Women’s Day: Are you ready to seize control of your personal finances? (2024)

Women’s participation in the labour force

In October 2023, the Ministry of Statistics and Programme Implementation released the Periodic Labour Force Survey Report 2022-23. As per the report, the participation of females in the labour force improved by 4.2% to 37% in 2023. The government has taken various initiatives to increase female participation in the labour force. Some of these initiatives include large scale initiatives for girls’ education, skill development, entrepreneurship facilitation and safety in the workplace, etc.

The above chart shows how women's participation in the labour force has increased in the last few years. However, much more needs to be done so that the female participation either reaches the level of men or exceeds it.

As more and more women start earning income, it is important for them to take charge of their personal finances, participate in family investment decisions, do goal-based investing, and achieve their financial goals. In January 2024, DBS Bank and CRISIL released the findings of the "Women and Finance" Survey. According to the survey, 98% of urban working women are actively involved in family decisions. 47% of women make financial decisions on their own. It reflects an ongoing transformative era of financial independence.

Why should women participate in family financial decisions?

Women should actively participate in family financial decisions and invest independently. Some of the reasons for this include:

a) What if the relationship breaks?

You must have read of several instances of how a housewife faces financial hardships after a relationship breaks. They are not involved in any family financial discussions and investments. The woman has to rely on her parents or is left on her own.

However, if a woman is employed and is financially independent, even if the relationship breaks, she will not be dependent on anyone. As she is already in control of her finances, she can continue working towards achieving her financial goals even after she separates from her partner.

b) What happens in the event of the husband’s demise?

You must have read several media reports of how a wife is unaware of where the husband is investing. After the husband's untimely death, she has to do the rounds of banks, insurance companies, mutual fund houses, and other financial institutions to get the details of where the husband has invested.

However, if the wife is involved in all family financial discussions and investments, in the event of the husband's demise, she can take over the finances. She is either a joint holder in the investments or is aware of all the investments. In such a situation, she can take charge and continue pursuing the financial goals.

How to take charge of your personal finances on this Woman’s Day?

So, now you understand why you should actively participate in family financial decisions and invest independently. Let us look at how you should invest to achieve your financial goals.

Budgeting: A budget helps you allocate your income towards regular expenses, lifestyle expenses, and savings and investments. Regular expenses are for surviving, lifestyle expenses are for thriving and enjoying life in the present, and savings and investments are for securing the future. The 50/30/20 budgeting method is a good one to start with. However, there are many other budgeting methods, and you can choose any one that suits your requirements.

Maintain an emergency fund and buy term life insurance: You should always maintain an emergency fund with 3-6 months of expenses to tide over any unexpected financial emergencies. You should buy a term life insurance plan, as it will be your family's financial backup in the event of your untimely demise.

Goal-based investing: You should always do goal-based investing. As per the "Women and Finance" Survey, the long-term goals of women vary as per their age. The top priority for women in the 25-35 years category is buying/upgrading their home. In the 36-45 years category, children's education is the top priority, and in the above 45 years category, medical care is the top priority.

You should make a comprehensive financial plan that includes all of your financial goals. The financial goals should be categorised into short, medium, and long-term goals. If you have adequate financial resources, you can start investing towards all financial goals. If that is not possible, you should prioritise short-term financial goals first, followed by medium and long-term financial goals.

Follow appropriate asset allocation: As per the "Women and Finance" Survey, 51% of urban women park their funds in savings accounts and fixed deposits. After taxation, the returns from savings and fixed deposits may not beat inflation. Hence, you should build a diversified investment portfolio. It may include domestic and international equity mutual funds, fixed income, gold, etc., to earn better risk-adjusted returns.

Invest for the long-term to benefit: When you invest in equity mutual funds, it should always be for the long term. For example, for financial goals like building a fund for a child's higher education or their own retirement, the investment time horizon is usually five years or more. In the long run, equities can benefit from the power of compounding and have the potential to give inflation-beating high returns.

Invest through the SIP route: In the short-run, equity markets are volatile. Hence, you should avoid lump sum investments in equity mutual funds. You should invest through the systematic investment plan (SIP) route. It helps you average your purchase cost in the long run. As your income increases, you can increase the SIP amount annually. The step-up SIP option allows you to do this.

Seek advice from a financial advisor: As per the "Women and Finance" Survey, only 27% of women seek advice from a financial advisor or an investment expert. It is recommended that you avail of the services of a SEBI registered financial advisor. A financial advisor can help make a goal plan, choose the appropriate financial products, invest regularly, and review periodically till the goal is achieved.

Are you ready to take charge of your personal finances?

Are you a working woman who is not actively participating in family financial decisions or investing independently? On this Woman's Day, take this opportunity to do so. It will help you understand where the family investments are being made. You can achieve the family financial goals jointly with your partner. It will also help you take charge of the situation if and when the need arises.

Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached at LinkedIn.

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Published: 08 Mar 2024, 11:30 AM IST