Ladies Special: Smart investment strategies for every stage of life

Balancing your financial decisions is the key to having enough.

In every stage of life, you meet a different you. This is true when it comes to managing your money too. As your aspirations and goals change, the quantum money you need and the reason for that also changes.

Building wealth is not just about choosing the right stock or mutual fund,  but a set of actions which tie in with one’s financial situation. Building wealth is a marathon, not a sprint, and a lifetime of financial discipline can help accelerate things.

Women face unique situations at different ages, and here are some focus areas that can get them on the path to financial stability.

Women in their 20s

For many, starting to earn means the freedom to spend as you wish. This is often confused with financial independence — which is having enough money to meet your financial needs and goals. This newfound freedom and the many temptations to splurge can leave women with very little savings.

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Hence, one must focus on saving 30-40 percent of the take-home salary, which can only happen by tracking expenses and staying away from buy now, pay later (BNPL) schemes, and avoiding personal / credit card loans.  This can also help build a good credit score, which you need to buy that dream house.

Most women in their 20s would baulk at the thought of saving for a financial goal, but starting early can help build a large corpus. Rs 10,000 invested every month at an RoI (return on investment)  of 12 percent per annum can grow to Rs 1 crore in 20 years. But the same amount invested 10 years later will only yield Rs 23 lakh.

Women typically reach out to family members for financial guidance, which can be very conservative as they often advise investments like FDs (fixed deposits). Instead, women  in their 20s can consider starting a SIP in a Nifty 50 index fund as they are young and can take the risk.

Just married

Women are hesitant to talk about money matters. But it is important to get into a relationship knowing fully about the partner’s financial life and habits. Because going ahead, both parties must be equally involved in money management to protect against any future uncertainties,  and assign financial responsibilities between themselves.

Also read | Assets managed by women fund managers double to Rs 13.45 lakh crore in a year

This is also important because many women give their income to the husband to manage, and even take on the burden of repaying the  partner's loans.

Women in their 30s

The 30s is when you need to accelerate your wealth-building. But before that, women should plan for emergencies by having an emergency fund equivalent to six-nine months of essential expenses. Further, home ownership should be considered only if a down payment of 30-40 percent of the price of the flat can be made.

In case the loan is taken jointly with the partner, ensure both contribute  equally to the EMIs. Given the additional responsibilities of children and dependent parents, ensure that you have a large life insurance cover and take top-up health covers, over and above your regular medical insurance. Focus on having adequate cover.

Work with a financial planner to structure a plan for all your goals, including children’s education and retirement. Long-term goal values are usually large, so ensure that your corpus has about 30 percent equity allocation as that can offer the best long-term returns. Increase the amount invested annually and stay invested for the long haul to ensure that your corpus compounds the quickest.

Also read | How women can leverage credit scores for financial independence

The 40s

The 40s need to be about maximising wealth. If 50 is the desired retirement age, you need to focus on reducing / closing loans and figuring out  plan B, where one may not earn as much as one did, but  one is mentally engaged and earns enough to take care of routine expenses.

For a comfortable retirement, being clear about where your money is going to be spent and ample health  cover are paramount. Children’s education / wedding expenses can drain the retirement corpus, and getting your children to contribute to these expenses can keep finances under control.

Also read | Indian women now prioritise retirement and travel, planning for kids’ weddings takes a back seat

Ultimately, balancing your financial decisions is the key to having enough.