By I-Winner Ms.Bindu Bhat, A Professional Financial Planner.
Let’s begin with some good news – A survey by an MNC Research Company reveals that while urban income has increased by 100% in the last decade, incomes of urban women specifically grew by 111%. Sounds great isn’t it!
This points to the fact that a greater number of women today are consciously working towards financial independence. However, this does not automatically translate to greater financial awareness and effective financial decision making on our part. So, let’s explore the idea of Financial Planning in a nut shell with this Panchmantra (5 Mantras) , the intention here is to incorporate the concept of financial planning in our daily life rather than being a high sounding idea.
Step 1: Let’s start at the very beginning – listing out one’s needs and wants, and then definitely prioritise them. All needs /wants cannot have the same priority; each will be unique. For example, results of a survey reveal that for a majority of urban women, children’s education tops the priority, followed by health expenses, family holidays and house rent /EMI’s.
Now, having completed the first step, the next step is,
Step2: Create a budget that plans for your regular monthly life style expenses, medical issues, birthday gifts and family outings. Use the idea of buckets – provisions and edibles bucket, education and extracurricular bucket, medical bucket etc.
With your budget in place, you have a clear picture about your monthly surplus. List out the goals you NEED to achieve in the short, medium and long term typically, in the next 2 / 5 / 10 + years. These can be planning for the early repayment of your loans, buying a house, taking a vacation, child’s graduation program and retirement planning. Invest your surplus appropriately to meet your goals on time.
Equally important is to create an emergency / contingency fund which can be upto 6 months of expenses. Build this up over 2-3 months if doing it in one shot is not feasible.
Step 3: Managing risks is an essential part of financial planning commonly understood as insurance coverage. Insurances are for life, health and possessions. A request – please do NOT treat insurance as a vehicle for growth.
In fact, insurance and investment MUST be treated separately rather than combining them. Insurance by its very nature is to minimize risks whereas growth by investment requires suitable risks to be taken to achieve desired growth. Risk levels are highly personal, no two persons even spouses will have the same outlook on financial risk.
Step 4: Research, research and research… and Implement your plan. Doing an adequate study on products and advisors is essential before signing up. Let us always remember that the market philosophy is “Buyer Beware”. The seller has no major need to educate the buyer unless the buyer insists on it. Please feel free to ask the product advisor / planner everything that you do not understand about the product /service. You should be clear about your expectations from the product / service, it is to satisfy your need.
Step 5: Finally, every plan is as good as it is monitored and corrected when necessary. Planning is not a onetime activity – not exactly like the motorcycle advertisement of “fill it, shut it and forget it”.
A Financial Plan is akin to gardening – creating the plan is the first step, implementing it is the action oriented part and regularly monitoring it is the test of our discipline. For sure, creating the right mix of assets in one’s portfolio calls for extensive research and investment of time, it is hard work.
However, if you find yourself strapped for time to do this effectively on your own, take up the services of a trustworthy and competent professional to help you in this exercise. A professional who understands and respects your needs along with helping you to build your knowledge base about financial products and investments.
Effectively, we will have to for plan for all our needs simultaneously rather than believing that when we take care of the immediate needs, the long term needs will somehow take care of themselves. Ensuring that we practice this Panchmantra regularly will help us to take ownership of our personal and family finances and make effective decisions.
Last but not the least, let’s acknowledge that while we work as professionals and family stakeholders round the clock, money also needs to work round the clock for us. By staying in a comfort zone of financial ignorance, we choose to give up the power of financial growth that can be ours.
In closing, start today with Prioritising, Budgeting, Planning, Researching, Implementing and regularly Monitoring your plan. Make money work for you today, this will ensure that you need not have to worry about your lifestyle 25 years from now.
Women take Ownership of your Money habits and Empower yourself to achieve your Needs.