Happy Women’s Day to all wonderful women who are supporting their families by taking care of one part of the life, simultaneously to those women as well who are participating in both aspects of the life and with the support of their families (Father, Father in law, Brother, Husband etc), achieving new mile stones in their life. I would like to share with you what I have learnt in personal finance by following which you may achieve financial freedom and assist your families to be much financially stronger:
1. Buy adequate Health Insurance
Health insurance may assist you to save you lakhs, in the time of health crisis.
2. Buy Term Plan
Earning member is the financial backbone of the family, hence, his life must be adequately secured so that in case of unfortunate event of his/her death the family doesn’t starve for money, hence buy the term plans for the earning member of the family.
3. Do not Purchase Endowment Plans
Insurance policies are meant to mitigate the risk and it is not a tool for investment, do not take insurance as investment because it enhances your cost of investment with huge percentage leading to lower rate of return on your investments.
4. Start Investing/ Mobilizing the funds
Every women whether working or home maker has some spare money which is either saved by them out of household expenses/dig out from the pocket of their husbands or saved from their earnings. They need to turn these savings into investments and Mutual Funds can assist them to achieve good return on their savings.
5. Prefer Gold ETFs instead of Physical Gold
Those who love to purchase the gold as investment they should know historically gold has not beaten the real GDP Growth and Inflation rate of the country simultaneously, still if you wish to purchase gold as investment then buy GOLD ETFs instead of physical gold which reduces your risk of quality, minimizes the cost of investment, provides better liquidity as compared to physical gold.
6. Assets Allocation
I strongly prefer Pareto principle of 80:20 for portfolio allocation, 80% investment in Equity and 20% in fixed instruments. However, those are new with investments and not willing to put large sum at stake in the initial stage then they should start with 50:50 allocation. They may choose to allocate funds as under
- 50 % in Equity Mutual Funds
- 20% in FDRs/PPFs/ Post Office etc
- 15% in Gold ETFs
- 15% in Debt Mutual Funds
7. Start Learning Personal Finance and educate their kids on personal finance
Personal finance literacy in India is much lower than the other developed countries which has become a barrier for the growth of the nation and if we want to grow as nation it needs to be changed immediately. Women should start reading books on personal finance which van enhance their knowledge on financial matters along with that they can make a change in the thinking of the next generation.
Few books which I find good to start with and assist in changing the life are
- Rich Dad Poor Dad
- The Little book of common sense investing
- The Intelligent Investor
- The richest man in Babylon
There are many other things which can be followed but these 7 basic steps may cover 60-70% of your financial literacy and allow you to achieve their financial goals in much better ways.
Happy Women’s Day, Happy Investing.