Financial Planning and Management Tips for Women

financial planning for women — (Source: unsplash)

The modern woman is breaking stereotypes every day. From managing households to businesses, women are changing all traditionally held perceptions about the “weaker” sex. Hence, the subject of financial planning for women is no longer considered taboo.

This article will help women receive the best financial planning tips and ideas, no matter in which life stage. Take a look!

Importance of Financial Planning for Women

Financial planning for women is a necessary part of their everyday life. Unfortunately, most women naively stay clear of all financial planning. However, here are some pertinent reasons why women should get involved in monetary management.

Achieving Financial Freedom

The primary reason to enter into financial management is to achieve financial independence. Financial independence gives you the freedom to live life on your terms.

A financially secure woman does not have to depend on others for her livelihood. Hence, it also increases self-esteem and self-respect in women.

Taking Career Breaks

Any woman may wish to take a career break. However, if she does so, there will be no steady income. Hence, she will need to plan for this period. Moreover, a career break may also involve additional expenses like educational expenses for the improvement of skills.

Preparing for Emergencies

Life is full of emergencies. From health to loss of life to accidents, there is no shortage of negative experiences. Hence, women will need to have a contingency fund to cope with these unexpected curveballs.

Spending on Higher Education

Further, a woman may wish to go in for higher education to gain a better work position. She may also want to switch careers and will need the requisite education for it. Hence, to plan for these eventualities, sound financial planning is necessary.

Marriage and Parenthood Bills

Marriage and parenthood are two major milestones in every woman’s life. Nowadays, in two-income households, women contribute financially to their children’s upbringing and no longer rely on parents to foot their wedding bills.

Hence, it is clear why women and financial planning should no longer be divergent themes.

However, women may not be aware of how to plan their finances. Below is a guide of the components that go into financial management.

5 Major Components of a Financial Plan

Now, let’s get started on the crux of financial planning for women. Some of the major components of a financial plan are:

Setting Financial Goals

Financial goals determine what you want to achieve with your money. One can have short-term, mid-term or long-term financial goals. These goals can be buying a house, travelling abroad, enjoying a particular lifestyle or hobby. Having a financial goal is the first component of a financial plan.

Identifying Your Baseline

When you start your financial planning, the second component is to determine where you presently stand. You can do this by calculating your baseline or net worth. Subtract your assets from liabilities, and you will have an idea of the baseline from which to start. Assets are bank accounts, investments, real estate, valuables, etc. Liabilities are credit card debts, loans, mortgages, etc.

Budgeting Your Cashflow

The third component is analysing what you are presently doing with your money. For instance, where are you spending your cash, and how are you supporting your lifestyle.

Moreover, it also helps to budget yourself. Once you create this estimate, you can extrapolate it. Accounting for inflation, you can estimate how much cash flow you will require for the next 10-15 years.

Retirement Plan

What women do not realise when they plan financially is that they live longer than men do. Hence, on average, they will require more money to face a life without a salary. Therefore, preparing for retirement is an essential component of creating a financial plan.

Emergency Fund

As mentioned before, emergencies can strike at any time. Ideally, prepare to cover for around 6 months of income-less existence when you create an emergency fund. Save this money in liquid instruments so that you do not have trouble accessing it.

With the above components, you can easily set about creating a financial plan. Hence, financial management for women is vastly simplified.

How to Create a Financial Plan?

As a part of financial planning for women, learn to create a financial plan for yourself. Follow these steps below, and make your own!

Step 1: Write Down Your Financial Goals

Using a spreadsheet or Excel, you can list down your financial goals. A financial goal is what you hope to achieve with your hard-earned money. The goals come in short, mid, and long-term intervals.

Ask yourself these questions:

What are my financial goals for 6 months to 5 years (short-term)?
What are my financial goals for 5 to 10 years (mid-term)?
What are my financial goals for longer than 10 years (long-term)?

Once you have a plan, you know the goals for which to save or invest. Hence, it makes the whole financial planning for women more target-oriented.

Step 2: Create a Budget

To create a budget, you will need to allocate funds for the following:

Housing expenses such as rent, mortgage, maintenance, repairs, phone, utility.
Healthcare such as dental, vision, medication, supplies, etc.
Transportation such as vehicular expenses, gas and oil, repairs, maintenance, etc.
Food such as groceries and dining out.
Personal expenses such as clothing, gifts, personal care, etc.
Entertainment expenses such as travel, sports, hobbies, pets, etc.
Savings towards financial goals and insurance.

The sum of all these makes up your budget. Subtract this value from your take-home pay, and you should have extra money to put towards your financial goals.

Step 3: Plan for Taxes and Debt

In the third step, plan for the taxes you have to pay and the loans or debt you must clear. Clearing off debt should be one of your priorities. Allocate some of your money to clearing off loans so that you can enter retirement without any debt on your platter.

Step 4: Prepare for Emergency Fund

Plan a contingency fund, in a liquid investment option, without any lock-in period. You should be able to access the money at any time. Hence, save aside money regularly to tackle those emergencies your insurance won’t cover.

Step 5: Plan for Retirement

Retirement may look like a long way off, but the only money you will have is what you have saved. Therefore, even those who plan to work post-retirement should also prepare for life when they have a subdued income source.

With these 5 steps in mind, create a financial plan for yourself. As you can see, it takes foresight and self-knowledge to prepare for the subsequent stages of your life.

How to Do Financial Planning as Per Your Stage in Life?

In the following section, we’ll show you how to do financial planning for women, no matter the stage in your life.

Financial Planning for a Teenager

Income: Young girls still in school or college can easily begin earning by taking tuition or freelancing. They can also save up money that they get from relatives or pocket money. In addition, doing odd jobs around the house at this early age can help them become financially responsible later in life.

Investment: Teenagers can begin investing in mutual funds as soon as they have all their documents in order. Other investment vehicles include fixed deposits, post office funds, etc.

Savings: Even at this age, children should be taught that saving half of their earnings is a good rule of thumb. If this lesson is learnt too late, people can become heavy spenders and poor savers.

Financial Planning for Single Woman

Income: Nowadays, all women strive for financial independence. They usually choose the safer route of becoming salaried employees. However, it should be understood that having just one income source is risky. Therefore, single women should try to supplement their regular income with a side job.

Investment: The risk appetite of young women in their 20s is different from those in their 40s. Hence, 20-year-old single women should focus on investing for financial goals such as education, marriage and parenthood.

Therefore, investing in higher-risk equity mutual funds is appropriate for 20-year-olds. In comparison, 40-year-old women should focus on investment for retirement and choose low-risk debt mutual funds.

Savings: While being 20 does not mean you should not enjoy your income, it also does not mean you can be foolhardy. If you have done your financial planning well, you will know that you will require considerable savings to achieve your goals. Hence, follow the traditional rule of “save half” and live on the rest.

Financial Planning for Single Mothers

Income: If a single mother is working, her focus will be oriented towards raising her child. However, she must not forget that retirement planning is just as important.

Investment: Invest in keeping retirement, children’s education, higher education, marriage and your future in mind. However, highly risky investments can be avoided. Instead, invest in instruments with a lock-in period so you do not feel the temptation to spend the money. Also, try to keep a six months’ emergency fund.

Savings: A single mother may not be able to save as much as she would like. However, whenever possible, freeze some of your assets in FDs, RDs, etc.

Financial Planning for Working Women

Income: If you are married and a working woman, you have the additional cushion of your spouse’s income. Hence, you can use your income to buy life and health insurance covers for your family.

Investment: However, managing a home and a family will leave you with little to devote to your finances. Hence, you should make use of apps to track your management of finances. Invest also on behalf of your children to secure their education and higher studies.

Savings: Though it is difficult for households to save a lot, you must stay focused on your financial goals. Maintain a healthy saving habit, and you should be able to achieve your target for retirement.

Financial Planning for Homemakers

Income: Homemakers save money from the monthly household budget. Hence, with no fixed income, they are at a disadvantage. However, they can also supplement their income in various ways with side jobs.

Investment: Homemakers can invest in FDs, RDs, and other low-risk investment instruments if they choose. However, they can also invest in mutual funds and other tax-saving investment vehicles.

Savings: Homemakers can save through FDs, RDs, and savings account.

Thus by doing thorough financial planning through life stages, women can avoid some pitfalls in life and maintain a higher standard of living.

What are the Tools or Apps Available for Financial Planning?

Financial planning for women has received tech support. There are apps available for the following:

Budgeting (Mint, YNAB., PocketGuard, Honeydue, etc.)
Expense Tracking (Mint, Goodbudget, YNAB, Expensify, etc.)
Investment (Groww, Acorns, myCAMS, Zerodha Coin, etc.)

Hence no more excused for financial planning, women!

3 Financial Planning Tips for Women

Here are 3 financial tips for women to kickstart you on your financial journey!

Curb the Frivolities

Even if you allocate money for entertainment and other activities, try to ensure you have covered all necessities before you stretch your budget to cover them.

Use Technology

From investing to budgeting to tracking expenses, an app probably does it all! Hence, there can be no more excuses for a woman not to utilise such means to keep track of her finances.

Health Insurance Policies

Women should invest in health insurance policies to avoid significant strain on their income, especially during medical emergencies.

In conclusion, financial planning for women is a crucial topic today. Women should be able to manage and handle their money with as much erudition as men. Hence, learn the basics of financial planning and get started!