Financial planning basics for women

6 basic financial planning basics for women

What is financial planning

According to the FINANCIAL PLANNING STANDARDS BOARD ( “Financial Planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a house, saving for your child’s higher education or planning for retirement. The Financial Planning Process consists of six steps that help you take a ‘big picture’ look at where you are currently. Using these six steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals. The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans”

Below are 6 financial planning basics for women –

  1. Women should ensure that the family accounts, including the statement of all assets and liabilities are maintained properly.
  2. She should be the custodian of all the passwords forall financial investments
  3. She should ensure that all the investments are in joint names
  4. Working women should always invest a certain sum of her money towards her own mothers (on in-laws) financial independence
  5. She must ensure that as a couple, her spouse has bought a Term Insurance
  6. You must ensure that you are the nominee for all policies, including Mutual Funds, Insurance, etc

Common Mistakes in Financial Planning Approach

11 Common Mistakes in Financial Planning Approach

Financial Planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a house, saving for your child's higher education or planning for retirement.

Let us now look at the some of the common mistakes made by consumers in their approach towards Financial Planning

  1. Don't set measurable goals.
  2. Make a financial decision without understanding its affect on other financial issues.
  3. Don't confuse Financial Planning with investing
  4. Neglect to re-evaluate their Financial Plan periodically
  5. Think that Financial Planning is only for the wealthy
  6. Think that Financial Planning is for when they get older
  7. Think that Financial Planning is the same as retirement planning
  8. Wait until a money crisis to begin Financial Planning
  9. Expect unrealistic returns on investments
  10. Think that using a Financial Planner means losing control
  11. Believe that Financial Planning is primarily tax planning


Financial Planning for Women – 50/30/20

Women are  inherent savers. The reason why household expenses are traditionally managed by our mothers and other female family members is because women are better at saving and budgeting.

Men, on the other hand, have a better way when it comes to investing. The point is not to compare, but to understand the strengths of each gender.

This post covers an important strategy for the women who wish to save.

The 50/30/20 rule

This strategy can help women in money management.

Fixed Cost – Expenses which don't vary much from month to month like rent, EMIs, utilities, etc. Keep them not more than 50% of your take home income.

FinancialGoals: Save 30% of your take-home income and invest towards your financial goals including retirement.

FlexibleSpending:  Expenses Consider no more than 20% of your take-home salary toward flexible spending. These are expenses that can vary from month to month, like eating out, shopping, hobbies, entertainment, etc.


Financial Awareness

A survey in 2016 indicated that out of 61% women with individual financial account only 15% claim to have a financial plan for unexpected events. The percentage of advanced active bank account users is even worse (4%).Lack of knowledge is the main reason behind women's financial insecurity.

Women in India progress to the latter stages of the customer journey at a rate that is substantially and significantly lower than that of their male counterparts. While women do have registered active NBFI (nonbank financial institution) accounts at a rate greater than that of men, this rate is declining as banks supplant NBFIs.

Why Mutual Funds

Here are a list of 4 reasons why you should prefer Mutual Funds –

1. Built-in diversification

When you buy a mutual fund, your money is combined with the money from other investors, and allows you to buy part of a pool of investments. A mutual fund holds a variety of investments which can make it easier for investors to diversify than through ownership of individual stocks or bonds.

Not all investments perform well at the same time. Holding a variety of investments may help offset the impact of poor performers, while taking advantage of the earning potential of the rest. This is known as diversification.

Before you decide on a mutual fund, figure out how it fits with the rest of the investments you own and your overall financial goals.

2. Professional management

You may not have the skills and knowledge to manage your own investments or want to spend the time. Mutual funds allow you to pool your money with other investors and leave the specific investment decisions to a portfolio manager. Portfolio managers decide where to invest the money in the fund, and when to buy and sell investments.

3. Easy to buy and sell

Mutual funds are widely available through banks, financial planning firms, investment firms, credit unions and trust companies. You can sell your fund units or shares at almost any time if you need to get access to your money. But you may get back less than you invested.

4. A wide range of funds to choose from

Mutual funds can be used to meet a variety of financial goals. For example:

  • A young investor with a stable income and many years to invest may feel comfortable taking more risk to achieve greater potential return. They may invest in an equity fund.
  • A mid-career investor trying to balance risk and return more moderately could invest in a balanced mutual fund that buy a mix of stocks and bonds.