Women must participate in financial planning in order to live their daily lives. Unfortunately, the majority of women blindly shun all types of financial planning. However, there are a number of compelling reasons why women should handle their finances.
1 Achieving Financial Freedom:
A woman who is financially independent is not reliant on others for support. Thus, it improves women's sense of worth and respect for themselves.
2 Preparing For Emergencies:
Emergencies are a part of life. Negative events abound, ranging from health to fatalities to accidents. Women must therefore prepare for these unforeseen setbacks by saving money in a contingency account.
3 Marriage & Parenthood Bills:
Two significant turning points in a woman's life are marriage and motherhood. Women today no longer rely on their parents to pay for their weddings in two-income families; instead, they contribute financially to their children's upbringing.
4 Spending on Higher Education:
A woman may also aspire to pursue greater education in order to secure a better job position. She might also desire to change occupations, for which she would require the necessary training. Therefore, careful financial preparation is required in order to prepare for these situations.
5 Taking Career Breaks:
Any lady might want to take a break from her job. But if she does, there won't be a consistent source of money. She will therefore need to prepare for this time. Additionally, taking a career hiatus could come with extra costs like tuition for skill-upgrading classes.
Components of Financial Planning:
1 Setting Financial Goals:
Your desired outcomes in terms of money are determined by your financial goals. Short-term, medium-term, and long-term financial goals are the three different categories. These objectives could include acquiring a home, going on an international trip, or engaging in a certain way of life or activity. A financial plan's first element is having a target in terms of money.
2 Identifying your baseline:
The second step in your financial planning is to assess your current situation. To do this, determine your starting position or net worth. You can determine the baseline from which to start by deducting your assets from your liabilities. Assets include money in banks, stocks and bonds, real estate, jewellery, etc. Credit card debts, loans, mortgages, and other obligations are liabilities.
3 Budgeting your Cash flow:
The next step is to evaluate how you are presently spending your money. Consider your spending patterns and your means of subsistence.
4 Emergency Fund:
As said before, emergencies can happen at any time. Ideally, you should aim to have enough money in your emergency fund to cover six months of no income. Save this cash in liquid assets to make accessing it simple for you.
5 Retirement Plan:
When making financial plans, women often are unaware that they live longer than men. As a result, they will typically need more money to cope with living without a salary. As a result, making a financial strategy must include retirement planning.
Steps of Financial Planning:
1 Allocate a budget:
Create a customized budget based on your goals and the timeframes you want to attain them, taking into account your monthly or annual income. Starting by applying the 50-30-20 guideline is a smart idea. Spend 50% of your monthly take-home earnings on food, 30% on savings and investments, and the remaining 20% for living like a queen.
2 Take charge of fixed expenses:
As the name implies, there is little chance that your fixed expenses will alter anytime soon. They consist of things like insurance, rent and EMI. Decide on a limit and rank your spending in order of significance. The majority of your budgeted expenses will be fixed costs. You can reduce your fixed expenses by moving into a home that is less expensive or by prepaying a loan.
3 Restrict variable expenses:
You risk falling into a financial hole if you don't keep track of variable expenses, which might include things like unavoidable travel, phone, and internet costs as well as impulsive purchases and nights out with friends. You don't have to forego the pleasure, but if you have long-term goals like establishing your own business or buying a house, you may want to consider about budgeting your money more carefully.
4 Put technology to use:
There are several budgeting applications available today that may help you stay on track with your finances, reduce your debt, organize all of your investments, and even invest any extra change from your shopping trips. Technology may be incredibly helpful, especially in this day and age when practically everyone has a smartphone.
5 Optimize investments:
Saving money alone is insufficient. Additionally, you must choose wisely when investing. Not only must your investment portfolio outperform inflation, but it must also produce enough wealth for you to achieve financial independence as soon as possible.
6 Plan your tax outgo:
Make sure you get the most out of any investing and tax-saving opportunities that are available to you. There is a product for everyone, including the Public Provident Fund and the Equity Linked Savings Scheme. You are eligible for additional deductions if you are a current homeowner.
7 Plan for the long-term:
You can't merely focus on the upcoming months or years anymore. Your investments must be planned such that, should you decide to retire, you may do so comfortably. You can take charge of your own future if you have access to a Demat Account.
Conclusion: From the above information we conclude that, financial planning for women is very important for them. A few issues and topics that every woman should consider were discussed. Every women should make financial planning a priority in their daily lives and put it into practice.
The above article has been written by Mr. Omkar Bandivdekar (CMA Aspirant) and reviewed by Mr. Suyash Tripathi (Chartered Accountant) and they can be reached at email@example.com and firstname.lastname@example.org .