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Gain valuable insights into financial planning for women and empower yourself by taking control of your finances to secure your future with smart money management tips.
Gender inequality is still rampant when it comes to financial planning. It is still somewhat of a man's territory. Proper financial planning for women empowers them to take control of their finances
We often turn to our fathers or husbands when the tax season comes, thinking, "Oh lord, it's too complex for me to understand! Let them handle it."
Or when it comes to choosing health insurance or life insurance, most women tend to turn to their partners or male elders, assuming they are more knowledgeable about these things.
If you agree with these examples, you know it's time to change this mentality. It's imperative and essential for women to have a safety net. And that safety net is becoming smarter about money and learning financial planning.
Don't worry; we are here for you. Keep reading to learn the top tips about financial management for women to help you get started.
Why is financial planning important for women?
Well, why not?
Let us tell you a story. In a recent interview, famous television presenter Oprah Winfrey expressed her concerns about salary discrimination toward her male co-presenter. Her boss asked her, 'Why should you be paid that much money?
While the gender pay gap in the world is still a real issue, light should also be focused on the lack of financial education and more importantly financial planning for women.
Here's why it is so important.
Women Are Being Paid Less
We are living in the 21st century. Equality is discussed and practised in every aspect of life. Except when it comes to financial planning for women.
Men in India capture 82% of labour income, while women earn just 18%, according to the first-ever estimates of the gender inequality in global earnings presented in the World Inequality Report.
Even today, women in almost every industry worldwide are paid much less than men. But it is not something that can be fixed in the blink of an eye. Therefore, financial literacy for women is very prudent.
Navigating career goals amidst pregnancy and married life.
Financial planning for women becomes even more important when it comes to excel professionally while simultaneously embracing the transformative phases of pregnancy and married life, as it requires careful planning and consideration.
Even today, married women find it harder to get a job than the ones who are unmarried.
Many hiring managers and companies think that after marriage, a woman's primary focus is on her family and kids and not work.
So, this journey calls for effective financial management, open communication with partners and employers, and the willingness to adapt and make necessary adjustments. Here’s a money management guide for women for every stage of life.
Lack of Financial Literacy
Sad but true. Today, women are going to mars and moon, becoming doctors and saving lives, managing households, and running businesses, yet many women find it puzzling when it comes to financial planning.
Promoting financial literacy for women is essential for creating a more equitable and inclusive financial landscape.
It involves developing knowledge and skills related to budgeting, saving, investing, debt management and more. By enhancing financial literacy, women can make informed decisions, build wealth, and secure their financial future.
What are the 4 basics of financial planning?
Today, women are more financially dependent on men, mainly because of two key factors: lack of awareness about financial planning and ignorance. Before you begin your financial planning process, five core components must be considered:
Analyse Your Cash Flow
One of the most essential aspects of financial planning is analyzing your cash flow, also known as your working capital.
Deduct your liabilities or debts from your current assets or income to get your cash flow. Make sure your expense is less than your current asset or income if you want to reach your financial goal.
Life is full of sunshine and rainy days. While making your financial planning strategies, make sure you count on those rainy days because you don't know when life will throw a curveball at you.
It involves identifying, evaluating, and addressing various risks that can impact financial well-being, such as market volatility, job loss, medical emergencies, or natural disasters. It also involves diversifying investments to reduce exposure to a single asset or market.
By incorporating risk management into financial planning, individuals can safeguard their financial stability and enhance their ability to weather unforeseen circumstances.
Retirement & Insurance Planning
Retirement and insurance planning are essential for everyone, including women. Due to various factors such as longer life expectancy, career interruptions, and the gender pay gap, women may face unique challenges when it comes to retirement and insurance. It's crucial for women to be proactive and make informed decisions to secure their financial future.
The earlier you begin planning for retirement and securing insurance coverage, the better. Time is a valuable asset when it comes to building retirement savings and taking advantage of compound interest.
When you are hit by life's rainy days, you should have a readily-available emergency fund. Insurance policies can also help you in this regard. There are three key types of insurance:
- Term Insurance - It is where you can make your and your family's life secure in case you die or meet with an accident. This is one of the most affordable and sought-after insurance policies.
- Health Insurance - Your health insurance is like protection gear. If you fall sick and don't have liquid cash readily available, health insurance can help.
- ULIP - Earn money while protecting your family. This type of life insurance offers equity income, tax-savings facility, and life cover.
Tax planning is an important aspect of financial management for women. By understanding and strategically managing your taxes, you can optimise your financial situation and potentially reduce your tax liability.
There are many amazing ways for salaried women to save tax. The Indian government offers many tax relaxations and tax reliefs. Make sure you avail of those if you want to maximise your savings.
How can a woman become financially strong?
There are four crucial steps in financial planning. Learn the easiest way here:
1. Assessing your Financial Situation
Financial planning aims to achieve financial independence, which only comes from financial literacy. Before you do or plan anything, take a thorough inventory of your existing assets, liabilities, expenses, and cash flow.
The key areas aiming at financial independence for women are:
Household expense - Are you contributing to household expenses? If yes, how much money are you left with every month after your expenses?
Living & lifestyle expenses - Are you single or married? Do you have children? Based on the answers, find out how much are you spending on your overall living expenses.
Current tax situation - How much taxes are you paying? How are you managing your taxes?
Existing expenses and savings - Do you have any investments? It can be mutual funds, Insurance, Bank savings, etc. How much debt do you have? Debts include credit cards, loans, etc.
Do you have any financial obligations - Do you have to plan any wedding? Are you saving to buy a property? Do you have an emergency fund? How far are you from retirement?
2. Setting Financial Goals
Set your financial goals while you are planning.
Define how much money you are going to set aside for your new business, how much you will invest, and how much you are going to spend. Financial goals could include:
- Getting married
- Family planning
- Purchasing a property
- A good education for your children
- Staying compliant with tax rules
- Retire with good savings
Irrespective of your goals, make sure they are quantifiable and achievable.
3. Develop the plan & implement it
Based on your current liabilities, cash flow, and your financial goals, create an investment and debt-clearing plan that works for you. Make sure you take your risk tolerance and values in mind. Planning is easy, but the implementation of those plans can be hard. Maybe your financial planning includes:
- Increasing your regular savings.
- Getting a new or additional insurance policy.
- Investing in a new stock or mutual fund.
Be it anything; you do it at your pace. And if you need any assistance, we are here to help you get sorted.
4. Monitor and Review
Many people forget about this step or overlook it.
But regular monitoring and making the right adjustments are essential for ensuring your financial plans are still aligned with your needs and goals. At least once a year, review your plan.
Best financial planning tools
Financial planning tools have emerged as indispensable resources for anyone seeking to take control of their financial well-being. Here are some best financial planning tools you should consider incorporating into your financial management strategy:
- Budgeting Apps: Apps like Mint, YNAB (You Need a Budget), and PocketGuard help you create and track budgets, monitor your spending habits, and categorise expenses.
- Expense Tracking Tools: Expense tracking tools like Expensify and Everlance help you keep a record of your expenses, whether for personal or business purposes.
- Investment analysis platforms: Morningstar, Yahoo Finance, or Google Finance offer comprehensive data and tools for analysing and monitoring investments.
- Tax Planning Software: Tax planning software such as TurboTax or H&R Block provides guidance and tools to help you navigate the complexities of tax preparation.
Habits that financially successful women practice.
Take baby steps toward fulfilling your financial goals. Small and sensible should be your approach to gain maximum stability.
Since women are the ones who take a break from their careers, either to plan a family or to take care of kids and elders, they need to be financially stable and secure.
You should not depend on your spouse or kids to take care of you. Take charge of your future with the right financial planning tips.
Here are some quotes by financially successful women to empower your financial planning journey.
1. Allocate A Budget:
Financial planning is incomplete without a proper budget. Based on your monthly or annual income, plan your expense-investment-leisure ratio.
The best way to start is: 50-30-20. It means 50% you spend on living expenses, 30% and 20% to live life queen-size.
Smart women figure out what exactly makes them happiest, they spend generously on those things but cut out the rest.
-Laura Vandekaram, Author
2. Create A 'Do Not Touch' Savings Account
Women need to start saving sooner and more! While you invest and spend your money based on your financial plans, make sure you keep some money in your savings account.
Set a particular amount and save it in your savings account every month.
Do not touch this money unless it's an emergency. Saving account because of its high liquidity. You can debit money at any time. This is essentially your emergency fund. This money is only for you.
Step one is literally putting this 'peace of mind' fund in. Just identifying that tomorrow if I don't have a job, what are my expenses that'll still continue.
-Dipika Jaikishan, COO & Co-Founder, Basis
3. Voluntarily Get Involved In Your Family's Financial Planning & Discussions
Get to know your family finances intimately. Do not move away when your parents or spouse is budgeting. Take an effort to review all the bills and accounts regularly.
Take charge of bill payments and other financial responsibilities. Be fearless to share your opinion.
Don't think that your thoughts don't count, or maybe you'll say something wrong. Remember, you run a household with your intelligence and smartness. If you can do that, you can do this also.
Everyone does have an ability to learn the financial markets, it's just whether you are willing to learn or not that will decide which side you are on.
4. Educate Yourself
Financial literacy for women is the foundation for financial freedom.
So, what is the right approach? Take time out from your busy schedule to study personal financing, budgeting, and money management, surf the internet to know more about the stock market, research popular investment methods, and familiarise yourself with various financial schemes.
If you feel overwhelmed, seek professional help and insist on learning.
Financial literacy can help you make smart investments, without having to be frugal. Secure your tomorrow without compromising on your dreams today. Educate yourself, educate others.
-Palki Sharma Upadhyay, Editor, Firstpost
5. Cancel High-Interest Credit Cards
Certain debts are good for you financially, like home loans, as they offer tax relief.
But there are some debts, like credit cards, that are extremely harmful to your financial health. Credit cards charge as high as 40% interest if you have a pending balance on your bills.
Falling behind on credit card bill payments can badly impact your credit score and eligibility to avail of loans in the future. So, identify those credit cards and eliminate them at the earliest.
I have a straight rule that, unless I can afford to buy that thing outright in cash, I shouldn't be buying it with any kind of debt. Remember credit card companies want you to be bad with your finances because that's how they make money.
-Nischa, Personal Finance Expert & Youtuber
6. Move From Traditional Savings Methods
Traditional savings methods like bank FDs, recurring, and purchasing gold ornaments are safer, but they do not yield good returns.
So instead, invest in mutual funds through SIP, bonds, and corporate FDs, and gradually share the market if you are confident and knowledgeable enough.
As for gold, avoid buying jewellery as a form of investment. They are depreciating assets. Instead, put your money in digital gold, gold bonds, or sovereign gold bonds. They give you a satisfactory return on investment.
Women have a lot of comfort factors. And all we are recommending right now is, instead of saving money in your cupboards and jars, do it the smarter way. Set up an online banking account, put in your savings there because that becomes your entry point into other smarter investment tools.
-Priti Rathi Gupta, Founder, LXME
7. Plan Your Taxes
Tax is a major hurdle in the road to securing your future. But it is important to be a responsible citizen.
So what do you do? Practice tax-saving regularly as a part of your financial planning. Invest in Public Provident Fund (PPF), purchase National Savings Certificate (NSC), National Pension Scheme (NPS), or tax-saving mutual funds etc. Also, home loans, housing rent, and kids' education bills also offer tax benefits.
Tax discussion is something many women like to avoid. Stop doing that! Be knowledgeable & stay informed! It is an essential step to being financially independent.
In today's day and age there is no major difference in terms of earning an income as far as one's gender is concerned. Tax slab elements are also similar for both men and women. When it comes to tax planning women are not very educated in terms of tax limits. It's important for women to save taxes and they should start tax planning from day-one.
-Pooja Bhinde, Certified Financial Planner
8. Plan Your Retirement
It's high time you take control of your future. If you don't take charge of your personal finance planning and money management today, you will not have to depend on your spouse or children when you retire—plan for your retirement as soon as you start earning. Every penny you save today will be gold for you in your old age.
Investing in mutual funds, PPF, and NPS until you hit 60 can assure you to retire rich with crores of rupees in your bank account. So, manage your money carefully.
Money will help us in the future, to sustain that same lifestyle when we are no longer working. So we need to treat our money the right way and multiply it.
-Gurleen Kaur Tikku, Founder Hareepatti
9. Take Advantage Of Special Policies Created For Women
In India, there are special policies for women and women entrepreneurs. From fewer interest rates on loans to special rewards – take advantage of all these benefits.
Govt. of India has MUDRA Loan tailor-made for women entrepreneurs.
Other women-centric schemes like Cent Kalyani Scheme, Mahila Udyam Nidhi Scheme, Annapurna Scheme, Stree Shakti Scheme etc. are made for women entrepreneurs.
Women applicants can enjoy 1-2% less stamp duty on home loans and 0.05% less interest rate.
Special premium rates on health and term life insurance.
The Union Budget will be an inclusive one that will benefit all and especially focus on women. New small savings scheme has been announced for women - Mahila Savings Certificate for 2 years up to March 2025.
-Nirmala Sitharaman, Finance Minister
- Financial planning for women is essential as it empowers them to take control of their finances. As the gender pay gap still persists, it makes financial literacy and planning even more important to secure their financial future.
- Pregnancy and married life can pose challenges to women in achieving their career aspirations. Therefore, it is crucial to diligently plan and manage finances well in advance.
- The four basics of financial planning for women are analyzing cash flow, risk management, retirement, insurance planning, and tax planning.
- Financially successful women practice habits such as allocating a budget, creating a 'do not touch' savings account, getting involved in family financial planning, educating themselves, canceling high-interest credit cards, and exploring alternative savings methods.
- Women can benefit from special policies and schemes created for them, such as lower interest rates on loans, special rewards, and premium rates on insurance.
Overall, financial planning empowers women to be financially independent, secure their future, and make informed decisions about their money.