India markets closed

Attention Women! This Independence Day, Attain Financial Freedom With These Tips

Rithika V Karumbaiah
Image source: katemangostar/Freepik

Ever watched that infomercial where an astrologer waxes poetically about how women should wear a necklace which brings good fortune to their household? Ever heard of people saying that women are some of the best money managers out there?

Well, it’s all true (but maybe stay away from buying products advertised on infomercials).

In fact, most financial experts state that women are some of the best money managers out there. When it comes to investments and other major financial decisions though, most women seem to be at a disadvantage. This is mainly due to the unique circumstances they face. From taking a break in their careers to raising children to the gender wage gap, women are constantly thrown curveballs that make it difficult for them to achieve some sort of financial security.

All of this being said, the one thing to remember is that women are great money managers. This Independence Day, as a woman, follow these steps to attain financial freedom.

Start That Emergency Fund

An emergency fund is the most important step towards financial freedom. This is your safety blanket, the fund that you will dip into if you were to quit your job or there is a sudden medical emergency.

Ideally, emergency funds should, at any time, cover at least 6 months of your living expenses. Of course, no bank is going to have accounts that cater specifically to emergencies. The onus to save falls on you.

Here are a few things to keep in mind when it comes to your emergency fund:

  • To build your emergency fund, you can put aside a small portion of your income each month into a savings account. Once that is done, make sure the ATM card is kept away from your wallet. This way, you are not tempted to spend the money you are saving.
  • You can use tax refunds and bonuses to help build your fund.
  • Dont just leave the funds in the bank, invest in it an instrument that provide easy liquidity. You can invest your saved money in liquid funds, recurring deposits and or fixed deposits.Save Some More – Independent Of Your Emergency fund

Start another savings account? After we just told you to start an emergency fund? Yes, that’s exactly what we are saying.

You see, an emergency fund should be independent of your monthly savings.

This amount that you put aside each month does not have to be in a savings account, but you could consider putting this money into a recurring deposit account. Even if you are able to squirrel away as little as Rs.1,000 each month, thanks to the power of compounding, you can earn quite a bit when your RD matures.

Sounds great, right? So, does it actually work? Let’s use an example to see if it does.

Let’s say that you decide to open a recurring deposit account with a private bank. You put away Rs.1,000 for the next 5 years and earn an interest of 7.25% p.a. At the end of 5 years, you will get Rs.72,413.

Now, let’s assume you do this every year. So, you start one RD in 2019, the next in 2020, then in 2021 and so on. Assuming you invest the same amount at the interest rate mentioned earlier, you get Rs.72,413 in 2024 when your first RD account matures, the same amount in 2025, and so on.

Put Your Money In Insurance

You probably already know that healthcare is expensive. One visit to the hospital could set you back thousands of rupees. This is just one of the few reasons why you should have health insurance.

There are people who will state that they don’t require health insurance because they receive health insurance coverage from the organisations that they work with. But if you stop to think about it, you will realise that you probably will need health insurance to kick in once you have retired. And at that time, it will be too late to get a health insurance policy. Even if you do manage to get one exclusively for senior citizens, the premium you will have to pay could very well eat up your savings. The sooner you get a health insurance policy, the lower the premium you will have to pay.

It isn’t just health insurance though. You should consider getting term insurance as well.

Term insurance that provides pure life cover has no investment component to it. These plans allow for large life cover and give you the opportunity to add riders to your plan. This could be a critical illness rider or a rider that provides coverage in case of loss of employment.

On the other hand, term insurance can also include and endowment competent. The endowment component gives you a lump sum amount at the end of the policy term if you survive the plan.

Whichever type of insurance plan you do end up choosing, remember that an important component of financial freedom is being free of worries and insurance is one way to ensure that.

Discard Your Money – Spend It On Wealth

So, you have money in a jar at home and some in your bank account. That’s great. But it isn’t good enough. You see, the value of money decreases over time thanks to that pesky economic concept known as inflation.

Which is why you should invest your money in financial products that will build your wealth. This includes investing in a SIP, in funds, the stock market, and even in property. If you are able to invest in property, look at getting the property registered in your name. Not only does it give you financial freedom, but it also makes economic sense since some banks offer lower interest rates for women applicants and certain states have lower stamp duty on the property if it is registered in a woman’s name.

Don’t Believe The Myth That Only Earning Women Can Achieve Financial Freedom

That’s right. Financial freedom isn’t only achievable by women who have careers. If you are a housewife, you can still achieve financial freedom. One way to do this is by requesting an earning family member to provide you with a small allowance. You can then use this allowance to invest, save, and grow your money.

You can also start your own business sitting out of your home. You could decide to provide home-cooked food to people or take tuitions. All the money you make from this can then be invested!

At the end of the day, it is important to remember that you should invest your money in a way that works for you. Set financial goals, no matter how small, and see how you can go about making these goals a reality.

And most importantly, while you can listen to the advice other people give you, don’t listen to the naysayers who say that big investment decisions shouldn’t be made by women. Because, at the end of the day there is one thing that financial experts and the astrologer from the infomercial agree upon – and that is that women manage money well. So, go ahead and start your journey to financial freedom today.