Today, many women are ready to take charge of their financial lives. Women are contributing to household finances and enjoying financial independence. Remember, there is a difference between financial independence and financial freedom. Financial independence is taking care of all your personal expenses at present. Financial freedom is being able to live your life on your own terms. You can maintain your lifestyle across life-time till retirement.
Men may plan for their retirement, but do they plan for spouse’s retirement? Women generally live longer than men. Retirement Planning is very important for women, though it’s challenging.
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Most women get lesser pay for the same job. This makes financial planning all the more important. Without financial planning women can’t achieve financial goals. Financial goals set a target like buying a car in 3 years or a house in 10 years. Women can’t save, invest, spend or borrow wisely without sound financial planning.
Financial planning is all about setting a target and the money and time allocated to achieve it. If a woman is earning less, she takes more time to achieve financial goals, vis-a-vis male counterparts.
Women more often than not, take more career breaks than men. This could be at marriage, taking care of the kids or even older family members who are ill. Women may give up their jobs when the spouse gets transferred. Getting back to a job after a long career-break is not easy. It also means a lesser salary.
This is where financial planning is important for the women who take many career breaks. Women must diligently save and invest when they have a job. You never know when you need the money in tough times.
See Also: Golden Rules of Financial Planning
Women have a higher life expectancy than men. Men have an overall life expectancy at birth at 69 years and women are expected to live for 70.4 years according to the latest Sample Registration Survey for 2013-2017.
As women live longer, they need more money at retirement. There would be higher medical expenses and living expenses. This calls for sound financial planning which includes investment, retirement and tax planning.
Most women are averse to taking risk in investments and prefer safe ones. This means accepting lower returns in a trade-off vis-a-vis lower risk. While safety is great, it limits the ability to gain wealth and achieve financial goals in a meaningful time frame.
Always invest based on age and risk profile. The risk profile is the ability and willingness to take risk in investments. While there’s nothing wrong in being a conservative investor, do have some holdings in equity.
Equity mutual funds are relatively safe over the long-term. This could be 5 years or more. Don’t avoid equities, but if you are uncomfortable then there’s no harm in not picking them up. Do understand that mutual funds are subject to market risk. Please read the offer document carefully before investing.
See Also: Steps in Financial Planning
Always participate in family financial decisions. Invest time and money to understand personal finance. Never carry useless investments in the name of safety. Look at the after-tax rate of return of your investments. (Tax-Efficiency). Have a back-up plan in place. Continuously monitor and review investments and weed out the bad ones.
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