Financial planning for women

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This module has taken you through investment options for women, taxation for women, and some career planning, investing ideas and trading ideas for women. These are all key aspects of one big exercise - financial planning. When you take a closer look at it, women and financial planning could be natural allies, simply because women are often great at planning ahead.

And with more women joining the workforce, turning into entrepreneurs and participating in the market, the time is right to talk about women and financial planning now. So, let’s take a look at a few key steps that can make financial planning for women more fruitful and efficient.

1. Identify your goals

Identification of your goals is the first step towards proper financial planning. Planning your finances without a clear goal in mind can never be effective. At times, it can even be detrimental to your purpose. Since your life goals determine how you save and how you spend, it is crucial for you to identify them beforehand.

That said, here’s something that you need to keep in mind. Your goals include both the big and ambitious ones, like setting up a business of your own or buying your first home, as well as the minor ones like taking a long pending vacation.

2. Draw up a budget

Once you’ve identified your goals, the next immediate step that you need to take is budgeting. To successfully carry out financial planning for women, budgeting needs to be taken quite seriously. It is a tried and tested way through which you can not only reduce your expenses, but also save and invest more.

Start by outlining all of your income streams and all of your expenses. Once you’ve done that, focus on getting rid of unnecessary expenditures and allocating more of your income towards your savings and investments. This way, you would essentially be putting yourself in a better position to satisfy your goals.

 

3. Pick the right investments

Okay, so you’ve identified your goals and budgeted all your incomes and expenses. What’s next? Well, now comes the tricky part - picking the right investments. As you might already be aware, there’s no dearth of investment options in India.

However, not all of them carry the same level of risk or provide the same level of returns. And so, it is essential to pick the right investments that can help you satisfy your goals. For instance, if providing for your girl child’s future education is your goal, investing in a fixed deposit may just not be enough. Instead, the Sukanya Samriddhi savings scheme may be a better option for you to help you get closer to the goal. Your investments also need to be aligned with your risk tolerance levels.

4. Keep your financial plan flexible

Having a financial plan that’s set in stone can end up setting you back considerably. That’s why it is very important to keep it flexible. Having a flexible financial plan can help you account for life’s uncertainties in a much better manner.

For instance, if your financial plan is flexible, you can properly account for future income changes, keep up with inflation, and manage other volatilities like changes in the interest rates.

5. Account for the different stages in your life

This is another major factor that many women tend to sidestep. The different stages of your life play a very important role in determining your financial plan. And so, it is essential to account for them appropriately.

For instance, when you’re young and unmarried, you can afford to take more investment risks. However, your risk tolerance and appetite tends to go down once you’ve started your own family, rendering you unable to carry on with the same risky investments. Here’s where you would need to account for this change and switch up your financial plan to accurately reflect the stage of life that you’re currently in.

6. Be mindful of your taxes

No matter how solid your financial plan may be, not accounting for taxes can ultimately erode your returns. However, there’s an easy way out. Pick a healthy mix of investment options that can help you save tax.

This way, you would still be earning a handsome return on your investment, while still reducing the burden of taxes. For instance, life insurance plans like endowment plans give you the ability to create wealth while simultaneously allowing you to deduct the premiums that you pay from your total taxable income.

7. Revisit your plan each year

Once you’ve accounted for everything in your financial plan, it is important to revisit it periodically - at least once every year. Revisiting your plan allows you to make changes to it in accordance with the current market trends. It also helps you factor in new goals. For instance, you might have received a big bonus for your exceptional performance last year. How would you account for it without revisiting your financial plan?

Wrapping up

And there you have it. Following the steps outlined above can ensure that financial planning for women gives the expected results. With this, we’ve finally come to the end of this chapter on women and financial planning. But the journey of learning never ends. So, do keep reading and keep learning, with the other modules of Smart Money.

A quick recap

  • Identification of your goals is the first step towards proper financial planning. Planning your finances without a clear goal in mind can never be effective. 
  • Once you’ve identified your goals, the next immediate step that you need to take is budgeting. 
  • After you’ve identified your goals and budgeted all your incomes and expenses, you need to pick the right investments. 
  • Remember to keep your financial plan flexible and account for the different stages in your life.
  • Be mindful of your taxes and revisit your plan each year.

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FAQ'S

Ideally, you should revise your financial plan each year. You also need to revise your plan when there are any significant financial changes in your life, such as an increment or a new debt. And if you find that you are adding new goals to your list, make sure you revisit your plan and update it as needed.
Your risk appetite influences the kind of investments that you choose. Aggressive investors tend to choose high risk high reward options, while conservative investors choose more stable investment options. So, ensure that you factor in your risk appetite when you create your financial plan.
If you are unsure of where to begin, you could always approach a financial advisor or an investment advisor for some professional guidance on creating your financial plan. You can also seek expert guidance when you wish to revise your plan.
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