Unlike a few decades ago, today, you can be just as financially independent as any other person. But even though you are raking in the same kind of money you probably aren't able to manage it completely. So we look at how you as a working woman can optimise your income and savings.
According to Dia Kothari, Panschil Realty, Mumbai, "As your spending power increases, there is an improvement in your social status. You don't have to rely on your parents or husband in order to survive."
Increased disposable income is a good sign of progress but often, investment of that money is neglected due to lack of knowledge as to how best make use of the money.
Despite the fact that Kothari feels that women are now more open to taking risks than being averse to them, there are still several women who are not equipped with the know-how of how to handle their money and spend it wisely.
"I have noticed that most investment and saving is done with the view to reduce tax. But, what women should realise is that after a point, tax has to be paid and you cannot avoid it and you shouldn't make investments with tax saving being your only priority. Invest post tax income and try to maximise that money, says Sandeep Shanbhag, Director, Wonderland Consultants, Tax & Investment Advisory.
He further adds, "There are various ways to invest smart and many women just leave money lying idle in the bank, which again, is a waste. Instead get out there, gather information and utilise your resources."
For Kothari, being financially self-sufficient is a sign of progress but the same movement can cause stress to others.
PAGE_BREAK
Rutchie K has just completed her Bachelor of Architecture degree from the Academy of Architecture-Rachana Sansad, Mumbai. She feels that being independent financially is definitely essential but views it as a phenomenon that should be applied to all individuals and not just women. In fact, she feels with more women earning, sometimes there is too much pressure to follow their example.
"Being part of a wealthy family, I never had any restrictions imposed on me for money. Yes, I do want to be financially self-sufficient but want to take my time and figure out how I want to go about doing it.
Learning to be financially independent gives you the confidence to be able to handle everything that comes your way. On a personal level, the kind of high you get from spending your own money cannot be duplicated as it is money that you have worked hard for and have the satisfaction of knowing you deserve."
But she also confesses that, "I sometimes notice women are being pressured into taking up careers and jobs they aren't really interested in just to make a statement or because they too want to be part of the 'independent women' phenomenon."
"Earlier, men would get pressured into doing things they didn't want to do due to family and financial responsibility and now, I see this happening to women as well."
However, even if such a situation does exist and women are working only because they have to and not because they want to, it does not have to be a long-term issue. As mentioned earlier and suggested by Shanbhag, the money that is lying idle in the bank can be used and invested to make more money and so, if you're smart enough, you could be doing what you love and make money on the side as well.
PAGE_BREAK
This is exactly what Jumana French did. At 45, she earns her own income even though both her husband and child earn. "I lost my father at a very young age and have been earning and taking care of myself and my family for decades now."
"In fact, now, even though I can retire and do not need to work, I cannot stay idle. I have been a teacher for over 20 years and I run my own play school in Hyderabad. However, none of this would have been possible had I not made my own money and more importantly, saved it, invested it and then used it to fulfil my own wish," says Jumana.
Besides investments and savings, making money and making it smartly really isn't as hard as it may seem.
"People need to explore their options, understand what they are good at doing and then maximise their potential. If you already have a job and still have the time and your employer allows, freelance is a great way of making additional income. Investing your money too is a great source of revenue as eventually, investments do pay off. At least, that is how I managed," Jumana advises.
On a cautionary note though, Shanbhag warns not to misunderstand insurance as investment or savings as extra income. "Very often, people get insurance, once again, with a view to reduce tax and end up getting insurance they don't need. Instead, keep an emergency fund or PPF fund and get secure for your old age," suggests Shanbhag.
Financial independence does not only mean earning an income; it also extends to utilisation and investment of that money.
Tips to manage your money
Do you feel like you do not know what to do with your extra income? Do you have money in the bank and no clue what to do with it? Sandeep Shanbhag gives you five helpful tips to manage your money:
1) Beyond a point tax saving is not possible
Money tends to lie idle in the bank and eventually, when it is invested, it is more from a tax saving point of view. Tax saving shouldn't be the primary motivator, rather it should be a by-product of your investments.
The selection of instruments should be as per your risk profile and your investment goals; tax saving should only be an added benefit. And remember, beyond a point, tax saving just isn't possible, so it is a much better strategy to try and optimise post tax income.
PAGE_BREAK
2) Keep an emergency fund and invest the rest
This is an extension of the earlier point. Working women generally tend to keep large amounts of income earned idle in the bank and then make sporadic investments based on the advice of a friend, colleague or acquaintance.
A better approach would be to keep an emergency fund in the bank (say 2-3 month expense requirement) and then invest the rest of the money regularly, systematically. Such a disciplined approach goes a long way in improving one's financial health.
3) Don't mix insurance and investment
Beware of expensive insurance products. High commission yielding insurance products are aggressively sold by greedy agents who obviously care more about how much they earn rather than whether the product is useful for you or not.
If you don't have dependants, you simply don't need insurance. If you do have any dependants, then buy the cheapest insurance that there is on offer, also known as term insurance.
Generally, agents will not sell this product as it yields lower commission, so go out of your way to ask your agent about the term insurance on offer and compare the same with other alternatives to know the huge difference. If the agent tries to dissuade you from opting for term insurance, simply change the agent.
4) Have a PPF account ticking for you
Since there is no social security in our country, PPF is a good way to secure your old age reserve. This is the best fixed income investment that you can make. Invest the maximum of Rs.70,000 per year and over a period of 20 years you would have as much as Rs.32 lakh salted away.
5) Invest in diversified equity funds
Without equity, it is not possible to build wealth. However, many shy away as they do not know where and how to invest. Others keep away after perhaps having a bad experience which was a result poor advice.
Equity is not a DIY (Do it Yourself) instrument. It is never a good idea to invest your hard earned money in stocks based on tips given by colleagues, relatives or neighbours. Instead, opt for well diversified equity funds that have a fairly decent track record.
There are many websites and personal finance magazines that provide rankings of mutual funds. Opt for those that are ranked high over a three to five year time frame. This way, you just cannot go wrong.
And remember, Slow and steady wins the equity race!
Comments
0 comment