Most of us feel that men are born with the knowledge to manage money. Cooking supposedly comes naturally to women. Come on ladies, we hate being stereotyped! As a financial advisor and educator, I meet more men than women and can tell you with authority that men really need your help in managing finances.
Let me show you how with this conversation with Miss WWP, who is a working woman professional.
Men commit common investment mistakes
WWP: So why do you believe men need help?
Me: Men love chasing trends. They invested in gold when it was Rs 55,000 per 10gm (expecting that it will touch Rs 1,00,000 per 10 gm). But now it is down to Rs 48,000 for 10gm – a drop of 13 percent. Yes, you heard it right; gold prices can fall. Then, they invested in bitcoin. All cool dudes are doing it. If Elon Musk can, why can’t they?
WWP: He has made a cool 50 percent return in a short period and is looking at investing more. Such a genius to put our money where it grows fast.
Me: Alas, Bitcoin is not regulated in India and chances of it getting banned are very high. A concentrated exposure means a large amount of money is at risk in one instrument.
WWP: Ok, but he is making money through stock trading. He is perennially stuck to his devices, checking stock prices and having animated discussions with his friends about it.
Me: How much return does he make? To generate consistent long-term returns is not easy for lay investors, who do not have access to detailed information on a company. The friends do not know better either. All of this is just speculation. Have you considered investing in mutual funds? There is a professional fund manager investing your money; you get access to many more stocks and there are tax benefits as well.
WWF: But mutual Funds are so confusing. How does one choose a fund and anyway the returns are very bad. Instead, we have some long-term insurance policies and the office-provided cover.
Me: The employer’s cover may not suffice in case of a large health issue. Also, Endowment, and money back policies do not give more than 4-5 percent return, which means they do not beat inflation. So, your money is not growing. Mutual Funds on the other hand come with lower cost and have given great returns in the long term.
WWF: Come on, I know he is managing our money well! Otherwise, we wouldn’t be able to live well, take vacations and send our kids to the best schools.
Simple products for retirement
Me: So are you saving for retirement?
WWF: Oh, that’s 25 years away and the EPF will take care of our retirement.
Me: If your monthly expenditure is Rs 1 lakh, then you need a retirement corpus of Rs 6 crore and EPF alone may not be able to cover that. Hence, you need to start investing more for retirement. Do you know if you can?
WWF: No, I do not know and will need to check with him. We have structured our finances in such a way that my salary is primarily used for expenses and his salary is used for investments.
Me: This means you don’t have much money in your name. Does that make you feel good? What if you need to support your parents or god forbid things don’t work out between the both of you? Or, if you want to start something of your own or do something on your bucket list? Would you be happy to ask for money from your spouse even though you are earning?
WWF: No I wouldn’t like that. So how can I start being part of money management in the family?
Me: Take a vow to be involved. First list all the expenses and see how they can be reduced. You should be investing at least 40 percent of your combined take-home salary. Work with a financial planner or use a goal planning tool to figure out how much you need to save for financial goals such as children’s education, retirement etc. Invest in simple products: mutual funds, PPF and NPS for these goals. Finally, keep your financial life simple and keep a check on documents.
Ladies, don’t just naturally assume the men know it all. Men and women make common investment mistakes.
They chase trends, do not follow a structured financial plan, nor invest for long-term financial goals, have too many loans, stay underinsured – these are all common blunders many men make. Just as you provide the balance in every aspect of life, do so in the case of family finances as well. Be equally involved and committed.
Happy Women’s Day 2021!