I never understand why women and finance do not gel well in spite of 40% of the total workforce in the world being women. Do women hate managing personal finance or they just avoid it?
Sunaina, 36 has been a housewife for the past 12 years and despite having completed her M.Sc and having earned some decent money through part time home based jobs, she has never really bothered to manage the finances herself. Today when her husband has gone abroad on job, she finds it extremely difficult to keep a track of the financial planning of her home. This is a typical situation which most Indian women find themselves in when financial dealings are thrust upon them due to the circumstances.
Common Reasons Why Women and Finance Diverge
Before we analyze the means to get better control over the finances, it is important that we understand the genesis of this aversion to financial decisions on part of women.
- Centuries of male dominance in the field of financial decisions of the family has led to a situation where women really don’t bother to engage themselves in this sphere as long as the supplies are coming in.
- Most women have this strong conviction that finances are too complex an affair for them to understand well and they are genetically not suited to handle money.
- Women being the backbone of the family often get so busy with a host of responsibilities such as home care, children and looking after the elderly, that they hardly have the time and patience to understand the financial status of the family.
Women and Finance thus find little or no scope to discover each other.
Women and Finance-Understanding the Trap
Luckily for Sunaina, her husband is just abroad and can still help her out by guiding her through the planning of the family budget remotely. However everyone may not be so lucky at all the times. There may be circumstances such as divorce or death of spouse which will push women into situations that demand active involvement in financial affairs. Lack of understanding in such situations may cost extremely costly often leading to a loss of lifelong earnings.
I know of a woman who when widowed, trusted the local financial advisor, who cunningly made her invest into endowment policies. The advisor got away with his commission while the poor woman lost a major part of the money that she had received at the time of her husband’s death.
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Even women who get divorced find themselves in a dangerous situation when they have to earn as well as plan for the future which requires some degree of understanding of the ways of the financial world.
Six Smart Steps for Women and Finance to Converge
There’s no escaping from scenes where women and finance will have to converge. Thus being ready to meet exigencies and taking control of the finances is the only way out for women to survive and sustain themselves in this world.
Learn the Basics
There are many simple ways by which every woman can get educated and be aware in the field of finances. The easiest is perhaps reading up on the internet. There are many wonderful sites and blogs about personal finance which can help them out in this direction. Asking friends and relatives is a good idea to start with.
Learn to Save
It is not that women are spendthrift in all cases. However due to lack of awareness and the basic emotional nature, they tend to spend their money on essentials as well as non essentials before the others do. A disciplined savings habit on a regular basis needs to be inculcated by every woman irrespective of their financial situation. The actual amount that needs to be saved from monthly earnings will depend on the exact financial commitments but on an average a minimum of 10 % must be kept aside as savings.
The power of compounding is often alien to women who may not be able to visualize the growth of mutual funds over a period of time. It is smarter to start savings right from an early age and let the compounding effect help you build up a good corpus over some time. Unmarried women who take up jobs must start making a small fund for themselves even if they have no financial burdens on the horizon. It is a disciplined habit of savings which subsequently translate into a more meaningful corpus at a later stage.
When you are aware of the investment avenues and their associated risks then you shall be in a position to understand your long term needs and then create a goal which you decide for yourself and your family. This goal shall have elements of short term and long term investments, creation of assets such as house or plots and insurance to protect the entire family against unforeseen circumstances.
Diversify to Protect
Women by nature are more risk averse than men. Thus it is natural for them to create portfolio of investment that is conservative and well protected. However along with the protection, the money needs to grow in step with inflation and increase in expenses. Thus the overall investment should be well spread to achieve both protection and a decent rate of growth. Taking advice from trusted financial experts in this regard is a smart idea.
Review and React
Periodic reassessment of financial plans is the bedrock of smart investment principles. Every woman when handling finances must realize that the markets as well personal circumstances are both dynamic and thus demand that periodic review be made to reorient the plans as per changed scenario. One must be ready and willing to take the efforts of reviewing the situation and make suitable amends accordingly on a regular basis.
Though most women still feel a bit uncomfortable in taking finances into their own hands, wherever and whenever they have done so, they have been extremely successful due to their inherent need for security and survival instincts. Contrary to the way men treat their finances, women and finance can be a great combination as they tend to be extra careful and vigilant making them ideally suited to take over financial planning for the family, only if they are ready to take the first step.