Empowering Her Wealth: Essential Financial Planning Tips for Women

By Sangeeta RelanJune 28, 20230 Comments

In today’s world, women are breaking all kinds of stereotypes and taking the lead in various spheres of life. The result is that women are becoming financially independent, earning their bread, butter and, in some cases, their jam too.

In light of this, they must understand how to plan their finances. While earning is good, saving some of your income and investing it wisely is equally important.

Every woman, regardless of age or stage, must master planning her finances.

Need for Financial Planning

There are several reasons why women need to be wise about their finances and plan them well. Life is uncertain and may hit us unexpectedly, which can be challenging if you don’t have enough money. Therefore while the going is good, one should save and invest for a rainy day.

1. Attaining Lifelong Financial Independence

Financial independence is every woman’s dream, but the dream cannot last only till one’s earnings years. It has to go beyond. Therefore it is vital to plan the finances while the income is steady. Self-respect and self-esteem are critical at every stage of life.

2. Career Breaks

More than men, women have to take career breaks for one reason or another. But they need to maintain their financial independence even during the break periods. That gets harder because the break means a gap in the steady income flow and, at times, may entail additional expenses. Thus planning for such spells is crucial.

3. Skill Enhancement

At times in life, women may want to upgrade their skill set. We are living in a highly competitive world, and skill enhancement is the need of the hour. But this requires funds. So if a woman is smart with her finances, she will not have to depend on anyone else to further her ambitions. She can quickly dip into her funds to pursue her goals.

4. Family Requirements

Women are equally responsible for the well-being of their parents and children, but again looking after that aspect will involve a financial element. Here again, financial independence will make things easier.

5. Preparing for Emergencies

Life is unpredictable and uncertain. We don’t know when something may hit us out of the blue. But when it does, one has to face it. It could be an illness, a financial loss or a death. Having money at these times could spell the difference between survival and disaster.

Financial Planning Tips for Women

Having decided to be smart with our finances, we must understand how to do it. We have identified 5 components of a financial plan which could guide you-

1. Setting Financial Goals

As with most things in life, with financial planning also, our goals should be clear. What is it that we want to achieve with our money? Our goals could be long-term, medium-term or short-term. The time horizon has to be very clear. Our goals could be to buy a house, travel abroad or maintain a particular lifestyle.

2. Assessing Present Financial Position

Understanding the present position is the starting point to move forward in life. You need to know where you currently stand regarding your assets and liabilities. You will know where you stand once you subtract your assets from your liabilities.

Assets include all your investments, bank accounts, real estate and all other valuables. Liabilities include loans, mortgages, credit card debts etc.

3. Budgeting your Cashflow

The next step is to identify the sources of your cashflows. You need to understand where your cash is coming from and where you are spending it. Knowing this will help you budget your expenses. Considering inflation, you can estimate how much money you will require in the next 10-15 years.

4. Retirement Plan

A woman must also know that she needs to plan for her retirement. Women generally live longer than men and must plan a life when they won’t earn. Therefore preparing for retirement is an essential component of creating a financial plan.

Also Read: 10 Ways to Earn Money Online from Home Without Investment

5. Emergency Fund

Emergencies can strike at any time. Therefore it is critical to prepare for them. Ideally, one must cover for around 6 months of income-less existence when you create an emergency fund. It is also vital to save money in liquid instruments, so you don’t have trouble accessing it.

How to Create a Financial Plan?

The following steps can help you create your financial plan-

Step 1 – Write Down Your Financial Goals

Using Excel or a spreadsheet, you can list your financial goals. A goal is what you want to do with your hard-earned money. The goals could be short-term, medium-term or long-term.

Short-term would cover a period of 6 months to 5 years, mid-term 5 to 10 years, and long-term would be longer than 10 years.

Once you are clear about your goals, you can make a plan around them.

Step 2: Create a Budget

To make a budget, you will need to allocate funds for the following-

Housing
Healthcare
Transportation
Food
Personal Expenses
Entertainment expenses
Savings towards financial goals and insurance

The sum of all these expenses will help you make your budget. Once you have all the figures from your income and expenses, you can make your budget and funds available to achieve your financial goals.

Step 3 – Plan for Taxes and Debt

As a third step, you need to plan for your taxes and the loans or debt you may have to clear. Clearing debt should be your top priority so that you can enter the retirement phase of your life with no outstanding payments.

Step 4- Prepare for Emergency Fund

This fund should be a liquid investment option without any lock-in period. The idea is that you should be able to access the money at any time. Therefore, you must save money to tackle those emergencies your insurance cannot cover.

Step 5 – Plan for Retirement

Retirement may seem like a long way off when young, but time does fly. And once it has and you have retired, you will only have your savings to fall back on unless you get a pension. Even if you plan to work after retirement, remember that post-retirement jobs generally do not pay well.

Also Read: Ten Jobs for Women Over 50

Keeping these steps in mind, you can have a solid financial plan for your future.

Financial Plan as Per Your Life Stage

You can plan your finances for every stage of your life. Let’s see how-

Financial Planning for a Teenager

Income: While still in school or college, young girls can easily begin earning by taking tuitions, freelancing, or blogging. Even the money that they get as pocket money can be saved.

Savings: Savings should be encouraged in children while they are still young. This habit could pave the way for a safe and secure future.

Investment: Teenagers can begin their investment journey by investing in mutual funds, fixed deposits, post office funds etc.

Financial Planning for Single Women

Income: In today’s world, many women aim for financial independence. However, most tend to opt for the safer route of being a salaried employee. Yet, relying solely on one income source can be risky. Therefore, single women may consider taking on a side job to supplement their regular income. Luckily, there are now numerous opportunities available for this.

Savings: As a single woman, your expenses may not be very high, but you must save. Following the traditional rule of saving half and living on the rest is best.

Investment: The risk appetite of young women in their 20s differs from those in their 40s. Women in their 20s should focus on investing for financial goals like education, marriage and parenthood. Investing in high-risk equity mutual funds could be a good option for women in this age group. Other than that, FDs, RDs, PPF and real estate could also be good options.

Women in their 40s, however, should focus on investment for retirement and choose low-risk debt mutual funds along with FDs, RDs and real estate.

Financial Planning for Single Mothers

Income: For a single mother, while the focus would be on raising her children, retirement planning is just as important.

Savings: For single mothers, saving may be more challenging, but saving as much as possible is essential.

Investment: Single mothers should avoid risky investments. The safe options include FDs, RDs, hybrid funds, real estate and PPF. They could invest in instruments with a lock-in period to prevent the temptation to spend the money. Also, try to keep a six months emergency fund.

Financial Planning for Working Women

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

Savings: Though it is difficult for households to save a lot, you must stay focused on your financial goals. You must maintain a healthy saving habits and maintain your target for retirement.

Investment: you could invest in FDs, RDs, SIPs and real estate. You must also invest on behalf of children to secure their education and higher studies.