Financial planning for women in India is also a necessity | Merry Mind

You may raise one question, “Why financial planning for women in India is exclusively necessary?” or, “Are there any distinct aspects in financial planning for women in India?” Arguably, women in India had been considered less important than men since early days and they have been facing various problems during their life time.

Gender discrepancy is a sad but true story in India. Women were not allowed to go outside their homes freely as men could. There are few parents who allow superior education to boy child compared to girl child. Rural Indian parents still think of marriage as the only primary goal when it comes to girl child. Education is not the primary objective for them. Still in the modern times, women have to face many illogical restrictions and problems in their daily lives.

Gladly, the scenario is definitely changing for the better. Women are aspiring to be financially independent. Thus financial planning for women becomes considerably important. Even if a woman is a home maker, she should be accompanied by her husband during every financial planning processes- starting from data gathering sessions, understanding personal financial situations, implementation of Financial Plan and periodical review of Financial Plan, etc.

Why is financial planning for women a necessity?

Just like men, women should be aware about family finances very well. Regarding documentations of important records, women must be engaged along with other potential family members. This is to ensure that in case of any eventuality (like untimely death, total & permanent disablement or temporary & total disablement due to illness or accident of husband), each of the family members can actively participate to run the family and support the dependants without any major disruptions.

After death of husband, the widow may remarry. If they have children already, how will their fund for education and/or fund for marriage be arranged and managed in the right manner? Even if she does not remarry, a woman must be prepared to manage family finances confidently so that she can finish all the unfinished works her husband couldn’t complete. This is why financial planning for women is crucial. Although an increasing number of women in India are getting employed and sharing financial burden of their family, it is still not up to the mark.

The thought process of the society is surely changing for the good. As Fee Only Financial Advisor in Kolkata, we strongly advocate that active participation of both husband and wife in managing family finances should be encouraged.

While both men and women want to become financially independent, many women may face following subjective issues when it comes to attaining financial freedom:

Women live longer than men: As life expectancy of women is generally longer than men, they need retirement planning for a longer period. A longer life means you’ll need more retirement funds to lead a comfortable life. Financial planning for women is a requisite.

Disruptive working span: Bringing up of children, looking after aged parents or parents-in-laws, etc. are not gender specific roles. Slowly, mindset of people are changing. Usually, women in India has been looking after major portion of household works. They can’t fully concentrate on professional career. Due to certain unique situations they have to leave their jobs or professions temporarily or permanently at times. All sorts of practical scenarios are very important while doing financial planning for women.

Life of a woman after separation: Living standards drop dramatically. Somehow a working lady may manage her standard of living but a home maker faces much uncertainty in her life. Even, due to divorce, she may have to take shelter at her parents’ home. A divorced lady suffers from identity crisis in our society.

Earning possibility: Gender pay gap in India, there is an income discrepancy between a male and a female.

Participation in financial decisions: Women take less or no part in personal financial decisions either due to lack of interest or because men do not bother to involve them in decision-making processes. As Certified Financial Planner in Kolkata, we have been observing the same and we urge all potential family members to take part in managing family finances. Where women are unaware of family financial aspects, while it comes to managing money due to unavoidable circumstances, they make gross financial mistakes. This can often leave women with costly debt, inadequate financial provisions for children and retirement funds.

Financial planning for women and related investment strategies

Irrespective of the fact that women are married or divorced or single, they have to take active participation in financial planning processes and investment strategies. Financial planning is future oriented. Strategies are action oriented. Although a woman may be educated but if she has no or little literacy about personal finances, she will lose her ground financially. To start with financial planning, women must address the following while participating in financial planning:

• Give enough personal facts (both qualitative and quantitative) to your Certified Financial Planner during data gathering sessions.
• Set a budget and maintain cash flow statement month wise.
• Understand the analysis of net worth made by Certified Financial Planner.
• Do debt planning. It is always better to speed up the debt repayment process if you can wisely generate surplus fund.
• Contingency planning is done (keeping 6-12 or more months expenses as emergency fund separately).
• Analyze your risk cover required with your Certified Financial Planner and insure accordingly.
• Create your short term, medium term and distant goals list. Then take steps accordingly.
• Be aware of employer sponsored retirement plans. If there is a deficit, additionally start your investment towards this goal.
• Invest your money as per Financial Plan depending on your own risk profile, investment objective(objectives may be future children’s provision like education, marriage or start up funds, retirement, house purchase etc) investment time horizon, personal and macroeconomic factors.
• Review your Financial Plan and other strategies periodically.

Those who’re financially aware do wise budgeting, investment money, control unwise expenses, handling debt prudently, chase retirement and other financial goals judiciously and become wealthy.

Bad financial advice and starting late are really challenging concerns

People may choose unsuitable investment and insurance products. They become soft targets of bank relationship managers, brokers or investment product sellers. Ultimately, they are misguided in investing hard-earned money. As a consequence, they never achieve their goals on time or may not reach the goal at all. Motive of salesmen are to push products. As a SEBI Registered Investment Advisor in Kolkata & a Certified Financial Planner, we work in fiduciary capacity by keeping client’s interest first.

Starting late is another challenging factor. To support it with logic, let us suppose Ms. ABC & Ms. XYZ are two friends. Their ages are same, say 30 years. They will retire at the age of 58. If Ms. ABC started a monthly SIP of Rs. 20,000 by considering 10% rate of return per annum, she can accumulate Rs. 3.69 Crores over 28 years at 58. On the other hand, Ms. XYZ started 10 years later than Ms. ABC. Ms. XYZ started monthly SIP of Rs. 40,000 by considering the same rate of return i.e. 10% per annum. Ms. XYZ could accumulate Rs. 2.42 Crores over 18 years at 58.

Just see the difference. Although Ms. XYZ doubled her investment per month, still could not reach the corpus accumulated by Ms. ABC. This the delay cost. You can make power of compounding your friend by starting early.

To ensure financial independence, women need to be active in following and practicing financial planning processes with their Personal Finance Professionals. In turn, this will motivate them to become more confident- financially and emotionally. Due to lack of awareness regarding financial planning, money will become worst enemy to women. As Financial Advisor in Kolkata, we urge women to come forward and allow themselves to understand the aspects of personal finances, thereby develop a true relationship with money.