How does financial planning differ for Women?
Financial planning for women is slightly different than that of men due to some special situations in life. Women need to take more career breaks than men, be it for higher education, maternity, to take care of elders, professional relocation of their spouses etc.
What exactly is a career break? What way do you feel that the breaks that women take from their career are going to impact their finances?
A career break means a certain period without an income. This, in turn, is bound to disrupt regular savings and investments. Working Women tend to take many breaks to manage the special situations in their life. These breaks disrupt their regular earnings and in turn savings and investments. As such their long term wealth creation goes for a toss. But there is a necessity for women to create more wealth, apart from knowing as to how better they could manage their finances, as they outlive men. It's also a fact that many women who have got used to financial independence, when they suddenly quit their jobs, get into depression or trauma.
What are all the basic factors that women should consider when it comes to financial planning and management?
As there would be breaks in between, women should focus on building a contingency reserve. As the work life will be limited in many cases although life expectancy is much more, they should focus on building a substantial corpus for their retirement.
Special advice for Home makers
Every household will have cash surplus and every average housewife tends to consider only gold apart from cash .So they should understand that diversification is the key to reduce risks. Again when their spouses plan their retirement planning, they should insist that their life expectancy should be considered for planning better instead of husband’s, as women tend to outlive men. Mutual fund offer multiple avenues for short time investors too. So women could plan better understanding the different categories and options available to them.
How working women can benefit from Mutual Funds?
Mutual funds give ample options to an investor. Mutual funds are one of the easiest ways to start investing as it has a lot of flexibility that can suit their multiple goals, based on the risk profile and investment horizon one could tailor make it too, to build the portfolio. If the working women start investing 20% of their salary in mutual funds, they could save for all their life goals, even retirement. Say a working woman decides to start a SIP of Rs 5000. Then, after 20 years, she could have a total corpus of around Rs 50 lakh at a modest interest rate of just 12%. Most importantly, she could save a lot of time as you automate your investments and outsource decision making to a professional.
How can single mothers benefit from Financial planning?
Single parents and especially single mothers need to plan more prudently as both management of money and earning solely lies in their hands. Also they being the breadwinner should work on Income replacement plans like term insurance, Income protection plans like health insurance, Long term wealth creation planning while planning for escalating costs. Biggest goal is going to be funding for the children's education and that could be done through active and passively managed equity mutual funds. While doing this they should ensure that their Retirement planning is not at the mercy of their children.
Why should women invest in gold the mutual fund way?
Women get easily addicted to Gold as jewellery. Physical gold carries too much risk as safety is the biggest concern. Further, buying and selling too demands sizable making and labour costs. When you invest in gold, you need to invest in a minimum of 1 gram, which could cost thousands. With Gold MF, one can invest in smaller amounts of 500-1000. Through mutual fund ETFs one could save in multiples of one gram at that day's value in a flicker of second online and without any risk associated with physical gold. One need not worry about safety, storage, design or making charges.
How can women best tackle emergencies?
Firstly one should identify their average monthly expenses and set aside 3-9 months expense based on their job profile as contingency, further should split into liquid assets say like savings bank, fd, liquid, arbitrage funds based on their taxation as well. This would ensure more liquidity to face contingencies, simultaneously ensure that assets grow tax efficiently and further diversifies the portfolio. (ensure tax efficient growth of assets and diversification in the portfolio.)
Do you find any common feature in women and is there any general advice to overcome that weakness in women in financial planning?
Yes. Generally, Women tend to let men manage their portfolios. But as they outlive men, there is a necessity to learn how to manage finance independently. Further, many women are conservative in their investment approach.
How can we invest for our 6 months goal and 10 year goal in the same FD?
A proper financial planning makes sense to women. Further it helps in budgeted living and that is more important given the way many women work for shorter stints.