A Money Checklist For Women

Whether you’re single or married, working in an office or as a homemaker, here’s a simple money checklist to help keep you firmly on course towards the attainment of Financial Freedom. The more points you can tick off, the better.

Awareness

While there’s no need to spend all your waking hours browsing business news channels, a rudimentary working knowledge of financial products is absolutely vital. 

Apply three simple rules. First, make sure that you understand the risks and rewards associated with all your investments. Second, don’t shy away from asking questions before you sign up for anything new – if it sounds too complex or “too good to be true”, give it a wide berth. Third, get involved in your household’s investment matters and actively participate in the investment decision making process.

Emergency Readiness

A safety net in the form of an emergency fund is absolutely critical for any person, and this assumes a higher level of significance for women.  Unfortunate incidents such as the sudden death of a spouse or a divorce has the potential to severely discompose your personal finances, and readiness is key. 

To avoid financial strife later, its critically important to put away meaningful sums of money on a regular basis, into an easily accessible financial instrument such as a liquid fund.

Diversification

Two things will play a vital role in your future success as an investor – first, a crystal-clear awareness of your attitude to risk taking; and second, your ability to avoid becoming a “one asset wonder”!

Risk, it would seem, is the only real ‘controllable’ within an investment portfolio. Returns, especially over the short run, are less predictable – being subject to the invariable vagaries that characterise all securities markets. If you’re a naturally risk-averse person who has undertaken an especially risky investment, panicky decision making will stand in the way of your wealth creation. Similarly, a high-risk taker will quickly tire from the muted returns that fixed income investments offer, and may end up flipping her asset allocation at just the wrong time. For this reason, its important that you know exactly where you stand on the risk tolerance scale before you invest.

Using your Risk Score as a beacon, go on to diversify your investments into various financial (mutual funds, stocks, bonds) and physical (real estate, gold) assets. In doing this, you may need to break past your comfort zone or proclivity towards a particular type of asset class.

Risk management

If your family members are financially dependent upon your future income stream, you may require life insurance. If you’re a single mother, you should be especially conscious about the need for having an adequate life insurance coverage, or you may end up compromising the quality of your children’s future. 

Be careful not to let your natural risk aversion snare you into purchasing one of those low yielding, opaque traditional plans that provide negative real returns. If careful deliberation reveals that you do require a life insurance cover, fulfil the need using a simple term plan.

In today’s age of frighteningly expensive medical care, it’s vital that you have a comprehensive health insurance plan in place too. Besides having yourself included in your family floater Mediclaim, you may also want to consider purchasing a women-specific critical illness or health insurance policy that includes maternity benefits, or lump sum pay outs in the event of your contracting a disease that could temporarily hinder your earning capacity. 

Having a well thought out risk management plan in place will go a long way in safeguarding your savings, so make sure you don’t take it lightly.

Goal Planning

It’s a well-known fact by now that a robust Financial Plan is the cornerstone of long term, sustainable wealth creation. But for women, Financial Planning high significance. 

A woman’s nurturing instinct and risk averse temperament are perfect for goal-based planning. These traits encourage her to think long term and prevent her from making rash and speculative investment decisions. However, despite the above, the odds are heavily stacked against women when it comes to creating wealth – considering that they (on average) earn lesser than men, take frequent career breaks, quit working earlier, live longer and incur higher healthcare costs.

Considering these challenges, a well-constructed Financial Plan that’s flexible enough to accommodate life-changes, becomes imperative for women investors. 

Financial Planning is essential for extrapolating the implications of one’s present actions into the future, so that corrective steps may be taken today in case retirement or other goals appear to be getting compromised. So, if you haven’t got a Financial Plan in place already, it would certainly make a lot of sense to get started with one right away!