Women and money can meet and make wonders. If one looks at successful entrepreneurs in India, and women honchos running blue-chip firms, one would get the picture. If you think this is just another gender-biased article, let us assure you, it is not.
Money is always a complicated matter not merely because it is difficult to earn, but due to the challenges in saving it. Whenever a financial adviser is approached by men and women, their response to them differs, even though their requirements might collide. Before we talk about financial planning for women, there are a lot of myths that need busting.
Myth 1: Financial planning — what is that? Most women love to shop (and many men, too!):
The biggest myth of all, is women do not understand financial planning. This is because they do not interfere in financial matters unless they think the need to do so. However, if you go by their daily routine or shopping preferences, you will understand that women are prudent about shopping — buying things at rates that suit their pockets. Not just that, they time their purchases to perfection, just like in the stock market, ‘buy low, sell high’. They are the perfect managers of their homes, which remain inflation-free (due to bargaining) most often than not.
Myth 2: Women are huge spenders:
This is because of their frequent habit of shopping. However, one fails to notice that their spending might still be lower than men's. Men usually buy stuff every three months or more, but these comprise electronics, luxury items such as watches, etc. in addition to other daily habits some men are addicted to, viz. liquor, cigarettes, pan masala, etc., which are in effect wasteful and harmful expenditure.
Myth 3: Women are poor decision-makers:
Nothing could be further from the truth. Give women a budget for the month and they will spend and save more wisely than men. This suggests that women work on an extremely tight budgets-be it working or household, even then they can accommodate everything from a child’s education to festival celebrations and medical expenditure of parents to even family vacations. They understand their needs well and have their objectives. Thus, when it comes to financial planning, women may create the ultimate portfolio keeping clear objectives in sight.
Does this mean women are perfect? Of course, they aren’t just like men who aren’t perfect either. Let’s share some tips for financial planning with the woman who can balance her home budget and save, too.
Emergency fund: Women are often dependent on their spouses for house or retirement savings. In this dependency, they ignore the bitter possibility of a separation or death of the spouse. In such unfortunate events, they might be exposed to heavy financial requirements in a short time. Therefore, it is vital that women build an emergency fund to cater to such emergencies and thus keep their future worry-free.
Most working women are forced to take frequent breaks from work on account of maternity leave or the spouse’s job switch or to raise children and care for the elderly. This may put a brake on their incomes for a certain time and may affect liquidity. What should a woman do then?
1. Take a calculated risk: Women are known largely for their risk-averse nature. Therefore, any investments they make, are the least risky. This is because of the security of receiving the amount back when the same matures, even if the return is minimal. Wealth creation is a subject of long-term investment with a mixture of moderately risky and low-risk instruments. Investing only in low-risk instruments may leave you well short of your desired objective. Low-risk equals low gain. Therefore, when the time comes, you may end up significantly short in your wealth creation. Conversely, low risk will provide leverage in case of poor performance of a high-risk instrument and safeguard your investment.
2. Save more than your spouse: Today, in many sectors, there is a huge pay gap for the same work, due to gender bias. Women often earn less than men and this creates an additional burden in saving money. Imagine a woman earning 30,000 per month and saving 10 per cent of it against a man with the same qualification earning 40,000 per month, but saving only 8 per cent. In the given scenario, a man saves 3,200, while a woman saves 3,000 only. This 200 at the beginning might look negligible, but considering the power of compounding every month, the figure becomes incredibly high.
3. Longer life expectancy: Most surveys have said that women have longer life expectancy. This raises their retirement savings. A higher retirement corpus might be ignored by many women. However, they must understand that a longer life span would mean a longer requirement of funds. The life span of women might be higher, but the retirement age for both genders remains the same. Hence the income age is fixed for both men and women. Considering this fact, women should start saving early and stay invested for a longer time.
4. Understanding your husband’s finances and debts: Men are more responsible here than women. It is their belief (at least many subscribe to that) that makes them keep women a part of financial planning. Human life is subject to various uncertainties; any mishap can jeopardise the best laid out plans. The wife or any other close relative is whom the family turns to when the husband is incapable of all the finances of the family. This makes it even more critical that women should be aware of and know what kind of investments are active and also, the debts incurred and pending, too. Staying in touch with one’s spouse’s finance is necessary as well as monitoring them.
(The writer is Founder, Money Mantra — a personal finance solutions firm)
