When it comes to money, women are believed to be wiser in handling matters related to it. It does not matter whether a woman is a homemaker or a working professional, she always appears to have an upper hand on knowing how to manage expenses within a budget. Still, there are times when a financial urgency can expose the limitations of all individuals, including women. For those unpredictable times, women must inculcate the important skill-set of financial planning. That apart, in general, financial independence is not a choice anymore for young women but a basic tool for empowerment that enables them to make their own decisions.
Here are 5 go-to tips on financial planning for women, which would help them manage their money matters better:
Tax planning: Effective tax planning is not just minimising taxes. It is also about maximising your savings after-tax returns. Three basic strategies for an effective tax planning are timing, income shifting and conversion. Educate yourself about the taxes you are paying. TDS affects the in-hand salary of working professionals.
Financial goals: It is important to set realistic financial goals for the future. But how do you do this? First, make sure your goals are attainable. If you have set a goal to save more money every month than your monthly income, you are bound to fail. Financial goals also need to be specific, not generic. Instead of saying “I‘ll save more money”, say “I will save Rs 1,000 more per month”. Another important aspect of setting up a goal is its deadline. Deadlines are always sacrosanct. Do not procrastinate.
Emergency fund: While setting up a long-term goal, create an additional emergency fund to attend to urgent needs and unexpected expenses that may arise along the way. Financial experts recommend at least three months' of living costs in an emergency fund. Even if you can't afford a large sum, build a pot of cash with small but regular savings.
Health allowance: The millennials believe in living today and spend heavily for that. Stop doing that. Start saving for healthcare, which should include critical illness and disability benefits in old age. Also, try to set aside a separate fund for family members.
Retirement planning: Once you have secured your and family's healthcare and other immediate needs, start planning for your retirement. Ideally, retirement planning should start in the thirties and invest in that fund should be for a lifetime.
With a good financial strategy, women can balance income against expenses and fulfil their goals like travelling, buying a house and preparing for an early retirement.