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Financial Planning for Women: Key Components, Steps and Useful Tips

Team JAR
January 31, 2023
Financial Planning for Women: Key Components, Steps and Useful Tips

However, gender inequality is still rampant when it comes to financial planning. It is still somewhat of a man's territory. Proper financial planning for women empowers them to take control of their finances

More often, we turn to our fathers or husbands when the tax season comes, thinking, "Oh lord, it's too complex for me to understand! Let them handle it."

Or when it comes to choosing health insurance or life insurance, most women tend to turn to their partners or male elders, assuming they are more knowledgeable about these things.

If you agree with these examples, you know it's time to change this mentality. It's imperative and essential for women to have a safety net. And that safety net is becoming smarter about money and learning financial planning.

Don't worry; we are here for you. Keep reading to learn the top 9 financial planning tips to help you get started.

Why Knowledge About Financial Planning Is A Must

Well, why not?

Let us tell you a story. In a recent interview, famous television presenter Oprah Winfrey expressed her concerns about salary discrimination toward her male co-presenter. Her boss asked her, 'Why should you be paid that much money?'

While the gender-based wage gap is still a real issue, light should also be focused on the lack of financial education and financial planning knowledge. Here's why it is so important.

Women Are Being Paid Less

We are living in the 21st century. Equality is discussed and practised in every aspect of life. Well, almost every aspect. When it comes to financial planning, women are far behind men.

Even today, women in almost every industry worldwide are paid much less than men. But it is not something that can be fixed in the blink of an eye. Therefore, it is prudent for every woman to know how to financially plan their life.

Pregnancy & Married Life May Hinder Career Goals

Even today, married women find it harder to get a job than unmarried women. Because many hiring managers and companies think that after marriage, a girl's primary focus is on her family and kids, not work. So, plan your finances well in advance.

Lack of Financial Literacy

Sad but true. Today, women are going to mars and moons, becoming doctors and saving lives, managing households, and running businesses, yet many women find it puzzling when it comes to financial planning. So, it is imperative to gain financial literacy.

Key Components Of A Financial Plan

Today, women are more financially dependent than men, mainly because of two key factors: lack of awareness about financial planning and ignorance. With this blog, we are planning to rectify that. Before you begin your financial planning process, five core components must be considered:

Analyze Your Cash Flow

One of the most essential aspects of financial planning is analyzing your cash flow, also known as your working capital. Deduct your liabilities or debts from your current assets or income to get your cash flow. Make sure your expense is less than your current asset or income if you want to reach your financial goal.

Risk Management

Life is full of sunshine and rainy days. While making your financial planning strategies, make sure you count on those rainy days because you don't know when life will throw a curveball at you. Anticipate the risks while making your financial plan.

Retirement Planning

Retirement is not something you should keep until you are in your 40s. Begin early. Decide how you want to live after you retire and work towards it.

Insurance Planning

When you are hit by life's rainy days, you should have a readily-available emergency fund. Insurance policies can also help you in this regard. There are three key types of insurance:

  • Term Insurance - It is where you can make your and your family's life secure in case you die or meet with an accident. This is one of the most affordable and sought after insurance policies.
  • Health Insurance - Your health insurance is like protection gear. If you fall sick and don't have liquid cash readily available, health insurance can help.
  • ULIP - Earn money while protecting your family. This type of life insurance offers equity income, tax-savings facility, and life cover.

Tax Planning 

There are many ways to save your hard-earned money from paying a high amount of tax. The Indian government offers many tax relaxations and tax reliefs. Make sure you avail of those if you want to maximise your savings.

4 Crucial Financial Planning Steps

There are four steps in financial planning. Learn the easiest way here:

1. Assessing your Financial Situation

Financial planning aims to achieve financial independence, which only comes from financial literacy. Before you do or plan anything, take a thorough inventory of your existing assets, liabilities, expenses, and cash flow. The key areas you should check:

  • Household expense - Are you contributing to household expenses? If yes, how much money are you left with every month after your expenses?

  • Living & lifestyle expenses - Are you single or married? Do you have children? Based on the answers, find out how much are you spending on your overall living expenses.

  • Current tax situation - How much taxes are you paying? How are you managing your taxes?

  • Existing expenses and savings - Do you have any investments? It can be mutual funds, LICs, insurance, bank savings, etc. How much debt do you have? Debts include credit cards, loans etc.

  • Do you have any financial obligations - Do you have to plan any wedding? Are you saving to buy a property? Do you have an emergency fund? How far are you from retirement?

2. Setting Financial Goals

Set your financial goals while you are planning. Define how much money you are going to set aside for your new business, how much you will invest, and how much you are going to spend. Financial goals could include:

  • Getting married
  • Family planning
  • Purchasing a property
  • A good education for your children
  • Staying compliant with tax rules
  • Retire with good savings

Irrespective of your goals, make sure they are quantifiable and achievable.

3. Develop the plan & implement it

Based on your current liabilities, cash flow, and your financial goals, deviate from an investment and debt clearing plan that works for you. Make sure you take your risk tolerance and values in mind. Planning is easy, but the implementation of those plans can be hard. Maybe your financial planning includes:

  • Increasing your regular savings.
  • Getting a new or additional insurance policy.
  • Investing in a new stock or mutual fund.

Be it anything; you do it at your pace. And if you need any assistance, we are here to help you get sorted.

4. Monitor and Review

Many people forget about this step or overlook it. But regular monitoring and making the right adjustments are essential for ensuring your financial plans are still aligned with your needs and goals. At least once a year, review your plan.

9 Ultimate Women-Centric Financial Planning Tips

Take baby steps towards fulfilling your financial goals. Small and sensible should be your approach to gain maximum stability. Since women are the ones who take a break from their careers either to plan a family or to take care of kids and elders, they need to be financially stable and secure. 

You should not depend on your spouses or kids to take care of you. Take charge of your future with the right financial planning tips.

1. Allocate A Budget:

Financial planning is incomplete without a proper budget. Based on your monthly or annual income, plan your expense-investment-leisure ratio. The best way to start is: 50-30-20. It means 50% you spend on living expenses, invest 30% and 20% to live life queen-size.

2. Create A 'Do Not Touch' Savings Account

While you invest and spend your money based on your financial plans, make sure you keep some money in your savings account. Set a particular amount and save it in your savings account every month. 

Do not touch this money unless it's an emergency. Saving account because of its high liquidity. You can debit money at any time. This is essentially your emergency fund. This money is only for you.

3. Voluntary Involve In Your Family's Financial Planning & Discussions

Get to know your family finances intimately. Do not move away when your parents or spouse is budgeting. Take an effort to review all the bills and accounts regularly.

Take charge of bill payments and other financial responsibilities. Be fearless to share your opinion. 

Don't think that your thoughts don't count, or maybe you'll say something wrong. Remember, you run a household with your intelligence and smartness. If you can do that, you can do this also. 

4. Educate Yourself

The foundation of financial freedom is financial literacy. We are not saying you have to take up a course. While that is helpful, it can help you to become financially literate only so much.

So, what is the right approach? Take time out from your busy schedule to study personal financing, budgeting, and money management, surf the internet to know more about the stock market, research popular investment methods, and familiarize yourself with various financial schemes.

If you feel overwhelmed, seek professional help and insist on learning.

5. Cancel High-Interest Credit Cards

Certain debts are good for you financially, like home loans, as they offer tax relief. But there are some debts, like credit cards, that are extremely harmful to your financial health. Credit cards charge as high as 40% interest if you have a pending balance on your bills. 

Falling behind on credit card bill payments can badly impact your credit score and eligibility to avail of loans in the future. So, identify those credit cards and eliminate them at the earliest.

6. Move From Traditional Savings Methods

Traditional savings methods like bank FDs, recurring, and purchasing gold ornaments are safer, but they do not yield good returns.

So instead, invest in mutual funds through SIP, bonds, and corporate FDs, and gradually share the market if you are confident and knowledgeable enough. 

As for gold, avoid buying jewellery as a form of investment. They are depreciating assets. Instead, put your money in digital gold, gold bonds, or sovereign gold bonds. They give you a satisfactory return on investment.

7. Plan Your Taxes

Tax is a major hurdle in the road to securing your future. But it is important to be a responsible citizen.

So what do you do? Practice tax-saving regularly as a part of your financial planning. Invest in Public Provident Fund (PPF), purchase National Savings Certificate (NSC), National Pension Scheme (NPS), or tax-saving mutual funds etc. Also, home loans, housing rent, and kids' education bills also offer tax benefits.

Tax discussion is something many women like to avoid. Stop doing that! Be knowledgeable & stay informed! It is an essential step to being financially independent.

8. Plan Your Retirement

It's high time you take control of your future. If you don't take charge of your personal finance planning and money management today, you will not have to depend on your spouse or children when you retire—plan for your retirement as soon as you start earning. Every penny you save today will be gold for you in your old age.

Investing in mutual funds, PPF, and NPS until you hit 60 can assure you to retire rich with crores of rupees in your bank account. So, manage your money carefully.

9. Take Advantage Of Special Policies Created For Women

In India, there are special policies for women and women entrepreneurs. From fewer interest rates on loans to special rewards – take advantage of all these benefits.

  • Govt. of India has MUDRA Loan tailor-made for women entrepreneurs.
  • Other women-centric schemes like Cent Kalyani Scheme, Mahila Udyam Nidhi Scheme, Annapurna Scheme, Stree Shakti Scheme etc. are made for women entrepreneurs. 
  • Women applicants can enjoy 1-2% less stamp duty on home loans and 0.05% less interest rate.
  • Special premium rates on health and term life insurance.

Key Takeaway

The bottom line of this detailed discussion is that women must be self-sufficient. You can be a working woman or a home engineer - adequate financial planning is a must for becoming financially independent. Hope these tips and points have helped you to understand how you can secure your future and present yourself. More power to you! Go, girl!