How Women Can Bring Light to Their Financial Freedom this Diwali?

November 3, 2021 Mutual Fund

Women are usually known to be the better managers as they handle their personal, professional and day-to-day home expenses with much ease when compared to men. Women are naturally more inclined towards saving money for times in need and make vigilant financial decisions, which is a good financial habit that has helped many amid the pandemic crisis. Often, it is the lack of financial literacy and confidence that leads to them entrusting their money related matters to the men in their lives.

However, today women are leading a financially independent life. They are stepping out of their stereotypical roles and breaking the glass ceiling. There are enough examples that can exhibit that women are better at managing money. Nowadays, you must have seen women entrepreneurs setting benchmark with their success across all domains.

For instance, recently, India’s first women led profitable unicorn start-up ‘Nykaa’ the online beauty aggregator has launched its initial public offering (IPO). The Founder and CEO of Nykaa – Ms Falguni Nayar, is an erstwhile investment banker. The banker-turned-entrepreneur is making history and raising the bar for women entrepreneurs.

Over the past years, women have come a long way in empowering themselves and being financially independent, as well as make wise financial decisions. Financial independence is the capability to be self-reliant and debt-free. It gives women the power to achieve their envisioned financial goals and allows them to make decisions without any financial constraints.

You must know that financial independence is the path to financial freedom, but many women consider their financial independence as their financial freedom. Financial independence gives you the liberty on things you need currently, whereas financial freedom is subjective and futuristic; it cannot be defined or quantified specifically.

Financial freedom may refer to live a desired life, fulfil your goals or focus on your passion, without worrying about money. Many women are financially independent but have they really attained their financial freedom?

In order to attain financial freedom, you must embrace effective financial planning at first. Do note, financial independence is not just about earning and owning certain assets, it involves your active participation in major financial decisions in life whether it is the household or personal investments, tax filing, etc. It is high time that women ensure their financial freedom and do not rely on men in their household to make momentous decisions. Working women do influence the society and the nation and for them financial freedom is a must.

Therefore, this Diwali let us try to illuminate the light of financial freedom, which will not only bring prosperity and happiness, but also bring a financially secured life for years to come. You must start working on your financial planning from this Diwali in order to step forwards towards financial freedom.

Here are few points you must need to work on to attain financial freedom:

1. Start investing for your financial goals

This Diwali as you plan gifts for your loved ones, start investing towards your financial goals as well. Every individual has some specific goals in life such as marriage, purchasing a house or car, children’s education, their marriage, and finally retirement. Each of these are goals, which should be planned well in advance and invest early and wisely to build decent corpus to meet each of them.

You must plan to invest for each of your S.M.A.R.T financial goals individually in various financial instruments. It should be directed well keeping in mind the time horizon and risk appetite. This enables you to ensure that you have adequate funds for your envisioned goals when the time arrives, which will lead to financial freedom.

2. Maintain an emergency fund

As you have witnessed the havoc of uncertainties related to COVID-19 pandemic, it is essential to maintain an emergency fund. Women are natural savers. You must have seen your mother and grandmother keeping a certain amount aside from the household expenses, and saving it for times in need. This habit of regular savings did help some women amid the pandemic crisis when everyone was struggling with financial difficulties.

You should always maintain a proper emergency fund, which will assist you to survive in uncertain times. Your emergency fund must include 12-24 months of living expenses including any loan EMIs to survive any unforeseeable events.

3. Plan for a debt-free life

During Diwali, many of you plan to purchase gadgets like new smartphones, digital appliances, etc. with the help of consumer loans and EMI options. You may also be tempted to use your credit card while shopping with various festive offers. Do note that, you may end up falling prey to debt traps as credit cards charge a very high rate of interest and borrowing consumer durable loans or personal loans may increase your debt burden.

Maintain a debt-free life to attain financial freedom. Having a debt is not bad, debt allows people to buy items that they couldn’t have otherwise been able to afford at the required time. You may take a loan for purchasing a car or your dream house this Diwali as you planned. But you must ensure that your debt-to-income ratio is below 40% and you are capable to repay the loan on time. More importantly it is not creating any debt burden on you.

You must focus on debt reduction and management, as it will help you to maintain your financial well-being and prevent you from any debt stress. Try to reduce your debt as early as possible and maintain a good credit score for future eligibility of any borrowings.

4. Maintain an Insurance cover

Each one of us are driven by a common goal, i.e. providing a secure financial future for our loved ones and protect them from any financial losses. Insurance helps us do that and is thus considered as a vital aspect of financial planning. You must have an adequate insurance cover to indemnify the risk to your life and health.

An insurance cover for life safeguards your family’s financial requirements in your absence (untimely demise), whereas a health insurance cover assists you during highly expensive medical treatments. It’s a medium to protect us from the risk of any uncertain loss that may occur such as the COVID-19 uncertainties and medical emergencies. Holding an optimal insurance cover for both life and health is essential for your financial freedom.

5. Build a robust investment portfolio

Many women tend to avoid making investment decisions and rely on the men in the house, father, husband, and brother to plan the investments for them. You must ensure that you make your own financial decisions and make investments in various financial instruments and maintain a robust investment portfolio.

Construct a robust investment portfolio and try to invest in avenues that can assist you in long-term wealth creation. You can start with small investments in mutual funds via SIPs and gradually increase your exposure as you gain a proper understanding of the instruments. Make worthy investments that can help you to mitigate the portfolio risk, offer diversification and provides optimal returns.

Once you start maintaining your investment portfolio you will understand how it performs during various market cycles and make changes accordingly. It is important to plan periodic review of your portfolio to avoid any loss in future.

6. Invest in your financial literacy

The major issue women face is lack of financial literacy, which creates hurdles in attaining financial freedom. Women have been relying on men to make various financial decision for them in the past and that has led to their lack of confidence in money matters. It is high time that women focus on empowering themselves with financial knowledge and take a step closer to attain financial freedom.

Many women are always tied up with their household and professional career so, they have less time to focus on financial literacy. Fortunately, there are several ways in this fintech world to enhance the financial knowledge. You can invest in an e-learning course on personal finance that offers understanding of money management skills and nitty gritty of financial planning and may help you to become your own financial planner. This will also save your time as you can easily access it at your convenience.

If women are financially literate they will gain the confidence to build a better financial understanding in them, they can make investment decisions on their own and attain financial freedom.

We all have heard about women being the Laxmi of house, the goddess of wealth and prosperity. This Diwali being a woman of your house you must aim to focus on attaining financial freedom and bring light to your family’s financial future. Similarly, you should also concentrate on improving your financial literacy. It will enable you to achieve your long-term financial goals and become a financial guardian for your family.

This article first appeared on PersonalFN here