A sound financial plan is crucial and a basic necessity for all at every stage of life
Over the last few decades, Indian women have emerged from their houses to become earning members of the family. They have juggled their family and career commitments exceedingly well. However, when it comes to managing finances or taking financial decisions, they tend to look up to their fathers, husbands for guidance and approval. The hesitation is mostly due to lack of knowledge or experience.
To put it plainly, the fundamentals of investing are no different for women; so you have to plan your investments, execute the investment plan and track it regularly.
Starting on this financial journey may often seem a complex task on your own, so
taking financial advice from a professional you trust can help accelerate your journey towards financial independence.
Here’s a checklist that can help you get started with financial planning:
Understand your net worth : Understanding your net worth is the first step towards your financial planning. An individual's net worth is simply the value that is left after subtracting liabilities from assets. An asset is anything owned that has monetary value which includes savings account, stocks, real estate while liabilities are obligations otherwise known as debt. Examples of liabilities, include loans of all kinds (home, car, personal), credit card balance. So, (Net Worth = Assets – Liabilities). It gives a clear picture of your overall financial health. But you should also keep in mind that it's not an overall indicator of your financial success or failure. Instead, you should use your net worth to track your progress periodically and work to improve and increase your net worth and assets over time.
Emergency Fund : The unforeseen — an unexpected expense, a costly home or automotive repair, job loss, etc. — may happen at any time. And if it does, it’s best to have an emergency fund from which to draw to cover your expenses. An emergency fund is a fund that should help you carry on with life and meet your obligatory expenses without opting for last-minute unplanned loans, withdrawing from retirement account, overutilizing your credit card, or selling and mortgaging your existing assets. The general rule of thumb is to keep in reserve an amount equal to three to six months of recurring expenses. The corpus must be large enough to generate an income adequate to take care of the basics. There must be enough money to pay for rent, food, utilities and education and perhaps leave a small surplus for indulgences. And most importantly, it shouldn't keep getting depleted. Instead, it must grow over the years, ideally at a rate that beats inflation.
Health Insurance : Health insurance protects your savings from getting drained in the event of a medical emergency. Remember, a medical emergency can occur anytime, irrespective of your present good health or disciplined lifestyle. Therefore, it is important to have forethought and protect your family and self from any unexpected medical situation. Be prepared and stay financially protected to deal with health-related risks in advance.
Term Plan: Accidents and disasters can and do happen. If you aren’t prepared, it could cause huge financial struggles and setbacks. Term Insurance is one way to ensure that your family has some financial support. It helps cover your loved ones' expenses with a lump sum benefit in case of your sudden demise and you get the reassurance of knowing they’ll have resources to help carry on without you.
Estate Planning : You want to be sure you and your family are legally and financially protected in case of any unfortunate and unforeseen eventualities, even if it doesn’t happen until much later in life. That means getting a legally sound will, along with powers of attorney (general POA and health POA), and advanced medical directives. Be sure to review these documents periodically and adjust them as your circumstances change. Organize and protect your assets/estate with your family’s needs in mind, to achieve seamless intergenerational wealth transfer and ensure a harmonious succession and disposition of your assets.
Realize your goals and invest accordingly : The most important thing to do while you sit down to plan your finances is ask yourself why you want to invest. It could be a desire to set up your own business or your child's upbringing or any variety of objectives. For this you need to list down exactly what you want to achieve, the time frame over which you want to achieve the investment objective and the amount of money you want to invest. If you find this a little too detailed and even unnecessary, remember it's important for you or any financial consultant to know this so that a well-defined investment plan can be prepared. It's a bit like telling your doctor everything so that he can prescribe the right medicine.
Retirement Fund : The next phase of life may still be decades away, but it’s never too early to start setting aside some of your earnings for down the road. The harsh truth about retirement is that most people run out of money too early. If you are among the majority of people who rely on their accumulated savings for contingency planning and retirement planning, you could be in for a rude shock when inflation rates catch up to you in your old age. Research has proved that women live longer than men. Women also have a shorter work life than their male counterparts with many leaving their careers to care for their families. So there is a need to build a larger retirement corpus with limited resources and time to to live comfortably during what could be a lengthy retirement, while also potentially offering support to children and ageing parents. So, create a rock-solid financial plan. Be sure to take advantage of any retirement plan matching contributions offered by your employer. Long term compounding has never gone out of fashion and there are many instruments available to get a good lifelong income post-retirement. After all, a comfortable and relaxed retirement is what you deserve.
Women must take charge of their personal financial wellbeing and excel in money management, just how they’re doing in other fields. If your finances are in order, you are in a better position to care for your loved ones and pursue your dreams.
Wishing you the best on your journey to financial independence.
TheNerdLife ❤❤❤
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