Invest in regular health care program and for the long term
to create wealth and lead a stress a free life
Today's women are juggling between high-pressure work
environments, fast-paced social life and simultaneously managing the family,
which can sometimes put money management on the back seat. A few money
management mistakes if avoided in the earlier part of life can help women hand
carve and secure a financial future. It is advisable that they start their
financial planning journey with the help of an advisor, who will help in
drafting a customized fiscal road map, ensure optimum asset allocation as per
the risk profile and simultaneously help in the execution of the investments.
The seven mistakes that a woman should avoid being financially
independent are
1. Not
having a contingency reserve of six months expenses
2. Not
investing regularly in a diversified portfolio with the right asset mix as per
the risk profile
3. Not
creating a retirement corpus Not creating a sufficient corpus for children's
education
4. Not
protecting against risks to health and life by buying sufficient health and
life insurance
5. Spending
too much in impulsive purchases & not keeping avoidable debt under control
and
6. Being
too dependent on the male members of the family like husband and father to
manage finances and being oblivious of the process is a fundamental flaw which
should be avoided
7. Being
financially literate is not a choice today but a necessity.
Have an
emergency fund
The blunder of not having a six months contingency reserve in
the bank account / liquid funds may have dire consequences in case of job loss
or medical emergencies. Having a contingency reserve allows bouncing back in
case of any eventualities.
Diversify your
investments
We all know the importance of "Not keeping all our eggs in
one basket" and so investments need to be diversified. While it is
important to start investing early to take advantage of the power of
compounding, it is more important to ensure the discipline of continuity of
regular monthly investments. Systematic investment plans (SIPs) in mutual funds
are a smart solution to this.
Health, wealth
and happiness
Retiring from work is obvious, but many women fail to plan for
post-retirement. Starting retirement savings in the early part of life leads to
a larger retirement corpus, which eventually provides for better
post-retirement security. Being frugal and cautious by nature, women prefer to
keep money in a savings bank account or make investments earning a fixed rate
of interest. A higher allocation to equity generally results in building a
larger retirement corpus, though the right mix should be identified after
speaking to your financial advisor.
The same is true the women who are mothers. Their biggest prized
possession is their child and there the most important goal is the child's
education. Higher education costs are growing every year and regularly
investing in equity mutual funds through the Systematic Investment Planning (SIP)
route and increasing this amount regularly as incomes grow, after discussing
the exact amounts needed with the financial the planner is a good solution to
achieve this goal.
Life is unpredictable, but managing finance well isn't. The
importance of life insurance and health insurance is paramount. Empirically it
is seen that women, in general, live longer than men, which increases the
importance of health insurance.
Expenses from activities like frequent dining out and impulsive
shopping, using credit card borrowings, may lead to a ballooning of debts and
then into a debt trap and realization often comes late, when actually one
starts checking the interest charged on the credit card statements. It is
important to stick to a monthly budget, and as soon as one receives the monthly
income, transfer 20 to 30 % to a separate bank account for investments. Also,
many mobile apps are now available, which help in tracking monthly expenses and
also show the trends in spending. Expense control is a critical step in wealth
creation. It is rightly said, "A rupee saved is a rupee earned".
Inheriting money from father or sometimes after the unfortunate
death of the spouse generally leads to the acquisition of a large chunk of
money. The vulnerability at that moment is also high. It is advisable to
protect and invest such corpus wisely, after taking advice from a legal
counselor and a financial advisor or getting in touch with a wealth management
firm, who provides a 360-degree service.
In a nutshell, every woman should keep this mantra of HWH
(health, wealth and happiness) in their mind while participating in the race of
life. Investing in a regular health care program, investing in the long term to
create wealth and living a stress a free life should be the essence for today's
modern women.
The writer is CEO of Karvy Private Wealth
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