Your Money: Four money tips for working women

Retirement benefits should not be used for spending but should be invested for lifetime.

By Alka Munjal

Many consider that men are more comfortable with numbers but women in India are called Laxmi-swaroop or Grihalaxmi which shows that it is women only who run the finances at home. Good financial planning is an important skill-set to be inculcated by all women. Everyone dreams of adequate means and success but a great part of this dream is achieved by good financial planning.

Here are some tips for financial planning for working women:

Tax planning
Effective tax planning is not simply tax minimisation but rather the consideration of all taxes, all parts and all costs when maximising after tax returns—three basic strategies are timing, income shifting and conversion. Know the taxes that you are paying. TDS affects your in-hand salary. Charitable contributions, harvesting capital gains, net investment income tax, estate tax planning are important.

Health allowance
Most people run out of money early; the millennials believe in spending heavily. They live on credit cycles, so less savings will lead to lesser retirement corpus. Large expenses for healthcare must include critical illness and disability benefits in old age. Health insurance at 65 years is tough, premium too becomes high. Also life insurance cover for a ‘Joint life first health’ to cover both spouses.

Retirement planning
One must start planning for retirement early in life, in their thirties. Retirement benefits should not be used for spending but should be invested for lifetime.

Savings for family vs needs
Always keep emergency funds so that you do not need to dig into long term investments for emergencies as the opportunity cost for early term withdrawal is very high. Saving is something which is a value to be inculcated in all youngsters even before they start earning as this is what teaches them the concept of ‘Value of money’, so that the millennials also start thinking about saving.

One must always distinguish between appreciating and depreciating assets—surplus ( which is sacrifice of present consumption for future benefits) must be invested in appreciating assets (stocks, gold, land, etc.,) not depreciating assets such as big cars, branded clothes, etc. It does not mean we do not live well, it means we live well but sensibly.

It is said that a woman who develops her potential and is well-educated creates a positive impact on two families, that of her parents and that of her husband and in-laws. A mother is the centrepoint of all value systems which are developed in a child, so women need to build the value of respect for money in our children too. As once they grow up, they will live as per what they saw and imbibed, so “be the change”. Every woman must develop this financial planning skill set.

A good financial planning strategy can help women achieve important financial goals such as travelling, buying a house and early retirement.

The writer is professor, Finance & Strategy, Amity University