many women struggle to have a say in their family’s finances. In some cases, women do not even have an idea of where they stand financially, and this has led to a lot of misery and pain which can be easily avoided. Even for women who are in secure marriages, it is important to take charge or at least be aware of the family's financial standing.  This is especially so, given that life can throw many curve balls and estate laws at women.

The author is a Certified Financial Planner and Founder of Finwise Personal Finance Services LLP.  

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.