Financial Management - " Every Woman's Cup of Tea "

Written on Monday, March 20, 2017
By Shikha Bhatnagar - Executive Vice President, private banking, Bajaj Capital.

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Are you one of those women, who say "financial management is not my cup of tea" because you don't have the academic financial background or sound knowledge about finance, investment, tax saving, money management, etc., then you need to pause and think again.

Financial management, that too for personal finance, is not as difficult as you think, and even if it is difficult, then also you must make efforts to become a pro in personal finance management because your acquired knowledge on this can be the key to many treasures of prosperity. For instance, as a financially aware woman, you will be able to define a clear and smarter path leading to your financial goals. Materializing the dream of wealth creation will become more achievable to you. Also, you will be able to build the best protection shield against life emergencies. In short, if you take hold of your personal finance and plan it wisely, then you attain financial prosperity for yourself and your family too.

How Should Women Do Their Financial Management?

Having a sound financial knowledge, especially an academic financial background is a plus point as one will always know of financial jargons, investment concepts & the intricacies involved in the financial ecosystem. But even if you don't have the academic financial background and you don't understand any of above-mentioned things, then also you can comfortably acquire this knowledge.

For this, no academic background is required. Investment concepts and products are designed in a way that one can easily understand and utilize them. All one need is will and awareness!

For the love of your hard earn money, you can give it a try to be financially aware because this awareness pertaining to investment, tax saving, wealth creation etc will augment your financial prosperity and make you financially secure and independent. 'Preparedness' towards life is the another major outcome of being financially aware.
'Health is Wealth' a cliche quote but an epitome of truth. Health emergencies can swap away the savings of many years. In fact, during health emergencies, 'Wealth Becomes the Health.' Medical facilities are immense and incredible these days, but equally expensive. Thus, in face of health emergencies, having the wealth to afford these facilities becomes the lifeline.
One who is financially aware will always know that 'Health is Wealth' and 'Wealth is Health' and staying prepared for health emergencies is the only way to glide over the possible financial crises.(Read : Enjoy best medical care with a suitable health cover)

Here is the wireframe on what you can do for your financial management:

1. Take the Route of Investment: If you are saving the money in your savings account, then be really careful, your money is not growing rather its value will decrease because of inflation. Thus, investment is the only way to grow your money. You need to link your investment with your financial goals so that you can easily fulfill your goals utilizing the amount earned from your investments.

2. Know Your Financial Goals: Emergency fund for any household replacement, children higher education fund, retirement corpus, Vacation, buying a house, looking after elderly parents, you need to realize what are your financial goals?

3. Divide Your Goals: Know clearly which are your short term and long term goals

4. Know the Investment Options Available to You: This information you can easily find online and the popular investment options are Fixed Deposits, Post Office Schemes, Mutual Funds, Direct Stocks, Gold, Real Estate, Bonds, etc.

5. Read up and Get Advice too: All the investment options mentioned above have different features that you need to know in length. Not having an academic financial background is not an obstacle here, because you will definitely have many people in your trusted friends who will have knowledge on this. You can take advice from any of your trusted acquaintance. Moreover, you live in the era of digital world, if you are ready to read then there is no dearth of information. You can read and know all about the investment products. And last but the very important, there are professional organisations available to help you on this. You can take help from professional financial advisers, who will provide you with the detailed and specific overview of each and every investment options available, risk associated and as per your short term & long term goals.

6. Diversify your Portfolio Through Proper Asset Allocation: Once you have become aware of the investment products, you need to create an investment portfolio for yourself. Here, Asset Allocation is core to the construction of your investment portfolio as it allows you to diversify your portfolio, which further helps in minimizing the risk involved in the investments. Each of your investment is an asset. Certain investments are subject to market risk but offer good returns like equities, while some investment products are not risky such as PPF, but offers fewer returns. Thus, asset allocation let you properly diversify your investments (assets) so that you can have a balance of risks versus rewards.
7. Execution is the Key: Everything mentioned above is a 'Strategy' that you need to follow to get the best out of your investments. But a strategy makes sense only when you execute it. Likewise, having knowledge regarding finance management and investment will turn fruitful to you, only if you apply it to yourself and your family's investment matters.

Some Golden Rules:

Having doubts and confusions on which investment products to choose is obvious, but when it comes to investment, there are some golden rules that you can jump into.

Be a Systematic Investor with Systematic Investment Plan (SIP): Mutual funds(Debt or Equity), although linked to market volatility, has the potential of wealth creation. So, if you plan to grow your money, Mutual Funds investment is a good option for you.

But you must be thinking that a considerable market and financial knowledge is required to invest in mutual funds. This is not true because even being a complete layman, you can invest in Mutual Funds. Systematic Investment Plan (SIP) is the right route for women like yourself. Through Systematic Investment Plan, you don't need to think about things like when to enter the market, when to exit, etc. Here, you invest in a systematic manner like monthly or weekly and reap the benefits of rupee cost averaging. (Read: SIP Simplified for Novice Investors of Mutual Funds)

Start Early and Get the Benefit of Power of Compounding: When you start early investing you get the benefit of the power of compounding.

Let's understand the power of compounding with the following example.
Ms. Reena and Ms. Kavita have daughters of same age. Ms. Reena started investing Rs. 4000 for her daughter's future, when she turned 1 year old. Ms. Kavita started a little late and started investing Rs. 7500 for her daughter when she turned 11 years.

Corpus amount when both the daughters of the two ladies turned 23 years old :


Ms. Reena accumulates 29 Lacs more than Ms. Kavita
       -   Assumed Rate of Return is 12% and assumed inflation rate is 6%

Thus, Power of Compounding is all about giving your money more time to grow. If you start investing early, you can build a better corpus even by investing small amounts, because your money gets the time to grow. But if you start investing late, then even after investing bigger amounts, your corpus will not be very attractive only because your investment period was short.

Do Right Tax Planning: Being neglectful towards tax saving can cause you heavy loss, thus you must do proper tax planning. Know which tax bracket you or your family income falls into , then accordingly chose your tax saving instruments. Don't do the last minute rush, rather be an early bird and do your tax planning with proper homework.

Always Plan Your Retirement: There is a rule called the rule of 72? According to it, at the rate of 6% annual inflation rate, expenses will double in 72/6= 12 years. Also, do know you the value of today's Rs. 40,000 will become Rs. 2.3 Lakh in next 30 years?

So have you got the calculation? After retirement, you will need more money to meet your lifestyle needs that too without having a regular source of income. Thus, it is very important to invest for your retirement, so that you can retire with a massive corpus. You can do it through NPS (National Pension Scheme), Mutual Funds, and there are many other products.

Be Prepared for Emergencies: While you decide your investment path and walk smoothly on it hoping to be financially secure , you should also stay prepared for possible life emergencies. For this, you should always have some liquid money with you and should also get your medical insurance done. Not just for self, but you should get medical cover for your elderly parents and children. If you are financially dependent on your husband, then you should even encourage your husband to get term insurance or endowment insurance.(Read : Should You Go For Term Insurance, If Yes, What Should be the Policy Duration?)


Being financially aware and independent is very important for women (Read: Why Should Women Have More Financial Knowledge Than Men?). Whether a woman is earning or not earning, her financial awareness is essential to support her family. Women should read online regarding these and also get confident guidance from a trusted person, mainly with whom you can connect comfortably or she can hire financial advisors, sit with them and get clarity. The bottom line is there is no running away from financial management if you wish to grow your money. Also there are professionals in the advisory field who can help you to move ahead in your path of financial prosperity.

"In the long run, it’s not just how much money you make that will determine your future prosperity. It’s how much of that money you put to work by saving it and investing it"
                                                                                                by Peter Lynch

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