You show confidence in all walks of life, but take a step back when it comes to managing and multiplying your own money ? Here’s a guide to help you shed your inhibitions, navigate that path with ease, and find practical answers to situations you often find yourself in.
I Have Just Started Earning. I Have No Financial Responsibilities. I Want To Enjoy Life!
It is a great feeling to be earning and to have the freedom to spend on whatever you like, without being tied down to any financial responsibilities or commitments. Of course, you can enjoy your first 2-3 monthly pay cheques going out with friends, buying gifts for family and splurging on the brands you have been eyeing.
Beyond that, don’t make it a habit to empty out your bank account every month. You need to start creating your financial identity, whether you presently have financial commitments or not. Surprisingly, most women think that their financial identity comes from earning a salary itself. This happens because we may not be the primary income earner in many households.
However, a salary credit to your savings account every month is just the first step. Misuse it or leave it in someone else’s hands, you will not have an identity even after many years of being a working woman!
Bottomline, take your earnings seriously. Save at least 30% of your income to begin with.
I Save, But My Dad Takes Care Of Where That Money Goes. I Don’t Know What He Does.
From toddlerhood to teenage, today’s generation wants to take their own decisions in every walk of life. Why should you step back when it comes to financial decisions? It is just assumed to be a ‘man’ thing, but women are traditionally good decision makers when it comes to money. Be it the household budget or buying gold for a daughter’s marriage, our mothers and grandmothers always thought long-term and took well-researched decisions. The truth is, we just don’t extend it to our personal finances and dismiss off our capabilities lightly.
It is the responsibility of parents too, to help their daughters understand the importance of taking financial decisions, for the daughter’s own financial independence in future. Else, the decision-making will just transfer from the father to the spouse, and the dependency will continue to remain.
I Want To Be Very Safe With My Money. I Can’t Take High Risks And Invest In Market-Related Products.
As women, seeking safety especially in money matters runs in our DNA! Even without a basic Google search, we assume mutual funds are risky, gold is always safe, insurance is an investment and fixed deposits are the best choice. On the other hand, young girls today also belong to a generation which dosen’t think twice before buying cryptos for a fad!
To get your anchoring right, here are three points to remember:
- One, gold prices also move sharply up and down or just keep fluctuating around a certain level for long periods. Hence it is not as safe as it is perceived to be.
- Two, compounding your money through financial instruments is a must. Gold alone is not enough.
- Three, your compounding must comfortably beat the general price increase you experience over the years (called inflation). Investing in stock market-linked products like equity mutual funds help you beat inflation over the long-term. Many debt products may be safe, but their returns don’t beat long-term inflation. Those that promise inflation-beating returns entail high risk.
Hence, your investment must be a smart mix of debt and equities. If you are young and don’t have any pressing financial commitments, equity mutual funds are the best option to begin your savings.
I Am Saving Through Gold Savings Scheme Of The Local Jeweller For My Wedding…
If you want to save towards buying gold jewellery for your wedding, go ahead by all means. But don’t treat it as an ‘investment’ and as your ‘only investment’. If you are using the gold savings schemes route, (where you save systematically for a year and convert that to jewellery) choose a jeweller of repute so that you don’t run the risk of losing your money.
Digital gold could be another choice. You can save for a few years and convert it into cash or into gold bars/coins, depending on your need.
Ideally, beyond a few pieces of jewellery, you can begin looking at gold ETFs/mutual funds as an ‘investment’ option. Take the help of an advisor to time your entry and exit into these funds, to benefit from movements in gold price.
I Want To Support My Parents And Siblings Financially….
This sense of responsibility is enough to cut down on unnecessary spending and increase your savings rate in your initial years when you are single. Whether it is making parents’ retirement comfortable or supporting your siblings through higher education, set up a dedicated SIP for each of these goals. Step it up every year to put your salary raise to use. Take the help of an advisor to find suitable funds, how much you can invest and how much you can realistically expect to save for them. Plan for withdrawal in advance to preserve compounding and beat market uncertainty.
That said, giving back to your parents or supporting your siblings should not come in the way of your carving out a financial identity for yourself. Remember to save something for yourself always. After all the hard work, you need an independent financial standing, and your dreams and goals need wings too!
How Should I Prepare Financially Before I Commit To A Relationship?
Before taking that big decision, train yourself to think independently on matters of money from early on in your working life. It is best to give yourself time to understand, experiment, and make investing mistakes when you are young, single, have no dependents and no liabilities.
Two, if you plan to get married, don’t use up all your savings prior to the wedding in buying gold or towards wedding expenses. However small or big, you will need to have a safety net for personal needs and goals when you start a new life. For many of you, marriage may bring disruptions in the form of having to move cities or countries or change jobs. The very feeling that you have something to bank on, will give you tremendous confidence, even if you don’t get to using the money.
Three, you must inculcate the habit of spending within your means from the first month of your earning. A salary opens the door to credit cards, personal loans or even loans to buy the latest smartphone in town and it is very easy to keep upping your lifestyle. But these kinds of extreme habits become big sore points in a relationship in future. It will make you more dependent on others or rob your freedom when you are between jobs or when you have to take a break. And the truth is, many women take a break or at least a backseat at some point in time in their careers to meet other personal obligations.
What Kind Of Money Conversations Should I Have When Considering Marriage Or A Serious Relationship?
Relationships stand the test of time when there is understanding and mutual respect on financial matters. This means that you should not feel the pressure to always think alike, do all things jointly, do things without the knowledge of your partner or give in and accept decisions made by your partner, by default.
If thought processes with respect to money match, great. But even differences can be overcome if you draw boundaries between personal and joint goals, spending and saving. Drawing boundaries becomes easy when you have already conditioned yourself to take financial decisions over the years prior.
Here are five things to discuss and have an understanding on, before you say “Yes!” :
- Income and expected trajectory – This will lay down the rules on the kind of lifestyle you can lead together and the savings you can make for individual and joint dreams.
- Sharing household / child -related expenses – Ideally, it should be in the proportion of your incomes. Plan on a joint account to transfer out the sums from your salary a/c every month. Draw from that. Replenish for additional expenses in the same proportion.
- Spending habits – Setting aside sums for joint obligations every month comes first. Outside of this how each person spends, should be left to individual preferences.
- Individual assets and liabilities – You need to save for personal goals independently, based on your risk appetite and time horizon. Pre-marriage assets should continue to be in your individual name. How big is the liability? Will it affect contributions towards joint assets/expenses after the wedding?
- Common assets and liabilities post-marriage – Title, ownership and obligation has to be joint, with contributions/EMIs divided in the proportion of your income. This will fund common goals and aspirations.
Read the previous blog: Beyond the Piggy Bank: Invest Smart for Your Child
If you wish to build your independent financial future, enroll with Milestones2Wealth today!
