As another year draws to a close and the beginning of a new year gets closer, it is but natural to get pulled into a vortex of ruminations on the happenings of the year gone by and paves the way for the yearly resolution-building ritual. In the realm of money management too, reflections on the hits and misses of the year passing by can serve as valuable lessons in the long run. We spoke to five women to know about their learnings from this year and what they hope to achieve in the next year.
The power of good old budgeting
“I am of the conviction that new year resolutions only work when they are based on a lesson that you learned from an experience. A resolution that does not have its roots in an episode where you have had to face some difficulties is harder to stick to. But as the saying goes, the smarter thing to do is to learn from the mistakes of others and that is what I plan to do next year, ”chuckles 26-year-old Yoshita Tandon when asked about her plans for the coming year .
A management consultant, Sharma, is clear when it comes to the resolution-making exercise. “My sole focus will be on sticking to my budget religiously and meeting my investment target every month. It’s not that I am starting my savings and investment journey now – I have been doing that for a while. But staying disciplined has been a challenge for me. On many occasions I find one part of myself trying to school the other impulsive part that is more intent on giving in to temptations,” Tandon narrates.
A solid budget is the first stepping stone to healthy finances. It is only when you can adhere to a budget, set aside a body of savings that you can channelize it towards investments to meet your goals.
Breaking away from stereotypes
Too many women have been kept away from the gamut of financial inclusivity for too long and it is hardly surprising that women find it hard to feel confident about their decisions even if they attain a certain degree of financial knowhow. 31-year-old Sushmita Nagpal has resolved to let go of patriarchal tropes in the coming year and become confident enough to take all financial decisions by herself without having to seek support from her husband.
“Since the day I have been married, my husband has been taking care of all the money that I earn and the assets that I have had because I would relegate these duties to him. Somehow, societal conditioning made me feel that my money would be more secure in his hands than him. However, of late he has started nudging me to take an interest in the finances because he knows it is a life skill and I shouldn’t be dependent on him. While I have learned a lot in the last two years, I lack confidence and still have the urge to seek his approval from him. Unlearning the notion that matters of the wallet are best handled by men will be focused in the coming year,” she says.
The mantra of goal-based investing
Investments cannot be a one-size-fits-all formula – the path to a successful investing journey is to keep your investments aligned with your goals. Many people make the mistake of choosing investments based solely on the returns without factoring in the suitability of the asset class for their needs. Add the prevalence of low financial literacy to the mix and that is enough for many people to set them on a path of financial losses.
With goal-based investing, you can assign values to your goals and this can pave the way for your financial resources to be utilized in an efficient and optimum manner. Anisha Rathore, a 40-year-old homemaker who started the journey of managing her finances on her own de ella a few months ago says, “I used to be someone who would invest without giving any thought to the ‘why’ factor. After a while I realized that goal setting helps set the direction of your financial plan. It is necessary to link investments with clarity of when we are going to use it and why we are investing. In the forthcoming year, I want to make goal-based investing the core of my financial planning exercise and move away from the habit of not linking an investment with a goal.”
Retirement: Ignorance is not bliss
Retirement planning is one of the major chapters in your financial journey. It is one of those goals that will have a significant impact on the later part of your life. Your financial preparedness for retirement will be based on the investment strategies that you undertake right from your 20s and 30s.
The fact that retirement is a long term goal can make many people get complacent with their retirement investment game. For women, who may be used to the male members of the family handling the reins of the finances, retirement planning can get relegated to the backseat completely. Urmila Singh of S9 Financial Planners says, “Through my experience with my female clients, I have seen that they think about travel, children’s education, or starting their own business as their goals, but they miss an essential aspect – planning for their retirement. For all above, there is a loan but no loan for retirement. So women should pay attention to planning their finances for retirement.”
Choosing the right asset classes
There is a sizable chunk of investors in India who shy away from asset classes that carry any element of risk. Gold, real estate and traditional investment instruments such as fixed deposits, post office savings schemes continue to find resonance with many and this is especially true in the case of people who have recently gotten into the habit of saving and investing.
However, playing it ultra-safe and investing without giving much thought to whether the investment can generate enough returns for a specific goal can be harmful in the long run. Preeti Zende of Apna Dhan Financial Services says,” I always advise the financial planning process starts with identifying your financial goals, segregating those in short, mid and long term goals. Then you have to decide your asset allocation according to your risk taking ability. Mutual fund is one such product which is suitable for all your needs. If you are very new to mutual funds, start with a liquid fund which will be helpful to park your emergency fund. Then for short term goals start investing either in conservative hybrid or aggressive hybrid funds. For long term financial goals, a combination of index fund, Flexicap cap and small exposure in international funds can serve the purpose.”
1. Do not forget or underestimate the importance of building a contingency fund that can help you sustain yourself and your family too for 3-6 months in the event of any emergency. Insurance coverage should be reviewed from time to time too.
2. Keep educating yourself in regards to personal finance and invest wisely. Have a financial planner who can guide you, but in the end, you should have the decision-making power about your money.
3. Investments cannot be a one-size-fits-all formula – the path to a successful investing journey is to keep your investments aligned with your goals
4. Your financial preparedness for retirement will be based on the investment strategies that you undertake right from your 20s and 30s.
5. If you are very new to mutual funds, start with a liquid fund which will be helpful to park your emergency fund.
This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.