Today women are making great strides and shaping themselves in all areas of life. From leading governments to managing multinational corporations to dominating academics, the progress has been phenomenal. However, if there is one aspect that Indian women have yet to catch up on, it is managing their finances independently. Among Indian women in particular, there remains a reliance on their father or partner to manage their finances, largely because they fail to break away from the centuries-old traditions of men who make all financial decisions.
As with anything else, women should take control of their finances and manage them themselves. And here is a list of basic mistakes to avoid:
Don’t be financially savvy
Lack of knowledge and the reversal of jargon often lead many women to take a back seat when discussing finances with spouses and family. Most women rely on their partner to make various financial decisions, such as: B. Investing and Insurance, mainly because they don’t like learning about financial products and the importance of financial knowledge.
First, women should read financial newspapers, magazines, online portals, etc. to get at least a basic understanding of personal finances. Trust me, it’s easier than it sounds. Knowledge of various products
Gradually, they should acquire all the necessary knowledge that will allow them to independently make financial decisions, even in the absence of a spouse due to divorce or death. If you are a working woman, knowing about employee benefits, the way you invest your savings, the type of insurance you need, etc. is vital to secure your future and get the most out of your income.
This awareness would enable you to make the right financial decisions at the right time rather than just getting carried away with sales pitches and advertisements. Also, discuss financial decisions with your spouse and make budgeting a regular practice to keep finances from getting off track.
Failure to comply with a separate emergency fund
Another mistake that most women make is not to have a separate emergency fund to deal with financial needs such as serious illness, accidents, or other unexpected life events. If you are married and work, you can consider maintaining a joint emergency fund with your spouse with your respective monthly contributions.
Ideally, the emergency fund should be at least 3 to 6 times the monthly income of your family. With interest rates of up to 7.25 percent, savings accounts are a great way to park your emergency funds. Whether you’re married or single, failing to adhere to an emergency fund can hit you hard when a financial crisis strikes. If you fail to do so, you will have to immediately borrow money from lenders or family members, or use your credit card limit to pay for such unexpected expenses.
Save instead of invest
Not only women but also men interpret saving and investing as similar terms. Saving simply means to park your empty money in your bank account without the motive to generate a lot of return from it. However, investing is when you use your excess money by parking it in investment options like time deposits, mutual funds, or PPFs. If you invest instead of standing idle, your money will work for you by generating returns over the investment period. Regardless of the investment horizon, you can achieve any financial goal with investments, e.g. B. building an age corpus, getting college education and marrying children, as well as your own pursuits like vacationing abroad or owning a car.
So make sure you don’t make this mistake of just saving and not investing. Both savings and investments are important aspects of financial planning. Savings will help you out in emergencies and help you maintain liquidity while investments are aimed at meeting various financial goals in the future.
Before investing, women should know their investment horizon, assess their risk-bearing capacity, financial position in relation to their expenses and income in order to select the right investment opportunity. For example, for short to medium-term goals (within 1 to 5 years), time deposits, debt funds, or balanced funds are a good option, while for long-term goals, equity funds are the most appropriate choices as they have consistently outperformed other investment options for a long-term investment horizon of over 5 years. ELSS (Equity Linked Saving Scheme) is an ideal investment choice for working women as they are equity-based mutual funds that offer tax benefits of up to 1.5 lakhs per year under Section 80C.
Not protecting yourself with adequate insurance
Regardless of your gender, adequate health and risk insurance is required to protect yourself and your family from unforeseen events such as serious illness or death. Risk insurance would protect your family financially when you are not around by providing them with an insured sum in the event of your untimely death. This would help keep investing and repay existing debts. Risk insurance premiums are very low compared to the tremendous coverage they offer. Working women should ensure that they have separate risk insurance that is at least 10-15 times their annual income. If you are married and your partner has risk insurance, then it would be wiser to get risk insurance to keep your family safe even when you are not around.
In addition, as medical costs continue to rise, you cannot make the mistake of not purchasing health insurance. Health insurance would help you bear the high medical costs where a single hospital bill can wipe out your savings. Even if both partners work, separate health insurance should be taken out without depending on the health insurance of their respective employer. Single mothers or married women can either choose a family floater plan and include children in that plan, or they can opt for a top-up medical policy to cover medical expenses in the event of a disability or accident.
In addition, both risk insurance and health insurance offer tax benefits. Pursuant to Section 80D, a premium paid for you and your parents for health insurance is eligible for a tax deduction of up to Rs. 25,000, while a premium for risk insurance is eligible for a tax deduction under Section 80C.
From Radhika Binani, Chief Products Officer of Paisabazaar.com