Manage your Money the Smart Way

With more and more women working and earning, there is an increased awareness among them to take care of their money. A lot of women are making an effort to take control of their finances, instead of leaving money management to a male member in the family. Take for instance Antara Dasgupta Ghosh, 33, a lawyer in a legal and regulatory compliance management company, who stays with her husband in Kolkata, and spends weekends watching movies and doing experimental cooking.

Her situation is somewhat similar to Chandini Bakshi, 27, a Delhi-based financial analyst. She has a busy work schedule but relaxes by playing tennis, swimming and also spending time with her family when she is free.

Both of them differ when it comes to how they spend their leisure time, but they have one thing in common—they know the importance of money in their lives and are willing to take charge of their finances. What is helping them further is the proliferation of women financial advisors who are much easier to interact with, especially when it comes to discussing such issues.

"Money allows you to grow, empower yourself and others you care about. It provides security and enables me to do what I want to do, what I believe in when it comes to work, learning and leisure," says Ghosh. For Bakshi, money is important as it helps us meet our basic needs and then our desires. Times are changing and more women these days are not only handling their finances, but are also making sure that they are not cheated when seeking advice from others.

Says Diya Thommy, CFP and partner, Northward Financial Planners, a Bangalore-based financial planning firm,“We see women becoming more and more successful in their careers and earning well to make a significant contribution to their family finances. While some may still lack the confidence to take major investment decisions by themselves due to a lack of information or experience, they are certainly more involved with their partners or advisors in making those decisions.”

Stepping stone
Money also forms a part of their discussions with friends and colleagues just as they would discuss a new movie or the latest in fashion. “Given that women are earning, it becomes imperative to save and invest. And, planning their finances themselves gives women an added confidence of breaking the stereotype that men manage finances and become independent in true sense. Doing the financial planning on their own helps women like me to be aware of where the money is lying and how it is performing,” says Supriya Sarambalkar, 56, a deputy manager with SBI in Mumbai. A few years away from retirement, her daughter is now married and she is a proud granny to a 4-year-old grandson.

After marriage, many working women divide the financial responsibilities with their husbands and pool in resources to meet the needs of their family. Says Dasgupta,“We both pool 50 per cent of our income to meet all our household expenses. The remaining we save and invest accordingly.” This is a good move to collectivey contribute money to manage family finances, with equal responsibility for both.

The first step of managing money is to cover risks that one is exposed to. With rising medical costs, having an adequate cover is important as a medical emergency can seriously dent one’s finances otherwise. Dr. Archana Dhawan Bajaj, 47, a Delhi-based gynaecologist and obstetrician, is covered under medical insurance for Rs 10 lakh under a family floater cover. Dasgupta and Bakshi are covered for health insurance by their company, but they should take a personal health cover too as it will help them stay protected even when they shift jobs and if the new employer does not provide them with a cover.

When it comes to life insurance, Dasgupta is invested in several money-back insurance policies that give her tax benefits. This is fine, but having too many investments-cum insurance policies may not be a good idea as they are expensive products and give low investment returns. Dasgupta pays Rs 47,000 in annual insurance premiums. She can instead take a term life insurance policy, which costs less on premiums. Considering her plans to retire soon, she should ideally stay away from life insurance. This way, she can separate her insurance needs from investments and focus on them individually than clubbing the two.

Being a banker, Sarambalkar has a sound knowledge of saving and investment options and has been investing all her life; diversifying her investments into bank deposits, direct equities, mutual funds, life insurance and real estate. In the early days of her career, she reached out to some of her friends who were working as financial advisors. Being closely linked to financial sector professionally, she had friends and colleagues who provided good financial advice as far as investments in stocks and mutual funds are concerned and that stood her in good stead. “I have always invested in mutual funds through SIPs regularly as they help you strike perfect balance between security and good returns,” she adds.

But for many, especially those in the early stage of their careers, most of their investments are mainly those that are required due to mandatory tax savings. Bakshi’s investments include those in provident fund and in Equity Linked Savings Scheme (ELSS). Dasgupta invests in Public Provident Fund (PPF) that helps her save tax and also into fixed deposits and monthly income plans from the post office. She is aware of inflation and that she would need to get an exposure to equity to make her investments grow at a faster pace. She had invested in mutual funds but had a bad experience.

“I lost a lot of money in the three years that I was investing in mutual funds and I avoided any further investments as I felt there was too much risk and I did not feel secure about my investment,” recounts Bakshi. Like Dasgupta, many have burnt their fingers in equity investments and have either reduced their exposure or stopped investing altogether.

“We all know what it's like to lose money in this market and how long it takes to make peace with that. However, three years is not enough time to judge equity investments. Equities are meant for the long term and should be left invested for at least seven to 10 years to benefit from the product. When left invested as such, you will see that no other product will give you the returns needed to meet any long-term goal you may have,” says Thommy.

Thommy’s advice to women who do not have any equity exposure—start off by investing a larger portion of your savings into liquid mutual funds which are safe and give nominal returns and are a good avenue for short term goals. A smaller portion can be routed to equity mutual funds and then it can be increased with time. “While PPFs are good for long-term investments, they will not match the returns that equities can give. And, if they need higher returns to meet all their goals, then that is a risk they will have to take,” she adds.

Planning ahead
Everyone of us has future goals, but we might not have clarity on the goals, their time frame and the amount of money we need to fulfil them. This applies to women, too, especially early on in their lives. “Right now I am just exploring different investment options, and do not have a particular goal for which I would want to plan my finances,” says Bakshi. Dasgupta’s goals include buying a property, travelling abroad and going for higher studies, but she has not specifically planned for her goals.

“I would recommend them to take help from a financial planner. They are lifelong partners to advise and ensure that you move in the right direction as far as your money is concerned. Hiring a financial planner is important, because if you haven't mapped out goals, you cannot know which direction to take,” says Thommy.

For Dhawan and her husband, planning for their son’s education has been one of their primary goals apart from their own retirement. Right from the beginning she and her husband had started saving for him. “Every month we kept a certain amount aside for his education. Over the years, this has helped us build a corpus for his education. “He is doing his engineering from a UK-based college and would like to go back to UK or he will go to US for his MBA, hence we are still preparing for that. We as parents will be supporting enough to let him do and pursue whatever he wants to do in his life,” she says.

What has worked for Sarambalkar is financial discipline and that she had started investing small amounts regularly very early in her career. “Power of compounding does wonders to even smallest of amounts you invest over a longer period,” she says earnestly. Her daughter had always been a bright student and made her way to a good engineering college on merit and they did not have to spend a huge sum on her education, allowing them to focus on other financial goals.

As far as her daughter's marriage expenses were concerned, she was ready with all her jewellery which she had slowly accumulated in 25 years of her working. The rest got funded from her savings. One important future goal for her is to pay off a home loan. “I have planned well for that so even if I have to retire now, the loan will be taken care of from my investments,” she says. She is fond of travelling and once she retires, she will like to take regular trips till she and her husband are in good health. Money makes the world go around. And if managed properly, it can fulfil your dreams as well!

The story was first published in Empower, March 2016

anaghpal@outlookindia.com