International Women’s Day 2024: How can you assert control over your personal finances?

Every March, we celebrate International Women’s Day. The purpose of this day includes helping women obtain equal rights in all fields. One of the objectives includes economic independence for women. This can be achieved by providing equal opportunities for women to participate in the workforce, including through work, self-employment and entrepreneurship. Government, industry and various other stakeholders are doing everything they can to encourage women to join the workforce.

Women’s labor force participation

In October 2023, the Ministry of Statistics and Program Implementation released the 2022-23 Periodic Labor Force Survey Report. According to the report, the female labor force participation rate improved by 4.2% to 37% in 2023. The government is implementing various initiatives to increase women’s labor force participation rate. These efforts include large-scale initiatives for girls’ education, skills development, entrepreneurship promotion, workplace safety, and more.

The graph above shows how women’s labor force participation has increased over the past few years. But more needs to be done if women’s participation is to reach or exceed men’s levels.

As more and more women become income earners, it is important that women take control of their personal finances, participate in family investment decisions, make goal-based investments, and achieve their financial goals. . In January 2024, DBS Bank and CRISIL announced the results of the “Women and Finance” survey. According to research, 98% of women working in urban areas are actively involved in family decisions. 47% of women make their own financial decisions. This reflects the continuing transformational era of economic independence.

Why should women participate in household financial decisions?

Women should actively participate in family economic decisions and invest independently. Reasons for this include:

a) What will you do if the relationship breaks down?

You may have read some examples of housewives facing financial difficulties after a relationship breaks down. They are not involved in any of the family’s financial discussions or investments. A woman must rely on her parents or be left alone.

However, if a woman works and is financially independent, she will not be dependent on anyone even if her relationship breaks down. Since she already manages her own money, she can continue her efforts towards achieving her financial goals even after separating from her partner.

b) What happens if my husband dies?

I’m sure you’ve read some reports about wives not knowing where their husbands are investing. After her husband’s untimely death, she has to visit banks, insurance companies, mutual fund companies, and other financial institutions to know the details of her husband’s investments.

However, if the wife is involved in all of the family’s financial discussions and investments, she can take over the household finances if her husband dies. She is a co-owner of the investments or she knows about all the investments. Even in such a situation, she can take responsibility and continue pursuing her financial goals.

How to manage your personal finances this Women’s Day?

Now you understand why you need to actively participate in household decisions and invest independently. Let’s take a look at how you should invest to reach your financial goals.

Budgeting: A budget helps you allocate your income between regular expenses, living expenses, and savings and investments. Regular expenses are for survival, living expenses are for thriving and enjoying your present life, and savings and investments are for securing your future. The 50/30/20 budgeting method is a good way to start. However, there are many other budgeting methods that you can choose that suit your requirements.

Establish an emergency fund and purchase term life insurance. You should always have an emergency fund with three to six months worth of expenses to cover unexpected financial emergencies. You should take out a term life insurance plan to provide financial backup for your family in case of your sudden death.

Goal-based investing: You should always invest based on your goals. According to the Women and Finance survey, women’s long-term goals vary depending on their age. The top priority for women aged 25-35 is buying/upgrading a home. In the 36-45 age category, children’s education is the top priority, while in the 45 and older category, healthcare is the top priority.

You should create a comprehensive financial plan that includes all your financial goals. Financial goals should be categorized into short-term, medium-term, and long-term goals. If you have sufficient financial resources, you can start investing towards any financial goal. If that is not possible, you should prioritize short-term financial goals first, then medium- and long-term financial goals.

Follow proper asset allocation. According to the Women and Finance survey, 51% of urban women keep their funds in savings accounts or fixed deposits. After tax, returns from savings and term deposits may not beat inflation. Therefore, you need to build a diversified investment portfolio. It may include domestic and international equity mutual funds, bonds, gold, etc. for better risk-adjusted returns.

Investing for the long term provides the following benefits: When investing in stock mutual funds, you should always invest for the long term. For example, for financial goals such as your child’s higher education or building your own retirement fund, the investment horizon is typically five years or more. Over the long term, stocks can benefit from the power of compound interest and can provide high returns that outpace inflation.

Invest through the SIP route. In the short term, the stock market is volatile. Therefore, you should avoid investing in stock mutual funds all at once. You have to invest through the Systematic Investment Plan (SIP) route. It helps to average out purchasing costs in the long run. As your income increases, you can increase the SIP amount every year. The Step Up SIP option allows you to do this.

Seek advice from your financial advisor. According to the Women and Finance survey, only 27% of women seek advice from a financial advisor or investment professional. It is recommended to engage the services of a SEBI registered financial advisor. A financial advisor can help you create a goal plan, choose the right financial products, invest regularly, and review your goals regularly until they are achieved.

Are you ready to take control of your finances?

Are you a working woman who actively participates in your family’s financial decisions or invests independently? Don’t miss this opportunity to do so on Women’s Day. It helps families understand where they are investing. You can work with your partner to achieve your family’s financial goals. It will also help you deal with the situation if the need arises.

Gopal Gidwani is a freelance personal finance content writer with over 15 years of experience. You can contact him at: LinkedIn.