Want to be a six-figure woman? Sorry gals, there is no magic bullet for wealth creation. It’s not enough to be a working woman; you have to be an investing woman too. Save smart and invest smarter, says Neelima Vinod
Even when women earn well they are reluctant to risk their savings, and display a sub-conscious cautious house sparrow attitude. Most men earn more than women not just because of salary disparity, but because of their willingness to take risks.
First, test your Financial Quotient. Do you know about the investments your spouse has made? Can you help your family get through financial crises if the need arises? Are you money savvy? If your answer is “No”, don’t despair; making money is a craft that can be learnt.
Many working women don’t know how a mutual fund works or how to invest in stocks. They are
too intimidated by stock shock to give it a try.
But, you don’t have to be a genius to invest in stocks or worry that you will fall into invisible financial trapdoors.
Also, if you’ve been a non-investor up to now, perish the thought that your husband will do the investing for you. Don’t just stick to meticulous book-keeping of financial gains and losses on the home front. Get involved in the big financial decisions too. If you want higher returns, you’ll need to raise the bar on your risk-taking verve!
Motivate yourself
There are many reasons to invest. Women live longer these days. On a lighter note, you may want to use Botox some day; that costs! The private sector does not give pension and depending on your already over-burdened kids is a never-ever situation. You are better off being secure as you grow older. It’s the best time to invest in yourself, in vacations and travel, things you could not do when the kids were growing up. Knowing how to invest is the one way you can meet your financial targets and ensure some kind of financial control in an otherwise unpredictable life. Which better place to put in a dash of womanly intuition?
Rake in the moolah
The first baby step is to make a financial blueprint. Take stock of your investments and liabilities or debt. Ask yourself these questions:
- What is your net worth?
- Where does your money go or cash flow to?
- What kind of financial priorities do you have?
That gives you a figure to work on. Think in the long term and then decide how you can move toward this goal. Any goal can be made to look realistic enough if you break up what you want to achieve into small time chunks. Maybe you want to buy your mom and dad a brand new car, maybe you want to sponsor your child’s education or help your husband get through the dark days as he has just been laid off. Financial goals depend on when you need the money as well. Do you need money to be recovered at a specific time or for a specific cause? Are you retired or new on the job? What kind of person are you—a
risk-taker or the think-centuries-ahead planner and saver? Whatever kind of person you are, there are investment plans that suit your Personality Quotient.
Use these top 10 tips to build an enviable nest egg
Tip 1: Start investing soon: Don’t sit on it and waste time thinking whether you should risk it or not. Without trade-off there can be no gain. The earlier you start, the greater the power of compounding and earning returns on your returns as well.
Tip 2: Source the information: Research on investment avenues and take professional help from a Chartered Accountant or an Investment Advisor to do this. You may have a full-time job and may not be able to invest time to do the necessary research.
Tip 3: Get more bang for the buck: Investing into shares of good companies with long-term vision will ensure you greater than normal returns. You can assess a company by profitability, quality of management and popularity of brand. Is the stock a valuable technology or a growing trend in the economy? These details are available on investor updates of the company and other research media outlets.
Tip 4: Track progress and time your investment: If your investment strategy fails, try investing in a new stock instead of giving it up altogether. Every investment and pay-off is the result of a lot of trial and error. There are not much chances of a windfall—a short-term investment could boom or bust but a long-term investment period of five years can guarantee a measure of success.
Tip 5: Keep learning: Don’t get too swayed by stock market trends—what matters is whether the company or stock you’ve invested is in good enough shape. When the market falls, smart girls don’t panic. A good investor buys rather than disposes of assets immediately.
Tip 6: Diversify: Have a diversified portfolio of cash, property and shares. Don’t put all your eggs in one basket.
Tip 7: Take the right decisions: Decide whether you prefer a short-, medium- or long-term investment plan.
Tip 8: Don’t go overboard: Never invest all your savings—you need liquidity for a rainy day.
Tip 9: Understand details of ownership: Are your investments in a joint name, single name or mutual names? Invest with your spouse so that you know what is happening with the family finances and
it also helps you to forge a bond with your spouse.
Tip 10: Teach your kids to invest: Getting your kids to understand the value of saving and money will go a long way.
Understand your potential assets
Deposits: This is the ideal investment for the starter or one with zero risk appetite (investment jargon is cool if you start using it!). Considered safe and reliable, you don’t have to fret about returns as they are guaranteed. The downside is that the returns may be lower than other investments.
Stocks: Highly volatile, you need to have one large risk appetite to get into this. Returns are not guaranteed—the stock market is constantly fluctuating and share prices can rise and fall that could leave you feeling distressed often. With the help of a professional, learn market movement and on a longer term, the right stocks can give you definite returns.
Real estate: This is long-term investment as real estate prices tend to remain stable and suddenly surge or plummet. The problem with real estate is that it is highly illiquid and cannot be disposed of at short notice.
Gold: This is a very good investment; gold seldom depreciates. The value of gold has only gone up over the last couple of years. Gold can be invested in various denominations and is inflation-proof. This precious metal is an investor’s best bet. Gold as paper investment and as hard asset in the form of gold bars is never a let-down investment.
Insurance: Good insurance is part of your risk management strategy—it protects your property and belongings from major damage and protects your family in a time of crisis like a sudden death or disability. However, it is critical to ensure continuity; otherwise the policy could lapse.
Mutual funds: Start a Systematic Investment Plan (SIP), a great instrument for wealth creation on a long-term basis even with a small but regular investment.
Plan your taxes
The key to creating wealth also involves planning your liabilities, particularly planning your taxes. Planning does not mean avoiding. Jain K. Shaji, a practising Chartered Accountant explains that tax planning only requires you to take advantage of all the maximum permissible benefits available to you under the law. He gives three pointers to tame the tax dragon.
- If you are a full-time employee, besides availing the benefit of your basic deductions take the benefit of deduction of interest paid on your housing loan. Interest on housing loan up to the extent of #1.50 lakhs is deductible in computing taxes every year.
- Invest into a medical insurance for the family. This too is a tax deductible to the extent of #15,000 per annum for a year. This ensures that in the event of any medical emergency you are fully protected.
- Deductions to the extent of #1,00,000 are available every year for investments in specific avenues including life insurance premium, NSC, mutual funds or housing loan installment.
- Additional deduction of # 20,000 on infrastructure bonds are permissble.
- Another smart way to plan your taxes if you are self-employed (a free-lance writer/designer/ web developer/copy writer) is to have a proprietorship or a partnership firm and show all earnings in the name of the firm so that you can claim deduction against that for your house phone, your professional meetings, fuel and travel expenses, driver’s salary, etc. Be very methodical - keep all the bills and expense statements. Any asset that you use for your profession including your computer, phone, car or scooter can be accounted. You can claim depreciation on assets also. Consult your Chartered Accountant to achieve this in the most appropriate way.
So, with a little financial acumen and savvy investing sense, you can make your bank account grow! Watch it grow and feel the sun; wealth is how you make it!
